Top 5 Tips For Buying A Home In A Competitive Market
In Northern Virginia and the Washington, DC metro area, the market is almost always competitive. The population in this area is growing and a lot of people want to live here.
As a result, home buyers need to do certain things to ensure they can buy the home they want. Here are our top five tips when submitting an offer in a competitive housing market that will help you stand out.
1. Get pre-approved for a loan before placing an offer. Pre-approval involves filling out a formal application and having a lender do an in-depth analysis about your creditworthiness (typically including a full review of your credit report) and ability to secure a loan.
While some lenders use the terms pre-qualification and pre-approval interchangeably, they are different. Unlike a pre-approval, a pre-qualification typically involves little more than a conversation with a lender about your financials and is much less certain. Sellers like to see offers from buyers who are “pre-approved”, as it gives them some peace of mind about the buyer’s’ ability to pay for the home. We’re happy to refer you to some great lenders in the area — just ask!
2. Make a substantial earnest money deposit (EMD). Earnest is money that you put toward a home purchase when you submit your offer. Earnest money deposits typically range from 1-5% of the offer amount. A significant EMD indicates to the home sellers that you’re serious about your purchase and are likely to see it through, because as a buyer would risk forfeiting this money if you were to pull out of the contract in breach of the terms.
3. Include a cover letter. Giving the sellers a cover letter with your offer both summarizes and personalizes your offer. You can use it to tell the seller what you love about the home. We’ve found that when the seller has an emotional connection to the house or has worked to improve it, they’ll often want to sell to someone who appreciates the same things they do.
4. Be aware of how contingencies affect the impression of the offer. Different contract contingencies will affect the timeline of your sale, how the seller perceives your offer and the likelihood that your offer will be accepted. Some contingencies are necessary to protect your interests, but some are just bonuses that are nice to have. In a competitive market (or a seller’s market) when multiple offers may exist in a single property, the more contingencies your offer includes, the less likely a seller will accept your offer.
Remember, your goal is to present an offer that the seller finds most advantageous. This may not be the one with the highest offer price. Depending on the circumstances, in some cases sellers may choose the offer with the least restrictions and fastest timeline, even if it is for less money.
5. Include a sizable down payment. A sizable down payment is a good sign that you’re a serious and financially responsible home buyer. A 20% down payment of the purchase price is typical for conventional loans, but it is not required to buy a home (contrary to popular belief). A large down payment can increase your flexibility with loan options and is usually a good indication that you’ll be able to get financing easily, making your offer more attractive to a seller. While it may look good to a seller, there are circumstances where a large down payment might not be in your best financial interest, which is why we always recommend our buyers seek advice from professional loan officers during the pre-approval process.
Working with a seasoned, professional Realtor is key. The team at Fidelis Property Group can guide you through this competitive market, help you write an offer that will truly stand out from the rest and help you get the best home for you.