How to Navigate the Competitive Summer Real Estate Market

Things are getting hot out there in the real estate market. Any predictions that the market would be thawing this summer have been proven wrong. That means that any buyers who were betting on a summer without mile-long lines for open houses, bidding wars, and unbudging sellers may need to rethink their strategies. These five tips for how to navigate the competitive summer real estate market could get your offer accepted before Labor Day.

Explore What Changed Expectations Can Get You

Don’t think of this as settling. Think of it as reorganizing your priorities based on the reality of the market. If you’ve been trying to get into a specific neighborhood for months without success, it might be time to broaden your search to neighborhoods that have larger inventories. The same goes for home features that you’ve been stubborn about up until this point. What if getting into a good home faster could be possible if you loosened up on your requirement for a home office? Questions like this could be the key to joining the summer buyer’s club!

Start Making Stronger Offers

Have you been hearing “no” all summer? Dust yourself off from rejections from sellers, reevaluate your previous offers, and start crafting stronger offers. This can be a reality check for some buyers because it means that you’re going to have to finally start playing by the seller’s market rules. Here are some offer-strengthening tips to consider:

• Collaborate with your agent to decide how much higher you should go with offers.
• Circle back to your finances to see if you can conjure up a slightly bigger down payment.
• Erase the buyer contingencies you’ve been demanding. If you’re not totally ready to ditch all contingencies, consider softening some of them. It’s understandable if you don’t want to waive your inspection just to get an offer accepted.

Overall, the strongest offer is usually the highest offer. That means that you may actually need to jump to a slightly lower price range to be able to make offers that are still consistent with your current budget. However, you need to craft your offer based on the circumstance. If a seller seems eager to move on by getting a home sold, your offer to waive some contingencies could be more attractive than a slightly higher offer because it will speed up the closing process.

If your goal is to impress a seller with a higher offer, you do need to factor your borrowing strategy into the picture. When a buyer makes an offer over the listing price, they can run into the problem of accidentally making an offer that’s also over the appraisal price. Lenders won’t allow buyers to borrow more money than a home appraises for during the professional appraisal. If you want to go high with your offer, you can only do this if you’re in a position to actually cover the difference between your offer price and the appraisal price. That difference is called an appraisal gap.

Cover Your Own Closing Costs

You may be able to make your offer irresistible by making it clear that you’ll pay for 100% of your own closing costs. In a buyer’s market, a seller might agree to seller concessions that help to cover closing fees related to property taxes, appraisal inspections, legal fees, or the buyer’s mortgage points. This isn’t usually the case when sellers call the shots.

Make a Bigger Earnest Money Deposit

You can show a seller you’re serious by offering to put down a bigger earnest money deposit. An earnest money deposit is the money you put in escrow to solidify your investment in a home. If you back out of your offer agreement without a reason that’s covered by the contract, you’ll forfeit that money. While the traditional earnest money amount is 1% to 2% of a home’s purchase price, you can go up to 10% if you are 100% committed to moving into a home.

Pepper Your Offer with Extras

Here’s a tip for getting into the big leagues with your offer. While any buyer can waive contingencies, the highly motivated ones sprinkle some seller enticements into their offers. Here’s how to handle things in a cutthroat real estate market.

The first high-octane “extra” to consider is an escalation clause. When you submit an offer with an escalation clause, it means that you’ll automatically outbid any other offer that comes in up to a certain amount. While not a guarantee, the escalation clause puts you in a good position to be the highest bidder.

Another powerful move is to set a strict closing timeline. This is a move you can do if you’re very confident in your financing source. You also need to have a pristine credit history without any potential last-minute surprises that can delay closing.