This Spring’s market is once again beset by a multitude of buyers and a minimal number of available homes. What a headache for the first time home buyer, particularly when they are forced to compete in a multiple offer situation. Many sellers, when faced with several offers on their home, have their agents call for “highest and best” offers from all buyers. How do you make your offer stand out from the crowd?
Let me give you a breakdown of the types of offers that sellers consider, in the order of most to least desirable. This may help you, as a buyer, understand where the seller is coming from,:
Ideal Offer: Cash, full price or over asking.
Great Offer: Conventional loan, full price, no seller’s assist.
Good Offer: FHA Loan, full price, no or small assist.
Weak Offer: FHA or VA Loan, less than asking and full assist.
I know that some of you will be banging your head into a wall when you read this- good Lord, if you need an FHA loan and desperately need the full 6% assist to get to closing, what chance do you have? Many buyers have limited savings and are counting on an assist to get them the cash they need to settle on a house.
Don’t give up yet! I have helped buyers get the house they wanted, even with an FHA loan and yes, even needing a full assist. Here are some tips to get you there.
- Be prepared to make several offers before getting one accepted. There will always be another perfect home, and it’s important not to get too emotionally invested in a house before you own it.
- Look into first-time home buyer grants and programs. Some municipalities, counties, and even lenders will help you with closing costs, allowing you to make an offer that includes less or no assist. Remember, any assist the seller gives you in money they lose at closing, even though they pay commission on the full asking price.
- Write a letter to the seller. This sounds corny, but it has helped my buyers win in a multiple bid situation, especially if children are writing the letter. Explain what the house means to you, and what happy plans you have for it.
- Improve your offer. If you keep offering under asking price and losing in a bidding war, then start offering full price or higher. Start saving so that you can lower your assist, or even consider asking a relative for gift money to help towards closing costs.
Finally, a few more words of advice. Be sure you understand what your monthly payment will be at any asking price, before making an offer. If you are starting to get uncomfortable with the numbers, talk to your realtor. Try to think not in home prices, but in monthly payments. Municipal property taxes can vary largely from town to town, which will make the monthly payment change significantly. Focus on a payment you are comfortable with, and if nothing you like is in that price range, consider renting for a while longer. Most agents agree that we are in a mini bubble, due to very limited housing inventory. There will eventually be a larger flow of houses into the market, which will make home buying a lot easier. In the meanwhile, don’t give up easily, but be realistic in what you can afford.