Make Your Best Offer First
This strategy is not about trying to negotiate the best price; it is about beating out the competition and buying the home. It may be difficult to understand until you have lost a few homes to better offers but when the reality of the situation is that there are not that many homes on the market, the competition heats up and different tactics are necessary.
Incline Village and Crystal Bay sales in January were down by at 30%, year over year according to the Incline Village MLS. The median sales price is $2,490,000 which is up 93.8% from the previous year. Inventory for January fell to 4.9 months' supply from 5.5 months' supply in January of 2020. Six months inventory is considered a balanced market.
Things that work in a buyer's market will not work in a seller's market. The shortage of available homes for sale has led to not only shorter on market times but multiple offers that have sales prices above the listing price. Buyers, especially in entry to mid-level price ranges, may have lost out multiple times to buy a home this past year.
Buyers must be strategic if they want to successfully find a home. There are some things that are absolutely essential to just be in the game.
Unless you are paying cash and have adequate proof of funds, you need to get pre-approved and work with a LOCAL lender. REALTORS® and financial advisors have been saying this for decades, but it is critical now. There are plenty of reasons that benefit the buyer but most importantly, it is to show that a buyer is serious and has gone through the effort to have a lender run his credit and verify his income, expenses, employment, and credit. Out of area lenders typically need longer timeframes to meet all the underwriting requirements and sellers are not willing to give that extra time. Local lenders seem to move much quicker.
If the home is fresh on the market, in a desired location and price range, you need to assume there will be competing offers and you may never even get a counteroffer from the seller. You need to consider making your highest and best offer first and as quickly as possible, as if you will not get a second chance. This is more difficult for some people than others because of their bargaining nature and desire to run numbers over multiple spread sheets before making an offer.
Earnest money that accompanies a contract shows that the buyer is acting in good faith. The amount that may be customary may not be enough in a competing market. Consider two or three times what might be normal. Talk to your agent about what would make an impression on the seller. A good rule of thumb for a transaction in Incline Village and Crystal Bay is 3% of the offer price.
While contingencies will protect your earnest money from specific concerns like loan approval and inspections, the seller will look at them as ways that the buyer can get out of the contract and they'll need to put the home back on the market. If a seller is presented multiple offers, they might be prone to accept one with the least and fastest contingencies, especially, if the prices are comparable. Some buyers are waiving their inspections and appraisal contingencies right now to get offers accepted.
There is usually a period connected to the different contingencies giving a buyer ample time to complete their due diligence. By shortening these times as much as possible limits the time the seller might feel they are in limbo.
If you have the flexibility, you might express your willingness to move the closing and/or possession dates to accommodate the seller's schedule. If the seller needs to relocate or find a replacement property, allowing them to occupy free of charge for a few weeks after closing can help your offer. This could be an important factor in your favor and could be done in a verbal statement conveyed from your agent to the listing agent.
Another option is to submit a buyer love letter with the offer. You can mention how much you love the home, the area, and your future plans for the home. You must be incredibly careful when writing these and consider Nevada fair housing law which prohibits discrimination based on race, color, religion, sex, sexual orientation, gender identity, or expression, disability, national origin or familial status. Write more about the home and the community and your history with our area versus your personal information as unintentionally make the seller liable to a discrimination lawsuit. And don’t include any photos of yourself.
Another controversial option to getting your offer accepted on your dream home is to consider including an escalation clause. An escalation clause can allow you to secure a home by promising to pay a set amount over what the other highest bidder has submitted. Not every seller will entertain escalation clauses and it’s best to first ask and check with your agent.
These are things buyers should consider and discuss with their agent before they find the home that they want to buy. While you are formulating your position, another offer may be accepted before you even make yours.