Updated: Apr 21, 2020
If you’re looking for a house in the Greater Boston area right now, you know that inventory is at historic lows. Any property that goes on the market is likely to draw multiple offers, sometimes ten, fifteen, or more. Ellie and I have each been working in real estate for a collective 30 years, and we’ve seen it all. Here’s our take on getting the most attractive offer possible in front of the seller.
If possible, pay for the house with cash.
Cash offers remove the hassle of paperwork, deadlines, and possible stumbling blocks with a loan. A seller may choose a lower offer if it’s in cash, as opposed to a higher offer with a mortgage contingency, because cash is a sure thing. If you can come up with cash in the short term (borrowing from family or taking out a Home Equity Loan or Line of Credit on your current property are options to explore), you can always finance after you close.
If, like most people, you need a mortgage in order to buy, put up the highest down payment you can manage. 10% or 20% is no longer the norm; think 40% or higher if at all possible. Again, this sweetens the deal for the seller—less money borrowed means less chance of a mortgage falling through at the last minute.
Waive, waive, waive.
To get the home of their dreams, many buyers are waiving their mortgage contingency and foregoing inspections. While we do not recommend either of these things except in specific special circumstances (case by case), you should know that there are buyers who will take these steps. Please contact us to talk about how to navigate these waters.
Overbid—but overbid smartly.
In Arlington, Watertown, and Medford, most homes are selling at 10% above listing price. That number rises to 15% over listing price in Cambridge these days. You should prepare to follow suit. But work with your agent to get the number just right. You don’t want to underbid, but you don’t want to overbid, either, especially if you have a mortgage contingency. If the seller thinks the property won't appraise (meet the market value as determined by your bank), they may take a lower offer.
If you can’t afford to overbid on the homes you’re currently looking at, and you’re repeatedly losing out on offers, you need to re-evaluate what criteria are most important to you. You might choose to look at homes listing for lower prices, and overbid on those.
Stay positive, stay active.
You will most likely lose out on a home during your search. In fact, in this market, you might lose out several times. Unless you’re a billionaire with vaults of cash, this is the buyer’s reality right now. But if you stay focused on your strategy, keep communications open with your agent, and keep honing in on your goals, you’ll find what you’re looking for. And in our personal experience, we’ve found that if a buyer loses out on one offer, they nearly always end up with something they like better than that one they lost.
When Ellie and I are working with buyers who have lost an offer or two, we come together to review their goals and priorities and tweak our offer strategy. Some folks soldier on and eventually win an offer—and how sweet it is! Others take a break from looking, and return to the market in a year or more. Still others shift their priorities, get creative with financing (such as taking out a Home Equity Line of Credit), and end up with a home that, despite being different from their original ideas, actually suits them perfectly. We’ll work with you to help determine which is the best course of action for you at any given time in the house hunting process.
Ready to start looking? Contact us and we’ll help you be the best-prepared buyer you can possibly be.