Are you struggling to get your offer accepted in the Bay Area’s hot seller’s market? Buyer competition is fierce. Despite increasing home prices, buyers are scrambling to lock in today’s low mortgage interest rates by closing on a new home as quickly as possible.
Homes are sitting on the market only a few weeks before going under contract. And in many cases, the purchase price is well over the listing price.
Just look at the March 2021 data:
San Francisco: The average home is on the market for 25 days and sells at 6% over the asking price.
San Mateo: 11 days on the market, selling for 4.7% above asking.
Alameda: 13 days on the market, selling for 9.1% over asking
Oakland: 13 days on the market, selling for 13.7% above asking!
The good news is that there are ways you can compete with other buyers and finally secure that new home.
Here’s how to get your offer accepted in a seller’s market.
1. Bring Your Highest Offer (Fast!)
In today’s market, the listing price might as well be considered a starting price for the bidding war. Your Sequoia real estate agent can analyze comparable home sales to give you an understanding of a home’s fair market value, which will help guide your offer price. Many buyers are consciously paying more than the fair market value in anticipation of future value growth.
You may even want to include an escalation clause in your offer. This clause is used to automatically increase your offer amount to match any competing offers, up to a specific price. Escalation clauses eliminate the need for excessive back-and-forths with multiple buyers and make the decision easier for the sellers.
And there is no room for hesitation in this market. If you’re serious about buying, make the decision and submit your offer right away.
2. Increase the Down Payment
Sellers prefer all-cash offers because there is no risk of the deal falling through due to financing issues when the buyer pays cash. But in our high-value market, all-cash isn’t practical for many buyers.
What you can do is increase your down payment as much as your budget will allow. Not only does this minimize the risk of failing to secure funding for the remainder, but it also allows you to waive the appraisal contingency. If the appraisal is lower than the purchase price (which can happen in this market where values are growing by the day), the lender will want to base the loan on the appraisal amount. And with a higher down payment, you can cover the difference between the appraised value and purchase price.
3. Waive Contingencies
Contingencies are conditions that must be met for your deal to close. The fewer contingencies in your offer, the more likely the sellers will be to accept your offer.
Common contingencies include:
Financing: the buyer can walk away if they can’t get a loan to complete the purchase
Appraisal: the buyer can walk away if the home appraises for less than the contract price
Home Inspection: the buyer can walk away if they don’t like the results of the home inspection
Title: the buyer can walk away if ownership of the property is contested or if there is a lien against the property.
Waiving the title contingency is extremely risky. You could be responsible for paying any liens against the property. Or another party could come forward with an ownership claim to the property that you would have to fight in court.
Waiving the home inspection is also risky. But some determined buyers are bringing a home inspector to showings so a quick inspection can be done on the spot. This quick inspection gives the buyers enough confidence to waive the inspection contingency.
If you’re offering a substantial down payment, you can waive the appraisal contingency. And if you’re offering all-cash, you can waive the financial contingency.
Getting your offer accepted in a seller’s market isn’t easy, but it can be done!
If you aren’t already being represented by a Sequoia agent, contact us today to consult with one of our experienced buyer’s agents. We can help you draft an offer with the best chances of getting accepted and get you into your new home!