How to get your Ann Arbor purchase offer accepted in a hot seller’s market (and not lose your head or make a mistake in the process).
If you are actively trying to purchase a home in Ann Arbor and the surrounding areas, you have seen first hand how hard it is to win at bid on a home at times. Sellers have the upper hand and buyers need every competitive advantage and creative angle available to them to beat out other buyers in the hunt for a good home.
Bidding wars are the norm. Buyers are having to offer above asking price, above comparable sales, be lenient on inspection deficiencies, provide discounted or free occupancy. Even then, on homes under $500,000 buyers with cash are coming in and winning the bid.
With all this going against them, there are still ways for buyers to succeed in the game at this time and find a home that suits their needs with a payment that is manageable.
Here are several tips to help you succeed in your home purchase.
- Work with a seasoned agent team that can support you every step of the way. Now is not the time to use an agent that doesn’t have experience in the market. A strong agent will
- Position and differentiate you and your bid against the competition
- Prepare a well organized, complete offer package
- Have a good reputation in the marketplace with listing agents
- Work with lenders that have a great reputation in the marketplace
- Be able to negotiate on your behalf when its time
- Be able to prepare and explain an acquisition strategy that you can trust to get the job done.
- Send you good listings to consider, set up accurate searches based on your preferences and be hawking the new listings for you each day.
- Work with a seasoned lender. Your agent will recommend a lender that is known and respected in the agent community as someone who gets their clients to the closing table on time and without unexpected problems. A strong lender will:
- Be able to speak to the listing agent and explain why your offer is as good or better than the cash offer they may be receiving
- Will get you approved through underwriting prior to writing your offer.
- Have lots of experience working in the local community
- Be available for you at all reasonable (and some unreasonable) hours.
- Be able to clearly communicate all the “moving parts” of a home loan so that you understand the process and can focus on finding the best home possible.
- Make it easy for your seller to accept your offer.
- Have your agent find out what the seller wants and needs for their move. If there is a special consideration the seller has, make sure to build an allowance for this into your offer.
- Be flexible on close date and offer free occupancy as needed by the seller. This may make the difference between two similar offers.
- Keep the inspection timeline and requirements for inspections as tight and simple as possible. You want the seller to know that you will be easy to work with, that you are organized and will proceed quickly to get things done.
- Decide up front that your inspection will be “for informational purposes only”. You can still walk away if you decide repairs are beyond your reach but your seller will know you mean business; that you are a no nonsense buyer.
- Write an offer appraisal gap coverage. In a fast rising market, appraisal prices can lag behind current home market values. What buyer and seller agree to may be less than the bank agrees to loan against. Offer to cover the difference between purchase price and appraised value
- Write an escalation clause into your offer. If the listing agent will accept this, offer a price to beat all bonafide offers up to your threshold price. Start at a price high enough that your seller knows you mean business.
- Get in homes quickly. Be educated by your agent so you are ready to write a great offer immediately when the home hits the market. He who hesitates is lost in this market. Is your agent telling you about great homes that hit the market or you having to alert them?
If you want the house – step up and buy it! Offer the price such that if you win the bid you will not feel you overpaid and if you lose the bid, you won’t wish you had bid higher. A good high offer with appraisal gap coverage, well positioned and presented by an experienced buyer agent, using a respected seasoned lender can win – even against cash.
Now, here are my tips for not losing your head in this market and some ideas on finding less competitive homes to bid on that still offer the value and amenities you need in a home. After all, you want a strong investment and a great place to call home.
- Consider moving out further! I know, you want to live in town and walk downtown, bike to work etc. Well, you will have to pay for it, and it may require cash. The market is a lot calmer just a little further out. Each band out from downtown offers a little lower price per square foot, a little less competitive purchase environment. Your agent can explain and help you understand these tradeoffs and help you determine neighborhoods that hit the sweet spot for you in the current market. You will get more house for your money, lower tax rates if you are in the townships vs. the city and probably will still land in a great neighborhood where you can develop lifelong friendships.
- Keep your head on straight. You may lose a couple of bids – its ok! In the long run, a good agent will help you keep your perspective and get you into a home you will love for the long haul. Remember it is easier and cheaper to buy than it is to sell (even in this market). Also. know that you didn’t just miss the last good house! There is always a better house to be found! It’s true. Keep saying this – I know from my personal experience and my experience helping clients over the last 17 years!
- Consider a home that needs some work. A home that needs some updating or repairs will scare off many buyers. A large number of buyers either do not have imagination for what could be done to improve a home, or do not have the time or interest to do updates and repairs. If you can take these on, you may still be able to find a bargain. Our agent can recommend a contractor to realistically estimate repairs.
- Work with an agent that will find off market properties. Aggressive agent teams like ours spend time on the phone and in their databases every day looking to match buyers and sellers with homes that have not hit the market yet. A seller that does not want to mess with showings and a buyer who is willing to take on a property as is may be the a perfect match.
- Wait until after the 4th of July to buy. Usually the market cools off as we get into summer and you will find that you have a little better shot at the hot listings. Don’t expect a big change this year, but you will probably see a little better market balance later in the summer. Remember though, interest rates are rising and this is eroding your purchase power.
Above all, my best advice is to always do what is right for your family at this time. You know what is important for you and your family to live their best life possible. Your purchase is more than an asset – prices will rise and fall and while it is important to make a solid investment there is so much more to consider. Your home is where you live your life, raise your family and make your memories.
Contact us. We’ll work with you to clearly understand what your needs and the best path to get you into the best home possible.