October is Luxury Month on Inman. Inman Handbooks offer deep dives on luxury marketing and agent branding, luxury staging, referrals, and more. We’re thinking about what luxury means now, examining how the pandemic is reshaping the needs of luxury buyers, and talking to top luxury agents, all month long.
As we close out the last quarter of 2020, the market still continues to be hot, and the competition is greater than ever. With low mortgage rates and changing housing needs, bidding wars have increased tremendously. According to a recent report by Redfin, one-third of homes nationwide sold in less than 30 days.
Although receiving multiple offers can be a positive opportunity for sellers, it can be daunting for buyers, especially since the best offer isn’t always the one with the highest price. Here are three tips to guide clients and help them compete in today’s ultra-competitive market.
Set your budget
When sitting down with your clients, help them set their budget. While outlining a realistic budget, it is also important to make them aware of additional costs such as closing fees, taxes and other expenses involved in purchasing a property.
Because buying a home can be an emotional process, clients can be tempted to overextend their budget, especially during a bidding war. Remind your clients that no matter how badly they might want a home they’ve put an offer on, it is crucial to stay within their set budget and make sure they can afford the monthly payments that come with owning the property.
Our team suggests offering a checklist outlining items such as the mortgage, homeowners association fees, maintenance, taxes and so on so they know they can afford the home they intend to purchase. Once that budget is in place, you can guide them through the next steps of the homebuying process.
Make sure your client’s financing is solid
Although cash offers are most favorable for sellers, even luxury homebuyers are now opting to finance to take advantage of the current record-low mortgage rates. That said, it is more important than ever to make sure your financing is strong before placing an offer on a property.
As real estate agents, our team has seen deals fall through even with buyers who have pre-approval letters from their lenders. These days, an offer with rock-solid financing can outperform one with a higher price. We recommend working with a reliable local lender, which will reassure the seller, and this trust can go a long way.
Another way to stand out from the competition is by offering a higher deposit or down payment. This will not only show that your client is serious about purchasing the seller’s home but also demonstrates their ability to pay for it. Once the offer is in, we ensure each member of our team knows their role and keeps all parties involved through each step of the process and makes sure nothing falls through the cracks.
Make your offer strong
With financing secure, make sure your client is prepared to offer the maximum amount possible within their budget. In today’s competitive market, if a client has identified their dream property and they’re up against competition, then the best bet is to simply outbid the others.
Coming in strong with quick contingency periods that are below the boilerplate terms in the purchase agreement, is also strongly advised. In this competitive market, sellers want the maximum amount of money for their property and the fastest close.
By having a strong, well-functioning team, you will be able to better serve your clients and make sure they are fully prepared and educated about competing in today’s market. Today, it is very important for your team to be strategic in helping guide clients through their transaction and have the strongest offer possible.
Be sure to review your client’s budget and keep it in mind through every step of the process. In addition to confirming the maximum budget of your clients, solidifying financing is key. Remember, an offer with very solid financing can even outperform an offer with a higher price.
Finally, if your client has identified their dream home and doesn’t want to get outbid, make sure they are prepared to offer at the highest end of their budget. In times like now, a strong bid and fast closing will help you stay ahead of the competition. Ensuring your team is employing these important tactics will keep you at the top of your game.
David Parnes is a director at The Agency in Los Angeles. Connect with him on Instagram. James Harris is a director at The Agency in Los Angeles. Connect with him on Instagram.