Navigating homebuyers through a competitive, low-inventory market can be difficult. Even the most experienced real estate agent can have a hard time helping their clients through a tight housing market. From bidding wars to high asking prices, set expectations for your clients on what to expect in a hot market.
Here are some tips you can give your home buying clients on what to expect in a hot market.
1. Be transparent about the real estate market
Be upfront about what homebuyers should expect in a seller’s market. This is doubly true if your client is a first-time homebuyer. They need to expect to be up against bidding wars, cash offers and higher prices.
Gently discuss with your clients what they can expect with what they can afford. Work through their list of needs versus their wants. Find out absolute deal breakers and try to veer away from them. They may not be able to find their perfect home, but they may be able to find one they love.
2. Encourage clients to get a verified approval
A Verified Approval Letter (VAL) through Rocket Mortgage® can help your client’s offer stand above the rest. A VAL isn’t just any pre-approval. It shows the seller your client is ready to buy because it’s backed by the buying power and expertise of Rocket Mortgage.
Using Rocket ProSM Insight, you can access your client’s VAL at any time as well as the information on how much they’re approved for.
3. Consider escalation clauses
To make a more competitive offer, talk to your client about adding an escalation clause to their bid. If they’re outbid, an escalation clause will give an immediate response, laying out how much more they’re willing to bid above competing offers.
A downside to an escalation clause, though, is that a seller may reject the bid, knowing that it’s not the client’s best offer.
4. Talk with your clients about adding extra incentives
In a seller’s market, there are a few ways buyers can sweeten the deal. Offering more earnest money or making a bigger down payment shows the seller that the client is serious about buying and may help the bid stand out.
You could also talk with your client about waiving contingencies, such as an appraisal or home inspection contingency. This may give them an advantage on a home they’re serious about. However, tell them how it can backfire. For instance, if the home appraises for less than the accepted price, they’ll have to cover the gap or lose their earnest money if they back out.
5. Understand your client
Some clients are more conservative with their spending than others. Be real with your client on what they can afford, but also know when to let them take risks. If they want to buy at the high end of their budget and waive contingencies, inform them of what this could mean for their finances, but also know that it’s their decision to make.
Home searches are hard. The most important things you can do for your client is give them good advice, coach them and connect them with the best house they can get.
The bottom line: focus on the positives
Charting the waters of a market with limited inventory is tough for any buyer’s agent. You’re really earning your commission. It may be a competitive market, but focus on the good. Mortgage rates are still low right now, things are better than they were last year and you’re helping people find their next home.