How To Buy A Home In A Hot Market Like This One

It wasn’t that long ago that sellers were practically begging buyers to purchase their home but that is not the case today.  Today, in some very sought after St Louis neighborhoods the inventory of homes is so low and demand so high that when a new listing hits the market it’s like a feeding frenzy for buyers.  This has led to frustration and disappointment for many buyers leading some to become a little too overanxious and buy a home that really is not right for them or overpay for one out of fear of “missing out”.

So, how do you get your offer accepted on the home you want?

While there is no fool-proof or guaranteed method, my 35 years experience in the business, including being the principal in the purchase of more than 2,000 properties, as well as having an excellent recent track record of my buyer and investor clients getting contracts accepted and beating out the competition, has helped me develop some methods that I know work and will stack the deck in your favor.  While not all my suggestions are right for every situation, and a plan must be custom tailored to the specific buyer and transaction, here is a list of things that have worked when right for the given situation and client:

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  • Be represented by an experienced, knowledgable, buyers agent who is working for you and in your best interest.  This is not the type of market to try to go it alone nor to pick an agent based upon friendship or affiliation, instead pick one based upon their experience, knowledge and reputation in the industry.  You definitely do not want to deal directly with the listing agent (see DontBuyFromTheListingAgent.com for more info).  Why is the selection of an agent so important?  This is a unique industry in that competitors must cooperate with each other to do business.  Since your buyers agent will be dealing with a listing agent who has tremendous influence on the seller, it is important that your agent be known and respected by his or her peers.  Listing agents definitely tend to shy away from offers that are from “problem” agents and gravitate toward offers from agents they feel are professional, competent and can get the deal to closing.
  • Be comfortable with your knowledge of the market.  With the best listings often selling in the first day or two, you must be prepared to respond quickly.  If you are ill prepared you will either be too nervous to make a decision, or perhaps make a bad decision.  However, on the other hand, if you have been adequately educated on current market conditions by your agent and have a through understanding of home prices and values, you will have the confidence, and wisdom, to make a quick, intelligent decision.  Also, if you are focused on just a few subdivisions, you may want to try to obtain the subdivision indentures and restrictions for them so you can review them in advance and avoid having to make your contact contingent upon reviewing them (your agent should be able to provide these).
  • Be prepared.  In addition to knowing current home prices, you also need to be prepared from the standpoint of your finances.  This would include, at a minimum, getting pre-approved by your lender.  It would be preferable to have your loan fully underwritten, making you a stronger buyer in the eyes of the seller and perhaps, given the right set of circumstances, may put  you in a position to write an offer that is not contingent upon financing (don’t do this without thoroughly understanding the risks and having a contingent plan in case a problem arises).  If you are planning on paying cash for the home, or at least writing a cash offer, you will want to have current statements showing you have adequate cash on hand to cover the purchase.  These statements should be provided to your buyers agent so they will have them to present with your offer when the time comes.  Finally, you should write out a check to the title company for the earnest money and give to your buyers agent so they will be able to include a copy of it with your offer.
  • Use electronic signatures.  Most agents today use Docusign or another platform for electronic signatures which allows you to easily review and execute your offer from wherever you may be (as long as you have internet access) making it quick and easy to get your offer put together.  If your buyers agent doesn’t use this, or doesn’t feel comfortable with it, find a new agent.  You don’t want to miss out on an opportunity because your agent was too slow getting the offer done.  The last couple of buyers I represented we had offers in the hands of the listing agent within minutes of looking at the home and deciding it was the right one.  By moving quickly, we had less competition as other buyers were moving slower.
  • Get notifications and updates on new listings.  You will want to be using a good real estate search website, preferably one that, unlike Realtor.com and Zillow, does not show listings that already have contracts on them, which wastes your time, and instead just shows active listings from the MLS, such as StLouisRealEstateSearch.com.  Be sure you, or your agent, have set up saved searches so that you will receive notifications of new listings that hit the market.  In addition, your agent should have similar searches set up in the MLS for him or herself to be notified as soon as new listings for you hit the market.  Between you and your agent, hopefully nothing gets missed that you would be interested in.
  • Don’t waste your time looking at the wrong homes.  The last thing you want to do is to take time to look at several homes that are not the right ones for you while, in the meantime, the “right” one comes out and you miss it or are too busy to see it.  With technology today, you can easily view the homes from your computer or tablet as soon as new listings hit and quickly eliminate the ones that you don’t like while honing in on the ones you do like.  Most listings today have an abundance of good, high-quality, photos, and sometimes even a virtual tour or 3d views which really let you get a good feel for the home.  This, along with google maps and earth which allow you to see the yard, surrounding area, neighbors, etc, really makes it easy to narrow down the list to those you want to see in person and will be worth the time.
  • Go see the homes now, not later.  Once you have reviewed the listing online and determined it’s a possibility, if it’s a new listing, you will want to see it as soon as possible.  I’ve had much success getting my buyer clients offers accepted simply by being one of the first couple of showings and then getting an offer in quickly while other potential buyers (and competition) hasn’t got around to looking at the home yet.  If it is not a new listing, there won’t be as big of a rush to get there.
  • Get Intel on the seller.  Today there is a wealth of information available to us so you might as well use it to your advantage when buying a home.  When representing buyers, I make a point to find out what I can about the seller of a home my client is interested in so we can bet a better idea of their motivation (or lack thereof) to sell as well as get a better idea of what we should offer so my client offers enough to buy it, but does not overpay.  Information I often provide includes things like how long current owner has owned the home, what they paid for it when they bought it, what they owe on the home and if I can, factors that may be motivating the seller to sell (divorce, etc).  I also speak with the listing agent and try to find out what I can from them including, at a minimum, what an optimum closing date would be for the seller.
  • Make your offer fast and clean.  When the time comes and you have done all of the above and you find the right house, then make your offer right away.  Your agent should be prepared to put it together electronically within minutes of your decision.  When you write your offer I would keep everything I’ve discussed here in mind, but below is a short list of things to do or consider:
    • If you expect competition (like in the case of a new listing) make a strong offer.  In fact, in many instances, I suggest to my clients to make their top offer from the start as they probably won’t get a second chance.
    • Have more than “normal” earnest money. While the amount of earnest money varies based upon price range, your agent should be able to tell you what is normal and then try to do more than that.  This will give the seller comfort in your offer and make you stand out from the others.
    • If you are comfortable without it, don’t have a building inspection contingency.  This is a rather aggressive and somewhat risky move though.  A good alternative to waiving the inspection all together, but still make your offer stronger to the seller, is to use the building inspection contingency but eliminate option 3 which is the part that gives you the right to ask the seller to complete repairs.  This still leaves you the option to terminate the contract should things be revealed during the inspection that cause you great concern but takes away the fear from the seller of having to negotiate the sale a second time.
    • If you are a cash buyer, make the contract not subject to financing however, I would still suggest an appraisal rider.  This gives you some protection as well as the ability to renegotiate if it doesn’t appraise, and will probably not raise any concerns on the part of the seller by having it included.  If you are obtaining financing and the circumstances merit it, you may consider not making the contract contingent upon financing.  If you do use the contingency though, keep the time allowed for it as short as possible (make sure your lender agrees with the date) and include that full approval or pre-approval discussed above.  Also, make sure all the loan terms are filled in so the seller can easily see what you are looking to borrow and the type of terms.
    • If you followed my advice above you have already reviewed the subdivision indentures so won’t have to make your contract contingent upon reviewing them which is good.  Every contingency is just one more thing the seller has to worry about so, the fewer, the better.
    • For closing date, if your agent was able to find the optimum date for seller and it works for you, use it.  If not, then make it as soon as possible.
    • Have all documents there and complete.  Have the sellers disclosure (if there was one) the lead based paint disclosure, etc so that nothing is “left hanging” that could leave an out on the deal and make the seller nervous.  Your buyers agent should deliver one nice, neat package to the listing agent with the contract, all riders, disclosures, your proof of funds or pre-approval, the copy of your earnest money check, etc.
  • Don’t give them much time. For acceptance time I would allow the absolute bare minimum as extra time only works in the sellers favor and not yours.  The longer you allow the seller to accept your contract the more time there is for more buyers to come through the house, more time for buyers that have already been through to think about it, or work on an offer, for the listing agent to call other agents and encourage an offer, etc.   The last couple of contacts I submitted for buyers we only allowed a couple of hours.  (we were successful too!).  If this is lined out in advance with the listing agent and handled correctly by your buyers agent, it can be done and will work.
  • Tell em your story…if you want.  Ok, this is something I have come full circle on.  I used to think this was a waste of time but I’ve seen it work.  If you feel so inclined, it may help if you write a letter to the owner letting them know how you feel about their home, why you want to buy it, etc.  Yes, it can be a little sappy but it does work sometimes.  Seller’s often have a sentimental attachment to their home so they like to know it’s going to someone that cares about it as much as they do.

This ended up being a longer list than I thought, but it’s not everyday you buy a house and it is a major investment so it’s worth some time and consideration to get it done right.

If you have questions, or I can help you, please don’t hesitate to phone or text me at 314.332.1012 or reach me by email at Dennis@STLRE.com. You can also learn more about me by checking out my bio at DennisNorman.com.

 

 

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