Write to Win: How to Beat Out the Competition for Your Dream Home
The information in this blog is really helpful to any buyer competing in a Seller’s market, where the amount of buyer demand outweighs the amount of available homes for sale, but I’ll give you some background as to the current environment in which this is being written…It’s May 13th, and we’ve been under Safer at Home orders from the Governor of California and the Mayor of Los Angeles for a whole two months. COVID-19 still has a grip on the entire nation and this global pandemic does not appear to be letting up just yet… And yet, here in Los Angeles, the real estate market remains as competitive as ever and people are still out there putting offers on properties left and right!
I’ll give you some data to consider: here in the West Valley, concentrating specifically on Encino, Tarzana and Woodland Hills, the Median Days On Market is 13 days. Since the COVID outbreak, over 63% of Sellers received multiple offers and sold their homes for over their original list price. The inventory is tight, and buyer’s demand is still strong due to the historically low interest rates.
Let’s start with some facts of life: everyone is the star of their own show. For the most part, people go around thinking about themselves, their desires, their fears, their goals, their life. You’ve got to put yourself in the shoes of the Seller. Here - I’ll do it for you: they want to sell their house for top dollar, as quickly as humanly possible. Their ideal scenario: someone comes along with a duffel bag full of cash for the exact amount they want to sell for, and takes the keys, no questions asked, on the first day they put it on the market. Obviously, that isn’t going to happen, so they have to settle for the next best option. If you really want the house, and the market is super competitive, you need to find ways to give them as close to what they want as possible. Here are a few good tips:
Be the first one to see the house and write the offer quickly. It’s kind of like you’re back in school, OK? The kid who showed up to class early and turned in their homework on time was the teachers favorite. It’s just a truism. When you show up and perform quickly, it sends a message: PICK. ME.
Let’s run with the student metaphor… It’s even better when the homework that kid turns in is done perfectly. So make sure your offer is submitted with all of the appropriate paperwork, filled out correctly. In California, this includes the following:
RPA - the Residential Purchase Agreement, aka “The Offer”. This outlines the terms in which you are willing to buy the property.
Pre-Approval - Don’t even get me started on this. The pre-approval is the document that shows you can actually afford to buy the house. Unless you are paying all cash, if you don’t have a pre-approval in hand, you will not be even considered.
Proof of Funds - This is a bank statement, in your name (the name on the Offer), issued within the last month, showing that you have enough cash for the down payment.
Letter to the Seller - Write a letter to the Seller letting them know how much you love their home.
If the house is priced appropriately (that is, either slightly under or right at market price) offer them the full List Price, or a little above List Price. Hey! If you know they are going to get multiple offers, and you are already willing to compete, you should accept that it’s going to go over list price anyway. Start out strong to show you are serious. Obviously, your agent should run comps and be able to guide you so that you do not overpay. (Check out my post about what comps are)
But don’t compete on price alone! Another great way to grab their attention is to show them you want to buy the house quickly. In California, if you are using a loan to buy a house, there are 3 standard contingency periods in which you have to perform due diligence and research. If anything does not “check out” during those time periods, and you cannot negotiate successfully with the Seller, you are able to cancel the transaction. Make your contingency periods short and sweet. By all means, do your due diligence - but shorten the standard contingency periods. For example, the standard timeline for Inspections is 17 days. Honestly, if you are working with a great agent, they should be able to get them all done within the first 5 days of escrow (depending on what is needed, sometimes even less!). Tell the Seller you won’t wait 17 days, and that you’ll remove your Inspection Contingency within 7!
Work with a terrific lender. For example, the lender I work with can close escrow early, get a loan funded in less than 30 days, and underwrite a borrower directly so that they can write offers without a loan contingency at all! That’s impressive. Then your offer starts stacking up to those who are coming in with an all-cash offer. Also, my lender will call the Listing Agent (the agent repping the Seller) and let them know that he is an experienced professional who knows how to close a deal and confirm that he has run a full pre-approval on this particular client. This information is powerful.
Last but not least, make sure you work with a great agent! This should come as no surprise. You need someone working for you who has strong relationships with other agents, a proven track record of closing deals, and their finger on the pulse of all new inventory coming up. For example, to shorten your Inspection Contingency, you better have a great team of inspectors lined up who will book you an appointment quickly. Typically, buyer’s find their inspectors via referrals from their agent. If your agent hasn’t cultivated those relationships, you cannot get the work done fast. This tip may seem like a no-brainer, but in practice, it can be hard. There are many agents to choose from, and if you have never bought a house before, how do you know who to work with? I may be a little biased, but you can click here for my contact info :) Or click here to read my article about how to pick the right agent for you.
Of course, this advice should be followed to the degree you feel comfortable. Don’t stretch your budget to win at all costs. Be clear on what your limit is, and be willing to walk away from a deal.