Estate agent shaking hands with potential buyers in front of residential house

Have a thorough knowledge of recent sales in the area to give you a leg up in determining the details of your offer. (Getty Images)

2017 has presented a hot spring market fueled by high demand and low inventory. Buyers are doing their best to stay ahead of rising interest rates, but are often confronted with short time frames to view properties and end up competing against multiple offers. What can you do if you find yourself in this situation? Let’s take a look at six strategies for creating the strongest offer in a competitive homebuying situation.

Asses the comps. Throughout your home search process, you’ve gained a strong understanding of the market and how far your dollar will go by viewing homes and following what they sell for. Now that you've zeroed in on a specific house, take the time to review the most recent comparable sales with your agent to determine its actual value.

Think of market value as a bubble, spanning a small spectrum of prices. On the back end of the bubble, you are getting the house at a great price – indicative of a buyer’s market. The front end is the top dollar you would pay for the home without overpaying – a perfect example is today’s seller’s market. The sweet spot in the middle is a price representative of a mutually beneficial price.

While preparing the offer, assess the comps and find out what part of the bubble you are willing to pay for the house. Be sure to set your expectations accurately considering the perceived demand for the house as well as local market trends.

[See: Weird Home Features That May Confuse Homebuyers.]

Ask questions. Do not assume the sale price is the end-all-be-all for the sellers. Have your agent find out where their priorities lie before constructing your offer. Depending on their life situation, previous real estate experiences and other important factors – there may be other ways to provide strength to your offer.

One example is to find out their ideal settlement time frame. While some sellers like to be out as soon as possible, others may want a longer timetable or lease-back to accommodate the purchase of their next house.

Have your deposit and financing in order. Again, the strength of your offer is made up of many factors. The deposit is one area you may be able to fortify by the increasing the amount, showing the seller you’re willing to put your money where your mouth is.

Talk with your lender to find out what loan options are available. It is imperative you don’t overextend or put yourself in a financially perilous situation. That said, there are certain mortgage programs a seller will find more attractive than others. Be responsible and financially knowledgeable to put yourself in the best position possible, both short and long-term.

[See: 8 Types of Roads That Can Have a Big Impact on Home Sales.]

Include an escalation clause. This is where it gets fun: An escalation clause can be added to the offer to incorporate incremental jumps in price above the highest offer. There is a cap in place to dictate just how far you’re willing to go.

An escalation clause is an excellent tool to span the “fair market bubble,” as it allows you to be highly competitive while not paying more than necessary. For example, if there are three bids on a property listed for $500,000, you can write a full-price offer with an escalation up to $525,000 that increases in $5,000 increments. If the second-highest offer is $510,000, you would only have to pay $515,000.

Why wouldn’t you want to make the increments as small as possible? You don’t want to allow consideration for any other factors the second-best offer may include, like financing or a better settlement time frame.

Write a letter. While we often look at an offer objectively when deciding what makes the most sense, there is always another human being on the other side of the transaction, foreclosures excluded. Recognizing the history of the property and telling the seller how you will build on it is an excellent way to set yourself apart. A hand-written note can tug at the owner’s heartstrings and tilt the scales in your favor.

Focus on what drew you to the house and what left the greatest impression. Be specific when you identify factors that set it apart from all the others you viewed and gave you that aha moment. Don’t tell the seller what was wrong with the property or what you’d do to improve the property, but explain how you plan to make it your home. It’s OK to play the growing-family card or any others you have.

It is not advisable to include a picture. While this has nothing to do with how good-looking you are, it has everything to do with violating fair housing laws. You don’t want the seller to feel any pressure one way or the other in their decision based on any of the protected classes – race, color, national origin, religion, sex, disability or family status.

[See: The Best Apps for House Hunting.]

Breathe. This may be the most beneficial (and overlooked) factor of all. Fast-paced seller’s markets can often cause frustration and anxiety which lead to poorly thought out, rambunctious decisions and buyer’s remorse.

Be sure to take a step back and analyze your thought process, decision and the short- and long-term ramifications. Rather than letting your competitive nature or emotional attachment to the property get in the way, take a moment to breathe and collect your thoughts before submitting your offer. This will help ensure your aha moment doesn’t become an “oh crap” moment six months later.

Tags: real estate, housing, home prices, housing market, new home sales, existing home sales, pending home sales


Ray Boss Jr. is a full-time, licensed Realtor for Re/Max Realty Group in Gaithersburg, Maryland, with over 11 years of experience working with clients ranging from first-time homebuyers to investors, sellers and renters. You can learn more about Ray by connecting with him on LinkedIn.

Recommended Articles

What to Know About Moving to California

Devon Thorsby | Jan. 15, 2020

No other state offers such a variety of places to live and job opportunities, but expect to pay more.

Which Home Is the Best Layout for You?

Devon Thorsby | Jan. 10, 2020

Before you buy or build a home, consider how the footprint and floor plan fit with your lifestyle.

Why You Should Sell Your Home in 2020

Devon Thorsby | Jan. 8, 2020

The housing market may not be as hot as in previous years, but selling now could be your best bet.

What to Know Before Renovating a Garage

Deanna Haas | Jan. 6, 2020

A garage renovation can add value to your home – here's what you should keep in mind before starting the project.

Best Interior Design Instagram Accounts

Devon Thorsby | Jan. 3, 2020

These interior design Instagram accounts offer advice, inspiration and resources to elevate your home design.

Is an Open House Necessary?

Wendy Arriz | Jan. 3, 2020

The traditional open house format is still popular, but whether it's effective in helping sell your home may depend on the type of property.

Hygge Decor Ideas for Your Home

Devon Thorsby | Dec. 27, 2019

Achieve the cozy feeling that embodies Danish hygge in your home design.

What to Know About Moving to Dallas

Devon Thorsby | Dec. 26, 2019

Before you decide to move to Dallas, explore all your options in this expansive metro area.

Options When You Can't Pay Your Mortgage

Lisa Larson | Dec. 24, 2019

Financial difficulty can leave you unable to pay your mortgage, but that doesn't always mean you're facing foreclosure.

What to Know Before Moving to Colorado

Devon Thorsby | Dec. 20, 2019

Get your hiking boots – and your wallet – ready for a new life in Colorado.

What Is the Cost of Living in Boston?

Dima Williams | Dec. 20, 2019

Here is what it takes to afford to buy, rent and live in the capital of Massachusetts.

Best Places to Live With Climate Change

Devon Thorsby | Dec. 18, 2019

See which metro areas are more resilient to changing climate conditions.

Housing Market Expectations in 2020

Devon Thorsby | Dec. 13, 2019

Low mortgage rates will help homebuyers afford property, while sellers won't see much reason to move.

Best and Worst Design Trends of the '10s

Robin Kencel | Dec. 13, 2019

Take a look at the 2010s fads that have transformed into staples, and others that are best left in the past.

What Is the Cost of Living in Seattle?

Devon Thorsby | Dec. 11, 2019

Here's a breakdown of what you need to be able to afford living in and around Seattle.

Is a Condo, Townhouse or Co-Op Best?

Steven Gottlieb | Dec. 11, 2019

Different forms of ownership have pros and cons, depending on how you plan to use the property.

Design Trends to Look Out for in 2020

Devon Thorsby | Dec. 6, 2019

Which design trends are on their way in, and which ones should you ditch in 2020?

What to Know About Moving to Nashville

Devon Thorsby | Dec. 4, 2019

Examine the details that can help you decide if you should move to Nashville, and what to expect when you get there.

Issues to Spot in a Final Walk-Through

Deanna Haas | Nov. 25, 2019

Both buyers and sellers should be aware of the issues that can arise during a final home walk-through.

Should You Buy a House With Cash?

Devon Thorsby | Nov. 22, 2019

Before you go all-in with your money, consider these caveats to paying for a home with cash.