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: Tenant Rights in Texas

Devon Thorsby | Feb. 15, 2019

Here's how renters in Texas fare when facing a dispute with their landlord.

Measuring Your Home's Square Footage

Devon Thorsby | Feb. 13, 2019

Know exactly how big your house is, and maximize the way you use it.

5 Travel-Inspired Home Decorating Ideas

Sally Forster Jones | Feb. 12, 2019

Transform your home's interior with a few simple projects that highlight the time you've spent in other parts of the world.

What to Know About a Pending Home Sale

Devon Thorsby | Feb. 8, 2019

As the buyer, seller or interested outside party, here's what you need to do while a real estate deal is pending.

10 Home Renovations Under $5,000

Devon Thorsby | Feb. 6, 2019

How to get the most impact from your renovation when you're on a tight budget.

4 Eco-Friendly Upgrades for Your Home

Sally Forster Jones | Feb. 6, 2019

You can improve your home with green features, but you don't have to sacrifice a sleek design.

What to Know: California Tenant Rights

Devon Thorsby | Jan. 30, 2019

What renters in the Golden State should know before they go toe-to-toe with their landlord.

How to Find a Room for Rent

Geoff Williams | Jan. 29, 2019

If you're relocating or you have poor credit, subletting a room can be a smart financial move.

The Best Places for Young Professionals

Devon Thorsby | Jan. 25, 2019

These places offer the job market, affordability and reputation recent grads are looking for.

First-Time Homebuyer Programs in Florida

Devon Thorsby | Jan. 25, 2019

State and local options provide financial assistance and teach about effective homeownership.

What Is a Condo – and Should I Buy One?

Geoff Williams | Jan. 23, 2019

Consider fees, association rules and mortgage rates before committing to condo ownership.

5 Healthy Enhancements for Your Home

Sally Forster Jones | Jan. 23, 2019

These easy changes to your home and how you maintain it can help you live healthier all year round.

How to Become a Real Estate Agent

Devon Thorsby | Jan. 18, 2019

Follow these steps to start on the path to being a successful real estate agent.

How to Find a Real Estate Agent

Devon Thorsby | Jan. 18, 2019

Here's how to find a real estate agent to help you confidently navigate a home sale or purchase.

How to Break Your Apartment Lease

Devon Thorsby | Jan. 18, 2019

Five options for you to end your rental contract before time is up.

How to Back Out of a Real Estate Deal

Devon Thorsby | Jan. 18, 2019

Here are your best options for bowing out of a home purchase or sale without ruffling too many feathers.

The Best Places to Live in Florida

Devon Thorsby | Jan. 18, 2019

See how the most populous metro areas in the Sunshine State compare to each other.

6 Tax Breaks for Homeowners

Devon Thorsby | Jan. 16, 2019

Keep these deductions in mind as your prepare for your next tax filing.

How to Tackle Major Home Winter Repairs

Devon Thorsby | Jan. 11, 2019

Avoid a bigger disaster when faced with freezing pipes, a broken window, power outage or roof leak.

Clever Tricks to Rejuvenate Your Home

Sally Forster Jones | Jan. 9, 2019

Simple improvements that will make your living space feel new again on a small budget.