With inventory decreasing in the DC metro area, sellers are currently in the driver’s seat when it comes to selling their home. More buyers are finding themselves in multiple offer situations, especially in the $300,000 - $500,000 price point. In recent weeks, Robert Garcia, a Realtor® with the Eric Stewart Group of Long & Foster, represented three different buyer clients who all found themselves competing against other buyers. In each situation, Robert’s buyers came out on top. How did this happen? Read on to find out.
Robert Garcia Shares His Viewpoint On How To Win Your Dream Home
It really all comes down to the agent preparing their buyer clients properly. What I have found to be the most effective tool in helping my clients get their dream home is to get them pre-approved for a loan, versus pre-qualified. What is the difference?
A mortgage loan pre-qualification is simply an estimate of how much house a buyer can afford and how much money a lender would be willing to loan. This involves a buyer providing a lender with their income, assets, debts, and a potential down payment amount. The lender will then provide the buyer with a ballpark figure in writing of how much the buyer could afford to pay for a monthly mortgage. The buyer does not incur any costs to get this done and there is no commitment on either side.
Getting pre-approved for a loan is a more involved process, but also gets a buyer one step closer to full loan approval. In this process, the buyer provides a home loan lender with actual documentation of their income, assets, and debts. This process may require an application fee since the bank will run a credit check and work to verify all of the buyer’s employment and financial information. Once approved, the lender will provide a letter of commitment, stating how much money the bank is willing to loan for a buyer’s home purchase.
Even with a pre-approval, there is still not a guarantee that the loan will go through. The funding will only be given when the property appraisal, title search, and other verifications check out on the home a buyer has chosen to purchase. In addition, a pre-approval letter is not binding, a buyer can still obtain a mortgage from a different lender. However, if a buyer does stick with the same company that pre-approved them, the application process will be much shorter once they find the right house. With a pre-approval in place, listing agents and sellers will take you much more seriously since your mortgage funding is already in place (assuming you stay with the lender who provided the pre-approval letter).
Recently, I assisted one of my clients looking to purchase a home in Germantown, MD. The offer price was $500,000 and we were competing against four other offers. All of the offers had escalation clauses, including the offer from my buyers. So, how did my clients come out on top?
First, as recommended above, I had my clients get pre-approved for a loan. Once my clients indicated they had a strong interest in this specific property, we all went to the Open House the listing agent held so we could meet the agent representing the sellers in person.
I then prepared the offer and included a letter that my clients had written thanking the sellers for all the work they’d done in the house. Yes, buyer letters can make a difference and often pull at a seller’s emotional heartstrings. I followed up with the listing agent on Monday and Tuesday, until the day the offers were presented.
My client’s escalation clause indicated they were willing to go up to $515,000 and were going to put 5% down. A competing offer’s escalation clause went up to $520,000 and those buyers were willing to put down 20%. However, my clients got the house because they had their financials in order and had already secured a mortgage pre-approval letter. My buyers also showed the sellers how serious they were in the house by writing a personal letter to them. It also didn’t hurt that I was very persistent in following up with the listing agent on the status of our offer.
In another situation, I had a buyer client who was competing with six other offers for a home that was priced at $290,000. While some of the other offers were higher than my client’s purchase price of $300,000, the listing agent was concerned the home would not appraise at those higher values. And, the buyers on those other contracts were not willing to make up the monetary difference if the house did not appraise. Since a mortgage lender determines the loan amount based on the appraised value, if the buyer will not cure the appraisal deficiency by paying more in cash, the seller will have to reduce the price to meet the appraisal value for the deal to stay intact.
In the end, the seller opted to go with our contract because we were already pre-approved with a lender. And, because when I was preparing the purchase offer, I had asked the listing agent if there were any contract terms the sellers were specifically seeking. While the sellers wanted to get the home under contract, they did want a rent back. A rent back allows a seller to stay in the home for a pre-determined amount of time after settlement for an agreed upon rental amount, which is typically the buyer’s monthly mortgage prorated for the amount of time the seller stays in home after settlement. Not all of the competing contracts had the rent back option and this also proved to be a distinguishing factor in our offer.
These experiences demonstrate that it’s very important for home buyers to work with an experienced agent who will truly be their advocate in the home buying process, and who knows how to put together a winning offer. With a good agent in your corner, you can be well on your way to home ownership!
Do You Want More Insights On The Home Buying Process?
Are you beginning the home buying process and need some real estate expertise? Contact one of the trusted Realtors at the Eric Stewart Group for assistance. Over the last 28 years, we have helped more than 2,500 happy clients buy and sell homes. Also, download our FREE Savvy Buyer Guide. Jam-packed with invaluable home buying tips, it will help jumpstart your efforts to get your dream house for the best price!
