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If you’re planning to buy a home, you’ll want to think very carefully about how you draft your offer. Real estate markets across the Pacific Northwest are hot right now and can be characterized as seller’s markets. A strong offer will help you come out on top.
What can you do to make your offer stand out? Here are a few tips to making your best offer and increasing your odds of coming out a winner.
Inventory is tight. Demand is high. Prices are soaring. Mortgage rates are relatively low. All of this means that it’s a competitive seller’s market right now, and you’ve got to have all your ducks in a row if you want to boost the odds that your offer will be accepted.
According to the National Association of Realtors (NAR), the inventory of homes available for sale in the 50 largest metros across the US dropped by 27.6% over the past 12 months. As of January 2022, there’s only a 1.8-month supply of existing houses. Tight inventory will continue to be a key factor in the increasing prices of homes.
The demand for housing among buyers continues to be strong, and the limited inventory has been unable to keep up with demand. Low mortgage rates have been an incentive for prospective homebuyers, and until enough homes are produced to meet the growing demand, it may continue to be a strong seller’s market throughout 2022. That said, rising mortgage rates could be a factor that may dampen demand somewhat.
Throughout 2021, home prices skyrocketed across the US. Last year, the median home sales price was $346,900, an increase of 16.9% from 2020, according to NAR. Many housing markets saw much higher increases in home prices compared to the national average.
In Idaho, for instance, home prices spiked 30.7% over the past year, while in Washington State, the average home price jumped 23.7%. States like these have heavily contributed to the strong home price growth we saw nationwide over the course of 2021, and experts believe that we could see a similar rate of growth throughout 2022.
Mortgage interest rates are still relatively low right now. As of the last week of February 2022, the rate for a 30-year fixed-rate mortgage is 3.89%. While that may be higher than what it was the same time last year, it’s still relatively low compared to a few years back.
Low rates encourage buyers to get into the market on the premise of more affordable mortgages. This extended low-rate environment has been a hefty driver in housing demand. That said, rates are expected to inch up throughout the year. The Mortgage Bankers Association (MBA) expects the rate to reach 4% by year-end.
There’s likely going to be a homebuyer’s queue you’re getting into. How do you get your offer bumped to the front of the line?
Bidding wars aren’t uncommon these days, especially in markets where inventory is super tight. If you want your offer to make it to the finish line, you’ll need to make it as strong as you can.
While there are plenty of items that sellers will look at in your offer, the first they’ll look at is the offer price. Whether you’re offering your absolute best offer price right out of the gates or are taking the wheel-and-deal approach, you should always go into an offer situation knowing what your upper price limits are. The only way to do that is to crunch the numbers beforehand.
To find out what you can afford to offer in a home purchase and how that purchase price will translate into mortgage payments, use our mortgage calculator for quick reference.
It would be nice to buy a turn-key home that requires nothing more from you than furnishing and decorating. However, you may want to consider buying a fixer-upper to save on the upfront purchase price.
If you choose to buy a home that’s in need of some TLC, there are mortgage programs available specifically for this purpose. ‘Rehab mortgages’ are specialized home improvement loans that buyers can use to purchase a home in need of renovation.
One of the more common loans of this type is the FHA 203(k) loan. With this mortgage, you can borrow just enough money to buy a home and cover the cost of upgrades.
A rehab mortgage comes with all sorts of perks, including the following:
Save money upfront. Instead of spending a big chunk of money from the get-go to buy a move-in-ready home, you’ll spend less upfront. You can finance the purchase price of the home and costs to renovate all with one loan.
Add near-instant equity to the home. The upgrades you make to the home can boost the property value. If you ever sell your home in the future, you can realize a healthy return on investment (ROI), or you can tap into the equity in your home in the form of a home equity loan or HELOC if you ever need a lump sum of cash at some point.
Put your own personal spin on the home’s finishes. You can use the funds from your rehab mortgage to update and customize the home to suit your specific tastes.
In a sizzling-hot real estate market, lowballing a seller or starting off small with your offer with the intention to negotiate might be risky. You could wind up losing the house or leave yourself open to a bidding war.
Instead, you may want to come out with your best foot forward and offer the highest price you can afford according to the current market. Just be sure not to make an offer that’s too high, or you risk blowing your budget.
In a hot seller’s market, there’s no point trying to underbid. Instead, make your best offer, or don’t bother.
Contingencies are meant to protect buyers from committing to a purchase that could result in significant financial loss. For instance, a financing contingency covers buyers if they can’t secure the mortgage needed to afford the home, and a home inspection contingency protects buyers from purchasing a property that requires expensive repairs.
However, there may be certain scenarios in which waiving contingencies may be best to get a seller to accept the offer. These ‘clean’ offers are more commonly seen in hot seller’s markets, particularly when a bidding war takes place. In this case, making a clean offer may be more attractive to the seller, who may be more inclined to choose the contingency-free offer over others.
That said, buyers should be very careful about waiving contingencies. If you’re considering this route, make sure you speak with your real estate agent in depth and make careful considerations. There may be contingencies that you can afford to give up, but there may be others that you decide to keep no matter what.
Some buyers have the financial means to buy a home outright in an all-cash transaction. How can the average buyer compete with such offers, especially when the market favors sellers?
The good news is that it’s possible to beat all-cash offers if your lender has a plan in place for this exact purpose. Sammamish Mortgage is proud to offer the Diamond Homebuyer program to help homebuyers get offers accepted in a competitive market.
Our Diamond Homebuyers gain the following competitive advantages:
Moving underwriting to the front of the mortgage process shows sellers that you’re a competitive, motivated buyer ready to make the home buy and close fast with no last-minute delays or surprises. Since this underwriting step is done as soon as you’ve identified a property, your mortgage preapproval is virtually completed by the time you make your offer, giving the seller an incredible amount of confidence in you as a buyer.
Since underwriting is already completed, you can make a confident offer without the financing contingency common with most buyers who leave underwriting until the last step. It’s this kind of benefit that makes your offer stand out, and gives you that much needed edge against other buyers who don’t have the same confidence in their mortgage approval.
Even if an appraisal comes in low, your mortgage loan can be protected from falling through with advance planning for just this type of situation. With fast-moving home prices, this can be just the competitive edge you need, and prevents you from being derailed by an older appraised value that gets updated halfway through your mortgage approval process.
This type of rapid closing is something even all-cash buyers can’t always promise – plus, we’ll even call the listing agent to back up the closing date so they know it’s a serious date and not pie in the sky. We’ll make sure they know the date is realistic and backed by our lending team.
When you’re a Diamond Homebuyer, you have all your ducks in a row before you even start to house hunt. You’ll know your mortgage rate and potential closing window up front, meaning you can make a fast confident offer as soon as you find the right property
Is your personal loan officer out of the office? No problem. At Sammamish, we make sure there are plenty of seasoned team members who are up to speed and ready to step in instantly when you need something and your main point of contact has stepped away from their desk.
Don’t be just another offer in a sea of faceless homebuyers. Be a Diamond Homebuyer and ensure you get noticed for a higher chance of offer acceptance in a seller’s market.
Sammamish Mortgage has been in business since 1992, and has assisted many homebuyers in the Pacific Northwest. If you are looking for mortgage financing in Washington State, we can help you get pre approved. Sammamish Mortgage offers mortgage programs in Colorado, Idaho, Oregon, and Washington.
Contact a loan officer if you have any mortgage-related questions or concerns. If you are ready to move forward, you can view rates, obtain a customized instant rate quote, or apply instantly directly from our website.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.