With the extremely low inventory and continual supply of buyers, the Silicon Valley’s South Bay is a competitive playing field. The November 2017 AVERAGE Sale to List Price hovered at 108% for all of Santa Clara County, with many homes having sold for thousands of dollars over the list price. And in many cases the winning bidder used an all cash offer to beat out those who require a mortgage. How do you as a buyer compete with that?
If competing in a cash market makes you nervous, there are ways to influence sellers in their decision making:
1. Highest price: Some sellers are looking for the highest bid, period. As a way to compete with that is to look at property that is lower that your full loan approval, giving yourself plenty of room to negotiate. Keep in mind, that you might need to show you have money set aside to make up any differences between anticipated appraisal and offer price.
2. Higher down payment: Since financing plays a big part of the offer decision, there’s an increasing trend of higher down payments. That trend is putting down at least 20%; the higher the better. According to research by Zillow, on average, higher down payment buyers make 1.9 offers, while low down payment buyers make 2.4 offers. “Sellers do need to feel comfortable that their potential buyer can qualify, and having more skin in the game in the form of a down payment tends to make people more comfortable,” said Zillow Director of Industry Outreach Jay Thompson.
3. Lender selection: Choose a lender that has a good reputation for closing and communicating. You want your lender to be part of your team, which means they can adjust a pre-approval quickly if necessary. As well as part of their normal practice, they reach out and connect with the listing agent on your behalf once your offer has been submitted.
4. Lessen/remove contingency removal time periods: This is where your agent should be providing you with information so that you can submit a strong offer. Don’t just sign all documents as they wiz through in DocuSign … READ them and ask questions! Look at the property multiple times and bring a contractor if there are concerns. Understand the comps and how those influence the appraisal. This will allow you to feel more confident about the contingency removal time periods.
5. Personal letter: Tell your story. Most homes have a history filled with memories. Telling your story of what you love about the seller’s home can influence and sometimes be the tipping point if all other offer aspects are equal. Here is a sample letter you can review.
6. Clean Offer package: Agents want to work with other professional agents. Every offer our team submits has all the signed components (including offer and disclosure documents, lending components, and personal letter) organized and personally presented (if allowed), with continual communication on your behalf.
We have a fantastic list of mortgage professionals who can “lend” a hand in helping you look at all your financial angles when developing your financial plan to purchase a home in Silicon Valley. Let us connect you and then show you what is on the market in your established price range.
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