When you are looking to buy a Florida home, the market is not always favorable. There are a number of reasons why you may be considering buying a home in Florida that might not align with the current market position. But that shouldn’t keep you from making a purchase. The best way to learn how to buy a home in a seller’s market is to contact a real estate agent in Florida who can walk you through the process step by step. In this article, we will cover the basics of how to buy a home in a seller’s market so that you can determine if it is the right time for you.
If You Need A Loan Get Pre-Approved, Not Pre-Qualified
Whenever you are considering buying a home in Florida, it is a good idea to talk to a bank to get an idea of your lending options before you ever begin looking at homes. There is nothing worse than falling in love with a house that you can’t afford. In a seller’s market, this is even more true. But you won’t just want to talk to a bank – you want to get the process going. When you are buying a home in a seller’s market, you have to remember that you are going to be competing with a lot of other buyers trying to get the best deal out of their purchase. You will need to take advantage of all the shortcuts you can.
Prequalification is a great thing in a buyer’s market. It gives you a basic idea of what you might be able to be approved for so that you have a general idea of what you can look for. In a seller’s market, things are a bit different. You will not have the time to mess around with negotiations and waiting on banks. You will need to go into it with a clear understanding of what a bank will actually lend you and the exact amount you are willing to offer. If you dilly dally with low offers hoping to negotiate, the seller will likely take a better, more solid offer. Talk to a lender to get pre-approved before shopping to provide a solid offer the minute you find your dream home.
Use an All-Cash Offer
If you are able to, it is best to use an all-cash offer. Sellers will be weeding through several offers and they are going to take the option that provides the least hassle for them and provides the most profit. In most cases, sellers will accept an all-cash offer over a mortgage offer because there is less paperwork involved and the sale can be completed in less time. A real estate agent in Florida can give you instructions on how to provide an all-cash offer and what legal and regulatory requirements are involved for your area.
Use an Escalation Clause
As a buyer, you want to make sure that you are protected, but you also don’t want to miss out on your dream home because of a technicality. Don’t mess around with your offer in a seller’s market. You don’t have the luxury to offer on the low-end and negotiate up because the seller most likely has other offers pending. However, you want to stay ahead of the competition and that is where an escalation clause comes into play.
An escalation clause cuts out the extra step of having to guess on an offer and approve a new offer if you get into a bidding war. Instead, you will add the clause into the initial offer and you will approve the increase of the offer in certain increments above competitor offers until it hits a certain cap. For example, if you set your increments at $5,000 and a competitor offers $10,000 above your offer, your offer automatically increases by $15,000 to be $5,000 above the competitor offer. This streamlines the bidding process up to a certain threshold that is predetermined by you.
Include an Appraisal Gap Clause or Provision
On the other hand, you don’t want to start off with a high offer or go through a bidding war and find out after the appraisal that your offer far exceeds the actual value of the house. An appraisal gap clause will protect you from overpaying for your new home. In many cases, a lender will not finance a purchase above a certain percentage of the appraised value. That means that if your offer exceeds the appraised value, you could end up being responsible for the gap. By including an appraisal clause, you can avoid the extra responsibility if the appraisal comes back low.
Put Down a Stronger Earnest Money Deposit
Finally, you can help ensure that a seller selects your offer by putting down a strong earnest money deposit. Earnest money is different from a down payment. Earnest money is cash you put towards an offer to prove that you are a good-faith buyer. In most cases, the earnest money is held by a real estate professional and put into an escrow account until the sale is processed. Once the sale is ready to go through, the earnest money can be applied to the down payment. This means that you are putting money down before your offer is accepted. By putting down more earnest money, you can prove that you are a serious buyer and make your offer more attractive to the seller.
Now that you know how to buy a home in a seller’s market, start looking for real estate agents in Florida to help you get started today. Buying a home in Florida doesn’t have to be complicated, with the right guidance, you could be picking up the keys to your dream home in no time.