Q: My wife and I are trying to buy a house in Fairfield County, Conn., and we keep losing bidding wars. We offer over the asking price, but we can’t pay in cash. How much do we need to offer to get a house? Is there a magic number, or is this a pipe dream and we’ll never find one?
A: You are deep in a seller’s market, so any reasonably priced home is going to have serious competition. Just compare the first quarter of 2021 to the same period in 2020 in Fairfield county: The number of home sales jumped 43 percent and the number of listings fell 57 percent, a record rate of decline, according to a report by Douglas Elliman. This narrative is being replicated in markets around the country.
“It’s trial by fire, where the buyer has to learn through pain that they are not in as much control as they thought they were,” said Jonathan J. Miller, president of the appraisal firm Miller Samuel, and the author of the Douglas Elliman report.
Jennifer Thomas, a licensed saleswoman at the Metalios Group in Greenwich, Conn., said that in her market the winning bid is typically 10 to 15 percent over the asking price. But not always. “I’ve had winning bids and we weren’t the highest offer,” she said. “It’s not just about your price, it’s about your terms and conditions.”
You probably know by now that you should be preapproved for a mortgage before you make an offer, and that buyers who can waive contingencies (or pay cash) have a distinct advantage. Discuss with your wife what contingencies you are comfortable forgoing, like ones for an inspection or appraisal. If you waive the appraisal contingency, for example, and the house appraises for less than your offer, will you be able to increase your down payment to make up for the mortgage shortfall?
There are other ways to sweeten your offer. Ms. Thomas often speaks with listing agents to find out what terms matter most to the seller. Perhaps the seller wants to close a deal quickly. If that’s the case, line up the inspection before your offer is even accepted to show the seller that you’ll move at lightning speed.
Another strategy: Try to find homes before they hit the market, asking your broker to make inquiries on your behalf and putting out feelers wherever you can. Post your request to local neighborhood groups to see whether a seller will talk to you before the house is listed (a friend of mine did just that last spring, ending up with a house that never even hit the market.) Eventually, with enough grit and patience, you will find someone willing to sell their house to you.