How to Outsmart the Competition in a Seller’s Market in California

The California housing market is red hot, and buyers are trying to outbid each other amid a tight supply of homes for sale. Whether a buyer wants to purchase a single-story ranch in San Diego or close a deal on a post-modern home in the Hollywood Hills, they should expect to face stiff competition. 

No matter their budget, Californians wonder how they can give themselves an advantage when buying a home in a seller's market beyond bidding over asking price. Purchasing a home is one of the most sizable transactions of a person’s life, and emotions can overtake logic when vying with other buyers for pristine properties. 

To help savvy buyers figure out how to outsmart the competition, the team at Prevu Real Estate compiled several tips to help buyers close a deal in the current environment.

Get pre-approved for a mortgage

Getting a mortgage pre-approval letter is the first step for Californians thinking of purchasing a home in one of the state’s spectacular cities. The pre-approval helps buyers understand how much they can afford and demonstrates to sellers that they are serious buyers.

Buyers should get pre-approved as early as possible, so they do not have to petition their lender the night before offers are due. Depending on the lender, buyers can get a host of different financing options, but they need to choose a provider that fits their current and future budget. 

Depending on a buyer's financial needs, a buyer's agent can help aspiring homeowners find lenders that fit their financial needs. Plus, expert agents can explain the home buying process to Californians just starting their home buying journey.

Tour homes the moment they hit the market 

Balancing work and searching for a home is a delicate act requiring buyers to manage their time. While it seems enticing to dedicate an entire weekend to attending open houses, buyers have to act faster than the competition. 

Southern California homes listed for sale in 2021 are barely on the real estate market for a week before bids are placed. This puts weekend warriors at a disadvantage. By freeing up time to visit homes during the week or even lunch hours, aspiring homeowners can put in strong offers ahead of the other buyers in order to scoop the property first.

That is why it is critical to partner with real estate agents keyed into the market that provides technology-powered buyer platforms to alert savvy buyers when their ideal Sherman Oaks home hits the market.

Ask for a commission rebate 

Purchasing a home in California is one of the most expensive transactions a person can make. As a result, buyers should look for ways to save on the price or closing costs. The easiest way to do so is to choose a buyer’s agent that offers commission rebates.

In general, buyer’s agents receive half of the real estate commission in a home sale. Most traditional brokerages keep the entire commission, however there are modern brokerages that give a portion of their commission back to buyers in the form of a rebate.

For example, if a buyer purchases a $2 million waterfront home in Orange County, a traditional buyer’s agent might receive as much as $60,000 in commission. If the same buyer hires a buyer’s agent that offers commission rebates, the buyer could receive a huge portion of that commission.

Prevu offers the largest commission rebate in California giving buyers up to half of their commission cash back. That's huge savings that can give you more purchasing power compared to competing offers.

Make bids based on value, not listing price 

Making an offer on a home is an emotional process, especially if it is the modernist hillside compound you have always desired. In a seller's market, buyers have to be comfortable making offers based on how well a prospective home meets their needs. 

Are you buying a home with a separate apartment for Airbnb rentals? If so, putting extra money down upfront secures buyers lucrative passive income down the line and is worth putting extra money behind an offer. And while interest rates remain low, it empowers buyers to make offers with the confidence that mortgage payments will not bust the bank.

Listing prices are a mental benchmark. When that perfect Santa Monica beach bungalow appears on the market, buyers have to confidently make offers reflecting the value they see in the property. Data-driven real estate agents will be able to provide buyers with detailed comp reports and educate you on current trends to make sure you bid enough to win without overpaying.

Offer flexibility to sellers

Sellers want to get the best price for their home. That said, sellers also want to have greater certainty of the deal going through and preferably on their desired timeline. By waiving contingencies around deposit dates and home appraisals, buyers can sweeten their offer. 

First off, buyers making all-cash offers have an advantage because they are seen as financially secure by sellers and do not require lengthy due diligence checks by lenders. But buyers need to weigh the value of using their capital for a deal or making use of the current low-interest rates on mortgages. 

While an all-cash offer usually secures a deal in places like Los Angeles, buyers can pursue a fully-underwritten pre-approval from their lender to give them the option to waive a mortgage financing contingency. This will strengthen your offer compared to contingent buyers seeking financing, however be sure to ask your buyer’s agent and mortgage lender about the risks of doing so.

Buyers can influence sellers by waiving non-financial terms such as the home inspection contingency. This contingency enables buyers to terminate a transaction if glaring defects arise. Buyer beware though as waiving a home inspection could cost thousands if a major problem goes undetected. If you are planning to do a major renovation anyway, then the value of winning over a seller might be worth waiving the inspection contingency. 

Sellers generally want to close a deal as soon as possible, but sometimes they’ll need extra time to find their next place. This is especially true in competitive markets seen today. Being flexible on a closing date that lines up with the seller’s goal timeline could give you a slight boost.

Prevu Real Estate, Inc. is a licensed real estate broker in California, license number 02134758.