How to Win Your Next Home

I’m not your typical real estate agent and this is definitely not your normal real estate market. As a buyer, if you don’t pay attention to every detail, you are bound to lose. That’s why I prepare and educate my clients about each step of the home buying process.

This white-hot market has brought a whole new set of challenges, graft and seller greed to the forefront that buyers must contend with. It is no wonder why buyers are exhausted, exacerbated, frustrated, fatigued and even a little scared. In what has become a high demand, low inventory housing world, buyers must now ‘win’ their home amongst heavy competition. This imperative guide will help you prepare and execute a winning campaign on the Miami residential real estate battleground.

To begin, you should understand your war chest and how your available cash is critical to leveraging yourself into an advantageous position for making a competitive offer. Not only will you need an earnest money deposit (typically 20, 10, 5, or 3% of the purchase price, depending on loan product), but you’ll also need to have money for closing costs and additional out-of-pocket cash to make up for a potential low appraisal.

The best way to start is to contact a local mortgage broker. They will give you a true answer as to what you can afford. Bank of America, Wells Fargo, Rocket Mortgage, Chase or any other big-name lenders often don’t have the local expertise and finesse to get a contract through to closing. Big often means impersonal and unreachable at just the wrong time. Conversely, I can whole-heartedly recommend you reach out to Ekaterina at Groves Capital (ek@grovescapital.com or 786-314-3676). She has been involved with the Miami real estate market for more than a decade and truly cares about her clients. She’ll answer your questions and pick up the phone at most any hour. Further, Groves Capital allows her to find the right mortgage product for you from more than 150 money sources.

Ekaterina (or your other local lender) should always produce a pre-approval letter to confirm that you are creditworthy to a certain dollar amount on your real estate purchase. However, in today’s hyper-competitive market you need to go beyond that step. Make sure your lender also provides you with a DU (desktop underwriting) summary or a fees worksheet. You will send all this documentation in with each offer, plus proof of your ability to make your earnest money deposit (a proof of funds letter).

Next, set your own expectations so you can only have an upside surprise. Understand that most good homes will receive multiple offers within its first two days on the market. This fierce competition means you have to think differently. Don’t expect the normal back-and-forth price negotiations. Your first offer must be your highest and best offer. Faced with multiple offers, sellers most likely will simply select the best offer in front of them and sign. Therefore, expect to lose a few homes to cash buyers. Instead, laser focus on how to win out over all the financed offers.

Next, be forewarned that the market values are outpacing appraised values in most cases. This is because appraisals must be based on closed sales, and closed sales were negotiated 30-60 days ago. With rapidly rising prices, appraisals are lagging. Therefore, expect a low appraisal and address it in your offer.

Let’s use an example term that can be added to your offer: “Buyer will pay up to $15,000 out-of-pocket to make up the difference between appraised value and contract purchase price.” This means you are assuring the seller that you have extra cash and are willing to pay it into the deal. For example, if your $500,000 contract gets an appraised value of $485,000, you are still guaranteeing the seller you will close. However, you are still protecting yourself because you are not compelled to close if the appraised value came in at $484,999 or less. Adding a clause to pay a premium above appraisal is critical in this market.

There are several other ways to win your next home, but each home and situation is different. Consult with a professional like me and the road to home ownership is well within reach.