Constricted inventory in major markets have pushed buyers into fierce bidding wars, but a recent survey and industry professionals said that equipping borrowers with the best loan products and proving their financial status will win sellers over.
The survey, released by Redfin Friday, asked 2,000 real estate agents what successful bids most commonly included:
1. A conventional loan (61.7% of successful offers)
2. An offer higher than asking price (51.9%)
3. A buyer’s personal cover letter in offers (28%)
Eddy Perez, President of Equity Loans LLC in Atlanta, Georgia said conventional loan products are highly preferred over FHA-insured product because of their higher down-payment requirements (normally 20%). This makes the borrowers appear stronger and makes the offer more “confident,” he added.
Approximately 73% of all offers in April went into bidding wars in April, according to the survey. This is down slightly from its peak of 79% in February.
Investors are leading the housing market recovery, purchasing a substantial number of homes, said Kevin Liskey, loan officer with Castle & Cooke Mortgage in Las Vegas, Nevada. This makes it harder for the borrower to compete.
But the market is expected to become less competitive when investor groups put those homes back on the market, said Bill Bent, executive vice president of Academy Mortgage. This will drive supply and demand back in balance, he said.
The report showed that the top four competitive markets were all located in California: Orange County (93% of all offers were in bidding wars), San Francisco (90.8%), San Diego (89.9) and Los Angeles (86.2%).
Competition seems to be rising significantly in Seattle, Baltimore and Chicago, where bidding-war rates rose by 2.1, 3.9, and 1.2 points, respectively.