Tips for buying a home in a hot real estate market

Echo Fine Properties Realtor Andrea Roth has strategies to help buyers get their new home.

Sappy notes with pictures of babies and puppies are trifles in today’s feverish real estate market where speed, truculence, technique and deep pockets — not family portraits — separate successful homebuyers from strikeouts.

Shrewd Realtors have dusted off tactics not seen since the heady home-buying days of the early 2000s to compete in today’s market slugfest where just a month’s worth of inventory is up for sale and 45% of people are paying in coveted all-cash deals, according to a February Florida Realtors report.

“There are a lot of ways to skin a cat,” said Echo Fine Properties Realtor Andrea Roth, who isn’t a fan of the so-called “love letters” to sellers. “At this stage of the game, you have to work on strategies that catch the seller’s attention and puts you at the top of the list.”

Some strategies involve risk for home buyers, others tempt sellers

Some gambits can be risky — skipping inspections may make sense for a contractor who knows what flaws to look for, or in newer construction from a reputable developer. But it can be a losing bet in older homes or for buyers lacking handyman chops who may want to opt instead for a shortened inspection period of 3 days or less.

Footing the bill for the closing costs and paying both sides’ commission sweetens the contract for some sellers. Waiving the appraisal contingency, which locks in a buyer even if the appraised value of the home is lower than the agreed upon purchase price, is another cherry on top.

Frank and Ann Grenci are shown a home for sale by Echo Fine Properties realtors Will Dean and Jeff Lichtenstein, far right.

GREG LOVETT/THE PALM BEACH POST

Pre-approved financing, a fast close and offering above asking price out of the starting gate can also work.

A previously uncommon trick of the trade that made a comeback in the past two years is the escalator or escalation clause — when a buyer promises to pay a certain amount over the highest bid made. Some escalation clauses are in the tens of thousands of dollars, committing a buyer to a much higher price but also increasing the chances of getting the home.

“They used to be extremely rare, and used only with multi-million-dollar properties,” said Mary Speer, a Realtor with Coldwell Banker in Delray Beach, about escalation clauses. “Now, really smart Realtors will do it with any property.”

Alyssa and Will launch tour a home for sale in Tequesta, Florida on April 13, 2022.

GREG LOVETT/THE PALM BEACH POST

How an escalator clause may help you win bidding war for house

How the escalation clause works depends on the contract and the buyer’s budget. Some escalation clauses go up in increments of $1,000 to $5,000 above the highest bid until it hits a specified amount and the buyer taps out.

Keyes Company Realtor John Sholar said he had 65 sets of people attend an open house in Jupiter on April 10. He got 14 written offers, four of which had escalation clauses. The winning contract had an escalation clause that was willing to go $60,000 over the asking price.

Other bidders may or may not know they are duking it out with an escalation clause, which some may say is unfair.

“When you are competing with six or eight or 10 other people, fair isn’t really what you are trying to reach. You are trying to get the house,” said Douglas Rill, broker of record for Century 21 America’s Choice.

Homebuyer David Duval was familiar with an escalation clause but had never used it when he was searching for a house in Jupiter last year and finding multiple offers on everything he looked at.

Roth suggested Duval use an escalation clause that would go up in $5,000 increments to a specified amount. They went in above the asking price, included the escalation clause and gave the seller just three hours to respond.

Echo Fine Properties realtor Andrea Roth in Tequesta, Florida on April 13, 2022.

GREG LOVETT/THE PALM BEACH POST

“Our first notion was to give them overnight, but we said, nope, they can love us or hate us, but they have three hours,” said Duval, whose contract was accepted. “My advice; buyers need to move quickly because nothing lasts.”

Speed critical element as inventory of homes for sale has plummeted

In February, single-family homes were going under contract at a median of 13 days, a 57% decrease from the 30-day timeframe during the same month in 2021. The median time for a closed sale was 55 days, down 25% from 73 days the year before.

Condominiums and townhomes also went under contract in 13 days in February, with the median time to close a sale at 53 days.

Also, there were just 2,580 single-family homes pending listing in February, a 37% drop from 4,100 homes in 2021.

The March market report is scheduled for release April 20.

With the market tight and inventory low, sellers may also struggle to find new housing arrangements after a sale. Sholer and Roth said they’ve won bidding wars by writing into the sales contract that the seller can stay in the home for a period of time.

The seller either rents back the home from the new owner, or they are allowed to stay rent free with money taken off the purchase price of the home.

“I had a sale that was purely based on the seller did not want to close quickly,” Roth said. “We offered a rent back scenario. Today’s ball game is all about making the seller happy.”

And what about those ‘love’ letters from home buyers to sellers?

Realtors generally recommend against love letters — notes from buyers outlining why they should get the house. One concern is they could work against the buyer if the seller has a race, gender, religion or sexual orientation prejudice.

“Once in a while we see letters, but at the end of the day you can have the cutest baby in the world or be the cutest couple in the world, an owner isn’t going to walk away from $40,000 because you have a cute baby,” said Carlos Melendez, president of Broward, Palm Beaches and St. Lucie Realtors.

What about cute dogs?

Sholer recently represented a couple who were trying to buy their first home after their rent increased $750 per month to $2,300. He wrote 14 contracts for them and they got 14 rejections.

“They just kept losing out to all cash buyers,” Sholer said.

The couple suggested writing a love letter. Sholer advised against it. They did it anyway, but with a twist. They included the perspective of their dogs, Butter and Nia, who they said were sad because their owners were always gone looking for homes.

The seller was a dog person.

“So, on their 15th written offer, they got the house,” Sholer said.

Kimberly Miller is a veteran journalist for The Palm Beach Post, part of the USA Today Network of Florida. She covers real estate and how growth affects South Florida’s environment. If you have any news tips, please send them to kmiller@pbpost.com. 

How to win in a bidding war:

Go for a shorter inspection period or no inspection. Estimate how much improvements will cost and consider them in your offer. For newer homes or concrete block-style construction not getting an inspection could be a valid tactic but beware if it’s an older home that can have many hidden problems.

Allow the seller to rent back the home for a short period of time. If the seller needs time to find a new home, the buyer can put in the sales contract that the seller can stay for a set period of time and pay rent or stay rent free.

Waive the appraisal contingency. The appraisal contingency allows a buyer to get out of a pending sale if the appraised market value is less than the agreed upon contract price. If the contingency is waived, it means the buyer agrees to pay the difference between what the bank is willing to lend on the appraised value and the contract price.

Use an escalation or escalator clause in the contract that says you will pay a certain amount above the highest bid. The escalation clause makes the offer more attractive because it guarantees it will beat the highest bid. The key is to set a limit on the clause so you don’t overspend.

Pay in cash. Cash sales are attractive because the seller knows there won’t be financing problems and they save time because there’s no underwriting process.

Set the right expectations. There are lower chances in a seller’s market that a home will sell for less than the listing price. Bidding wars basically guarantee you will pay full price or over asking price. That means if you are approved for a $400,000 loan, look in the $350,000 to $375,000 range so you can come up if necessary.

Get preapproved for a mortgage. A pre-approval shows the seller you are a qualified buyer with solid financing.

Act fast and be aggressive. Have alerts set to notify you when a house meeting your preferences comes on the market. When you find your dream home, don’t delay. Make a strong offer as soon as possible. 

Andrea grew up in Buffalo NY and spent her early adult years in Chicago. Her parents taught by example with a hard Midwest work ethic, family values, and an understanding that life is to be enjoyed. “I love to laugh, and I think other agents see me as great to work with. I get calls daily from other agents wanting to know what I have coming on the market.”

The Roth’s have 3 kids. Connor, Austyn, and Jake all have grown up here in Florida and they are very close. Andrea loves the beach, “I love the smell of the ocean, the feel of the sand in my toes and the sun on my face.”  The sunny Florida outdoors is the best of all worlds and she wants to enjoy every minute of it with her family (when not working hard for her customers of course!)

If numbers really don’t lie, Andrea Roth’s numbers tell the absolute truth. She has consistently sold more condos from Juno Beach to Jupiter and throughout Palm Beach County than any other Realtor.  Every year Andrea has sold 30 + condos with 2021 eclipsing 50+ sold representing over $45 million in sales. When people want to know the ins and outs of what condos to see, pet rules, association fees, and the details of a seaside home, Andrea is undoubtedly the perfect choice. She puts her clients first, and they in turn have made her #1.