You’re finally ready to take the plunge and put in an offer on your dream house. You found something that is perfect for you and your family’s needs and you’re willing to pay the asking price. It’s a sure thing, right? Not so fast.
A seller’s market means that there are more buyers than there are homes available for sale. It may mean that your full-price offer just isn’t going to cut it. So, what can you do to get that perfect house you’ve searched for high and low? These tips might push your offer to the front of the line.
1. Make Your Offer As Clean As Possible
A clean offer should not be contingent on the sale of another property or have other financial constraints. It should also be free of seller concessions, which are things that a buyer asks for outside of the offer price, such as help with closing costs.
Kristina McCann, the founder of Chroma Realty, states, “I tell my clients that the traditional contingencies are like a deck of cards you hold to your chest for protection: loan, appraisal, inspection are the main ones. As you lay them on the table, you give them up, which makes your offer more appealing to a seller because you have less opportunity to back out of a contract that you write.”
McCann suggests that even if you don’t add contingencies to your offer, there are still ways to protect your interests. For example, you can get your loan fully underwritten. This means that you will complete the entire loan process with your lender before making an offer on a home. Then when you put an offer in you can confidently put down your loan contingency with little to no risk.
She also suggests that you consider giving up your inspection contingency. If the seller has provided inspection reports from reputable companies, then you can do this with little risk involved.
2. Avoid Asking For Personal Property
Drooling over the sparkly chandelier listed in the exclusions? Don’t ask for it. Want them to throw in that cool lawn furniture? Skip it. Your offer could be very similar in price to another offer that isn’t asking for items that belong to the seller. Asking for excluded items could weaken your offer.
BenjaminRoss, Corpus Christi REALTOR®, says, “If you want a chandelier or lawn furniture, go to Home Depot. If you want to seriously compete for and win the bid on this house, it is important for you to remain focused in achieving your goal: buying the house, and hope your competition falls in love with the chandelier.”
3. Offer Above-Asking
This is not the market for making low offers and hoping someone will bite. You will have to make your offer strong enough to beat out a multiple-bid situation. If you want the house, you’re likely going to have to go above the asking price.
Don’t allow the thought of offering over the asking price to overwhelm you. Sometimes, you only need to offer $2,000 – $3,000 more to achieve the effect you’re going for. Doing this will show the seller that you’re serious about buying the home, and that you want them to consider you as a potential buyer.
Making an offer above the asking price won’t end up costing you much in the long run. What you put down and what you pay monthly on your mortgage will only change significantly if you offer an unrealistic amount above asking. Keeping your offer aligned to the home’s value, while still above the asking price, will help you secure the home you’re interested in.
4. Put Down A Stronger Earnest Money Deposit (EMD)
Your earnest money deposit is proof that you are a good-faith buyer. Usually, the real estate broker will hold onto your EMD and it will contribute to your down payment and closing cost. On average, EMDs are about 1% – 3% of the purchase price of the home. If you put a larger amount down, it may show that you are a serious buyer and that your intentions are genuine.
But, if you do put more of an EMD down, make sure you intend to buy the home. If you don’t end up moving forward with the purchase, your EMD may be in jeopardy. If you’ve already signed the contract and don’t buy the home, the seller could keep your EMD as compensation for the time wasted.
5. Waive The Appraisal Contingency
McCann adds, “An appraisal contingency can be given up as well – but, this poses the most risk unless you have enough cash to cover any potential shortfall between offered price and appraised price.”
This is a huge one in neighborhoods that are experiencing a resurgence in property values or gained interest. An offer indicating your intention to bring money to the table if the home doesn’t appraise will definitely set you apart from the others. Just make sure you are in a strong financial position to take this risk.
6. Make A Larger Down Payment In Your Loan Program
No matter what type of loan you choose, offering to pay more down is another sign of good faith to your seller. As we’ve indicated with several of the previous points, anytime you can showcase that you’re in a good financial position, you should do so. This situation is no exception to that rule. By putting down a larger down payment than you have to, you send the message that you’re serious about the purchase and capable of meeting all financial obligations.
7. Add An Escalation Clause To Your Offer
An escalation clause means that your offer will outbid other offers up to a maximum price. This means that you make an offer saying you will pay X price for a home, but if a higher offer comes in, you will increase your offer to Y price.
Keep in mind, even if you provide an escalation clause, it may be in the sellers’ best interest to issue a counteroffer. A counteroffer is in place of accepting your escalation clause offer. The seller may also decide to raise the list price instead of providing a counteroffer or accepting an escalation clause.
If you decide to move forward with this option, consult with a lawyer before you submit your offer. Your lawyer will be the one who writes this clause into the contract.
8. Pay With Cash
Michael R. Santana, a real estate attorney at GrayRobinson, states, “Cash offers also have the important effect of keeping the deal primarily between the buyer and seller – they call the shots and not some stranger at a bank. A financed deal is usually subject to financing contingencies, which leaves a back door for the buyer to exit.”
When buyers finance through a lender, they are often at the mercy of the lender’s process. This has the potential to lead to a negative outcome. Santana suggests that many lenders want an inspection or to include appraisal contingencies to protect their best interests. This could deter a seller, especially if they have other offers on the table.
Dealing with cash offers proves that a buyer is serious and has the financial means to expedite closing. Cash offers allow the buyer to be in control instead of letting a lender dictate the closing process.
9. Make Sure Your Offer Is Complete
Paying attention to the details of your offer should be a no-brainer, but every day there are mistakes made in this process. This may include missing disclosures, EMD, or pertinent information for the purchase agreement. In a competitive market, mistakes like these may result in your offer getting tossed.
If a seller receives multiple offers that are complete, they may not give your offer a second look. If you want to make sure you have a chance in the running, make sure to cross your “t’s” and dot your “i’s”.
10. Offer One Month of Free Occupancy
When purchasing a home with a mortgage, your payment isn’t due until a month after you close. Why not offer your payment early to sweeten the deal? A seller could benefit from you paying “rent” for a month, and this may strengthen your offer.
But, if you do decide to offer one month of free occupancy, make sure you discuss all of the details beforehand. It’s wise to have this agreement in writing so guidelines are clear and concise. You don’t want to find yourself an unwelcome house guest for an indefinite amount of time.
The Bottom Line
While they may seem small, these things can go a long way to making your offer stand out and get you the home of your dreams. Establishing that you’re a serious buyer, with the financial capabilities to meet all obligations, is the way to a seller’s heart. Be willing to go the extra mile, both in your intention and in your financial offerings. If you do so, the seller of your dream home will notice your effort and give your offer a second glance.
Don’t forget about the details. Make sure you are following all the guidelines to a T. This includes submitting your documents accurately and on time. Take the extra time to follow up with all parties involved to assure your information and payments made it to the appropriate person. Don’t be afraid to come across as over-attentive to detail. Being proactive will serve both you and your future home’s seller well.