Secrets of a Good Offer
You’ve found the home you’ve been waiting for. You’ve looked up dozens of homes online and toured more than you can count. Then, you walked into a home that you could immediately see yourself living in.
The downside? It’s considered a “hot home”, meaning there are lots of interested buyers.
In today’s market, housing is scarce. We are currently facing a low housing inventory without a shortage of buyers. Homes are receiving multiple offers the weekend it goes on the market. One of our listings received seven offers in the first four days of listing...and that was during quarantine!
During a “seller’s market”—meaning there are more buyers than available homes—you want your offer to stand out amongst the others.
We will be sharing what you need to put in an offer as well as other helpful tactics you can use to make your offer attractive in the midst of other competitive offers!
OFFER BASICS
At this point in the process, you hopefully have already accumulated your savings and have a pre-approval letter from a reputable lender. Having this before placing an offer is helpful for two reasons:
You know what you can actually offer on the home
With a pre-approval letter the seller will know that you are a viable, qualified candidate for their home
With this information, you will decide what to offer. Depending on the situation, your real estate agent may do a Comparative Market Analysis on the home.
This will give the agent a clearer picture of what the home is worth and what would be a suitable offer to place on the home. In a hot seller’s market, especially with multiple offers coming in, you will likely need to offer the asking price or above.
Your agent will work to find an offer price that is competitive and realistic to the value of the home.
Additionally, you will add other information like earnest money amount, down payment amount, close date, loan information, and expiration date of the offer.
This is also the time to request specifics like closing costs contributions or what items of the home you want to stay (like the trampoline or beautiful swing on the front porch). In a buyer’s market, you can get more specific and picky about what you would like the seller to do or not do.
In a seller’s market, like we are in currently, you want to keep your offer as simple as possible. Of course, it is okay to request things that are important to you, but just know that a competitive offer that is less complicated may win out over yours.
Fair warning, contingencies may be your only option— like if you need to buy a home before your home goes on the market— but they are not very attractive to sellers. If a home has been on the market for some time a seller is more likely to accept a contingent offer. If your contingent offer is accepted, you become a “bumpable buyer,” meaning they accept your offer, but they can accept another offer up until the point your home receives its own accepted offer.
Overall, you want to keep your offer simple and competitive!
WRITING A LETTER
It is amazing how much a personal and well thought out letter can impact a seller’s decision. We cannot emphasize this enough! Time after time we’ve seen buyers win in a multi-offer situations because their letter touched the heart of the seller. Whether it was a suburban home, a home with lots of land, an investment property, or even a commercial property...we’ve seen many kinds of sellers choose offers because of well-written letters!
The seller wants to know that their property is going to a family that will take care of—and is passionate about living in—this home. Sharing details about your family, your work, your hobbies, and what you LOVE about the home will bring a personal touch to your offer. You can even include pictures!
One of our home listings was located next door to a cemetery. Our seller didn’t mind living next to it, but some buyers shied away due to its proximity. However, two different buyers came along and shared specifically in their letters how they had wonderful memories growing up next to a cemetery as children or how their family worked for cemeteries growing up. It was so special for the sellers to know that there were other families that would appreciate the location and would likely respect the families who visited the cemetery in the same way they had during their time there. They ended up choosing one of those offers over others.
Don’t be afraid to get personal! It goes a long way!
SHORT CLOSE
Oftentimes sellers want to be done with the process as soon as possible. Putting your home on the market is hard work and disrupts your routine as people endlessly need access to your home throughout the process.
Typically closing is around 30-35 days. Having a shorter closing can feel like a breath of fresh air after all of the efforts they have put into having their home on the market.
Sometimes three-week closings are possible. Everything depends on how quickly appraisals, inspections, title, and underwriting for the loan are completed. Make sure that whatever time frame you put down is accurate. We’ve seen offers get accepted with a short close only to find out at the end the loan could not close that quickly and actually extended past a typical closing date. These are big no-no’s and you may have to compensate the seller to have the deadline extended.
Only include this option if you are sure you and anyone else involved can follow through.
ESCALATION CLAUSE
In a multi-offer situation, this can be an extremely helpful tool for getting your offer accepted.
An escalation clause states that your offer will be raised in increments above the highest offer up to a certain amount.
For example, say you are placing an offer for $500,000 with an escalation rate of $2,000 over the highest offer up to $520,000. If the highest offer comes in at $510,000, your offer will raise up to $512,000. However, if an offer comes in at $519,000, your offer will only go up to $520,000 as that is your max. Any offers above $520,000 will automatically be higher than your offer.
Some agents may think that placing an offer above asking by $5,000 in a hot market is enough to get their offer accepted. However, the final sold price of a home is often a function of how many offers it receives and how hot the market is. An offer that is $5,000 over the asking price is very unlikely to be accepted when there are more than 2 offers on the table. In fact, I have seen offers that are $50,000 over asking!
Keep in mind that whatever you decide to offer, your max amount cannot exceed the amount on your pre approval letter.
LARGER EARNEST MONEY DEPOSIT
Earnest money is a money deposit that is to go to the seller in the case that you— the buyer— are not able to fulfill the duties of the contract for a reason other than the inspection or the appraisal.
Sellers take a risk by accepting an offer and taking their home off the market. If the offer does not go through in the end, their home would have been off the market for potentially thirty days or more. This could have been a prime time to receive another offer. Additionally, a home going back on the market can cause buyers to raise their eyebrows and wonder if issues with the home are the cause for the failed closing.
However, a seller would still receive their earnest money if the contract did not get completed for— like we said earlier— a reason other than the inspection or appraisal. That can be a silver lining in an otherwise frustrating situation. This is why a larger earnest money deposit is a further incentive for a seller to accept your offer.
Thankfully, any money you place down for the earnest money will be used as part of your down payment and/or closing costs once the offer is successfully completed!
SHORT INSPECTION OR NO INSPECTION
The inspection is a critical part of home buying. During this period you have the ability to use inspectors to discover any critical (and non-critical) issues with the home. Finding issues ahead of time, before the home is in your ownership, could save you thousands of dollars in repairs down the road. This is especially true if you have the ability to negotiate a compromise with the seller for the repairs. If you do not want to deal with the issues that crop up you have the ability to back out and receive your earnest money as long as you are still within the inspection window.
That being said, if you are desperate for a house and it is in a multi-offer situation you do have the ability to shorten the inspection period or forgo an inspection altogether to make your offer more attractive.
Shortening the inspection period could be an alluring option for a seller as it would mean less time going back and forth for negotiations and the possibility of a faster close. However, you may run the risk of not getting in adequate negotiation time.
Forgoing an inspection all together would be a highly attractive option for a seller. The home would close quicker, any issues wouldn’t be discovered, and no repairs would need to be done on the seller’s side. The inspection window can be stressful as there are plenty of times sellers and buyers have issues coming to an agreement on who will do the repairs, how they will be done, and who will pay for them. Eliminating this step all together would be an enticing reason to accept your offer.
Although it is a viable option, we do not ever recommend this. Moving into a home without an adequate inspection could mean big issues down the road.
CHOOSE YOUR OFFER CAREFULLY
Whatever you decide, you want to make sure you have thought through all of the details. You want an offer that not only is attractive, but more importantly is one that you are comfortable with. Do not stretch yourself so thin that you regret the offer once it is placed.
A quality agent will take the time to research and review the best options for your situation.
If you are looking interested in buying a home— and want to discuss your unique situation— feel free to reach out to us by phone, text, or email. We would love to help you find the right place for your needs and help you write the offer that will blow the other offers out of the water!
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