Monday, January 21, 2019 / by Nicolette Samash
With the market we’re in right now, competing offers are practically a guarantee. Submitting a standard offer for the asking price of the home is often not cutting it alone, so what is it specifically that you can do as a buyer to stand out and be the offer the seller decides to choose?
- Expect to have to offer over the asking price of the home. With as quickly as home prices are rising, most homes are escalating over what the home is listing at due to competing offers. Sellers are expecting this to happen and often will list their home at a competitive price to begin with to spark a bidding war. Because of this, as a buyer you should be looking at homes that are slightly under the amount you are approved to purchase at to allow some wiggle room in your offer.
- Include an escalation clause in your offer. Instead of offering far over the listing price from the get go and hoping that your offer is higher but not too much higher than the other offers, you can include what is called and Escalation Clause. What this form allows you to do is offer a certain price from the get go, but if an offer comes in that is higher than yours, your offer will automatically raise up in increments to a certain final amount. For instance, you could choose to offer $175,000 on a home with an escalation in increments of $1000 up to $190,000. If an offer came in at $180,000, your offer would automatically increase to $181,000.
- Consider offering to pay for your own closing costs. If you are financially able to, it is definitely a good idea to forego asking the seller to help pay for your closing costs. The seller is mainly going to be looking at the bottom line net income they would be making from the sale, and even if you offer $4000 over the asking price, asking them to pay for $5000 worth of closing costs would put you at a disadvantage over a full price offer with no closing costs being paid by the seller.
- Have a strong preapproval letter ready from a reputable lender. Not all lenders are created equal, and not all prequalifications/preapprovals are equal either. In a situation where there are multiple offers that are very similar, the listing agent is going to be carefully screening the preapprovals. Some letters from your lender are going to simply state that you are prequalified up to a certain amount, subject to review of your tax returns, W2s, pay stubs, etc. What you want is a preapproval that states that those documents have already been reviewed and approved, so there is less risk of financing problems during the transaction. The more information your lender collects and thoroughly reviews upfront the better. Make sure your real estate agent has reviewed your preapproval beforehand, and ask them if the lender you’ve chosen has a good reputation for closing on time, being communicative, and being knowledgeable. Close to 40% of transactions in our market are falling through after going under contract, and the majority of them fell through due to some sort of financing/lender issue.
- Write a love letter about the home to be submitted along with the offer. Sometimes this personal touch can make all the difference. Writing a brief letter about who you are, what you do, what you love about the home, and how you plan to take care of it can make it more than just a numbers game when the seller is reviewing. Including pictures of you and your family are an added bonus, or even recording a video.
- Make sure your agent is asking if there are special considerations to the offer. Sometimes sellers will need a longer closing time, or would prefer a move out date that is a couple days after closing. Sometimes they would prefer a buyer who would let them leave behind some of their larger items so they don’t have to worry about moving them out. The offer that includes special considerations from the beginning is going to be favored. It is such a bummer to lose out on a home simply because you weren’t aware of what the seller was looking for.
- Shorten contingency periods. There are many contingencies in a standard offer that have standard timeframes. Depending on the circumstances, some of these timeframes can be shortened to allow for a quicker closing. Talk to your agent about what the contingencies are and what ones you would be willing to shorten to make your offer stand out.
- Consider waiving your home inspection altogether – IN THE RIGHT CIRCUMSTANCE. Typically I would not recommend waiving your home inspection, but there are situations where there may be a previous home inspection you can review or if you are 100% comfortable spotting and/or fixing potential issues that come up down the line. Just keep in mind that your agent is NOT a home inspector and will not be held responsible if you do discover problems down the line that could have been caught in a home inspection if you decide to waive having one.
- Put down more earnest money. Earnest money expresses your interest in the property, it represents the skin you’re willing to put in the game. If the transaction closes, this money is applied to your down payment. If you are looking for an extra thing to do to improve your offer, consider upping the earnest money you have on the line by a bit.
Most importantly, be intentional about your choice in real estate agent and be in communication with them about your offer. They will be able to advise you on specific situations and houses depending on many varying factors such as how many offers you are competing with, what the comparables for the home are, if there are red flags that could make the home unfinanceable with your loan program, etc.