7 tips for making a successful offer
We all want to buy our new home or investment property at the lowest price possible. On the other hand, the home seller wants the highest price they can get. As home prices rise and the inventory of homes for sale drops, homebuyers realize they have to adapt to a market in which sellers call the shots.
In most cases you will fall in love with a place that fits your budget, and the you will have to get in line with other buyers bidding on the same home. That’s how the story goes for buyers in competitive markets.
Sometimes buyers will put a short expiration on an offer in hopes of forcing the seller to accept before someone else has a chance to make a bid. In a hot market, this doesn’t always work. The sellers know they have all the leverage and aren’t going to be too worried about you walking away because they took an extra day to get back to you.
In today’s sellers’ market, most buyers only have one shot at making an impression. While offering more money is a safe way to land at the top of the list, it is not the only thing that sellers look at, especially in a situation where there are a number of competing similar offers.
Homebuyers in hot markets may need more than just money to get what they want. They must give sellers enough reasons to pick their offer over offers from other bidders. This is just an example of some of the factors involved. The question is, how do you go about it? After all, the offer has to be too good to be refused, but you don’t want to pay too much in the process.
If you are trying to buy a home in a seller’s market, here are seven tips to make your home offer stand out.
Get preapproved for a loan
Don’t bother submitting an offer on a house without a loan preapproval in hand. If you really want to please the seller, get preapproved for a loan.
A preapproval letter demonstrates that the lender has verified your income and other required documents. It’s not a prequalification letter. It’s a letter based on the information you provide and shows the seller you could qualify for a loan.
This is probably the next best thing to a cash offer. Coming to the negotiating table with a mortgage pre-approval letter in hand shows the seller that you are serious about buying the house and have the support from your mortgage broker or bank to borrow a specific amount.
In the end, the seller will get a check, regardless of the type of loan. But since the point is to convince the seller that your offer is the best one, if you qualify for a loan, go for it.
Hire an assertive real estate agent
An assertive, experienced realtor will know the market well and will move quickly to present an offer to the seller. An agent who constantly combs the marketplace and networks with other agents is more likely to get a lead on your new home before anybody else, which is why you need to hire a good real estate agent.
Get the seller to like you
You don’t want to say anything that could offend a seller. If the seller has eight offers on the table but your offer includes a letter that is personally handwritten by you, your offer will stand out. In your letter, you will want to appeal to the seller’s emotions by explaining why you are in love with their home and what you particularly like about it. Be as specific as possible. Appeal to what you may know of the property history. If you can evoke tears of joy or induce empathy from the seller, your offer will likely win. Do your homework and be prepared to have an engaging conversation.
Letting the seller know why you want to live in the property they once called home improves your chances of winning a bid. You should refrain from mentioning offers you have lost because past failures may be taken as a sign of weakness. Appearing too desperate or pushy can also put off a seller. Just keep it short and positive!
If you can get the seller to like you, they are more likely to accept a borderline offer, accept your terms or favor you in a bidding war. So, you not only have to be friendly and polite and make their kids laugh and their pets beg for your attention, but you also have to complement their home, ooze love for it and overflow with admiration. Sellers can be sentimental creatures; they want to know that whoever buys their property will love it and care for it as much as they have. Pluck their heartstrings, familiarize them with your family and show them exactly why their house will never be in better hands than yours.
You also don’t want to appear high-maintenance or make unreasonable demands, such as a super-fast response time from the seller, because if there are a number of people interested in the property, the agent may prefer to negotiate with the less troublesome potential buyer rather than the one that’s being a pain in the backside.
Though it may sound silly, bonds can easily be built over a mutual love for cats, or the Patriots or whatever it may be. If you share a common value or hobby with the sellers, mention it in your cover letter. It’s an easy way to make yourself more relatable, and will also show that you’re not sending the same generic letter with every offer you submit. It’s a small detail but brings that extra touch.
According to Forbes, a heartfelt letter might be the difference between securing your dream home and losing it. Selling a home is both a financial and emotional transaction, but finance almost always will trump emotion. Not a lot of sellers will leave money on the table so a personal letter might not make up for a weak offer, but given two strong offers, it might just tip the scale in your favor.
Write a Friendly Offer
Don’t include demands in your offer that are likely to irritate or anger the seller. If it is customary in your area for the buyer to pay for her own title insurance policy, don’t ask the seller to bear that cost. If most buyers demand possession at 5:00 PM on the day of closing, show that you are different and be generous by giving the seller two or three days to move out.
You might get only one chance to make an impression on the seller, so don’t make a low offer hoping the seller will give you a counteroffer. If the seller has received multiple offers, the low offers most often are not even considered. They are shoved into the rejected pile. Figure out the top dollar you are willing to pay for the home and offer that price.
Be respectful of sellers even if you think the sellers have overpriced their property or have let it fall into disrepair, it is important to treat them with respect and follow the protocol of your local real estate market. After all, this is the sellers’ home, perhaps the place where they have raised their family. They may be selling because circumstances are forcing them to sell, rather than by choice. A lowball offer may be upsetting to the sellers, but if you and your Realtor present the low ball offer along with an expression of your appreciation for the property, it’s more likely to be accepted than a lowball offer accompanied by a half-complete contract or an insult about the property’s condition.
Don’t be stingy with your offer, but don’t overreach either. It’s a fine line between offering too much or too little, which is where employing a buyers’ agent can be worth their weight in negotiation gold during property transactions.
You may want to make your first offer your best offer. It shows sellers that you’re a serious buyer and is less likely to result in a counteroffer cycle, which can be frustrating and tedious. However, you should never offer more than the property’s value, which again points to the importance of research and preparation.
If you offer exactly what the seller is asking, you will get their attention and probably their respect and appreciation, and in most cases, your offer will be accepted.
Other schools of thought favor the lowball approach. This works best in a buyer’s market, so use it with caution. If you go in too low, you might be dismissed as pushing your luck and your intentions as a serious buyer will be questioned.
The right price is somewhere in between.
Of course, it’s important that you don’t offer more than you can practically afford, even if your finance is preapproved for more because you’ll end up resenting the property when it was actually your fault that you overpaid.
A seller might value you taking some of the load off of them by offering to pay some of the extra fees that crop up. For example, you could offer to cover some of the closing costs, HOA dues, or home warranty.
Put Down a Healthy Earnest Money Deposit
Earnest money is the deposit you make on a house when you write up an offer. Again, it really doesn’t impact the seller one way or another if the deal goes through. The whole point is to show that you’re serious and you’re willing to put some cash toward proving it. You won’t back out of the deal for no reason without losing your earnest money.
A larger earnest money deposit shows you are serious and are willing to put your cash on the table. Sellers will feel you are more committed to, say, a 3% deposit than 1%, meaning if a home is listed at $300,000, don’t offer a $500 deposit. The seller could feel you have nothing at risk and could walk away from the transaction at will.
If you are able to pay all cash for a home, say so. Although it’s always all cash in the end to the seller, even if the buyer obtains a loan, a transaction that is not dependent on receiving loan approval is more attractive to a seller. This could give your offer a winning edge. Submitting a pre-approval letter with the deposit puts your bid ahead of the others by showing the seller you have serious intentions.
If you’re not able to bring a top-dollar offer to the table, you can make up for it with timeline flexibility. Whether your seller wants to close in 30 days, or if they need 90 days to get their affairs in order, if you’re flexible to meet their needs, you’re likely to beat out other buyers with more strict timelines.
Speed things up
Offer to close quickly. Most sellers want to make a speedy transaction; they’ll like this.
When you have competition, don’t ask the seller to give you 15 days to inspect the home. You don’t need more than five days to get an inspector there.
Some buyers will go as far as doing the inspection right away, before submitting the contract, so that the offer is not contingent on inspection. But that could mean throwing money out the window if the offer isn’t accepted.
One way to make your offer more attractive, while ensuring that you have enough time to get a proper inspection done, is to have an “as is” inspection contingency.
The first way to do that is by shortening the compliance time. Instead of 15 days to respond to the seller’s disclosure form, agree to do in in five. Rather than agreeing to have a home inspection completed in 10 to 14 days, agree to do it within a week. At this point, the seller is looking to get to the end of the sale as quickly and easily as possible. Given the choice between a buyer who is ready and able to move fast and one who seems to be dawdling, the buyer ready to move is going to move into the home.
If the seller has set a date to consider all offers, schedule a pre-inspection before that date. You’ll get a full inspection report and can make your offer with no inspection contingency at all. If that’s not an option, you can also change the terms of your inspection contingency. Instead of a traditional inspection contingency where you can come back and request repairs from the seller, you can buy the house “as-is” but with a due-diligence inspection. That means you have a specified number of days to conduct a detailed inspection of the home.
An ‘as is’ inspection contingency lets the client find out the condition of the property and lets the seller know that the buyer will not ask for any repairs. If the inspector finds any issues in the house, the buyer will have the choice to take the home as is or walk. If you find the kinds of minor things that would normally be negotiated with the seller, you just accept them. But if you discover something truly deal-breaking, like a roof about to collapse or a giant sink hole in the basement, you can simply cancel the sale. The benefit to the seller is they know you aren’t going to nickel-and-dime them for every little thing you find wrong or delay the sale for minor repairs.
Another winning negotiation strategy is to waive some of the contingencies usually included in a standard contract. For example, a winning offer can be one which agrees to shorten the period the buyer has to inspect a property for lead paint contamination.
Unless there are extenuating circumstances, many sellers prefer to close within 30 days or fewer. If you can offer a 21-day closing time frame, that might be more important to the seller than an offer for more money and be just the edge you need to beat out the competition. If you can close in three weeks instead, this could convince the seller to accept your bid; even over one that offers more money.
Many standard real estate purchase contracts give the buyer X number of days to perform inspections before the buyer is required to proceed with the transaction. If the default in your purchase contract is 17 days, try shortening that time period to 10. By federal law, unless you specifically waive your right under the Lead Paint Disclosure, you have 10 days to inspect the property for signs of lead paint contamination.
Before you agree to waive any contingencies, however, you should check with your attorney.
However, there are risks. If you waive an appraisal contingency and the home appraises below your sales price, you will need to make up that difference in cash. But without some contingencies, your offer will be more than solid than a competitor’s.
It’s a safer way of making your offer stand out by letting the seller know you are willing to pay more for the house, without the risk of offering more than what is needed to get a contract. If the escalation clause is triggered, the sellers generally are required to show the other offers to the buyer.
If you are offering a lowball offer price for the home, you should not expect to have the sellers make repairs or to convey additional items to you such as their window treatments. You should still have a home inspection, but you may want an information-only inspection if you anticipate making any repairs yourself. A lowball offer is not always the right offer to make. In fact, you need to be prepared to lose the house if your offer is too low. However, making the low ball offer respectfully in the context of your local market could result in a successful purchase.
Make sure you’re ready for a yes.
If the seller says no, the next steps are clear enough – you make a better offer or continue house hunting. However, even if the seller accepts your offer, you don’t have the front door keys just yet.
Make sure you have some time set aside to gather all the necessary information and documentation in the weeks following the offer’s acceptance.
You must also make sure you adhere to all the agreed timeframes in the Contract of Sale, such as the payment of any deposit monies, because failure to do so may mean the deal falls over and you’re back searching for a property once more.
And don’t forget the all-important building and pest inspection, because no matter how much you think you might want the property, if it’s got significant problems that weren’t disclosed, you’re better to walk away (if legally able to do so) than end up with a lemon.
When it comes down to it, ideally, your offer will be one that makes everyone – the seller and you – happy and reassured that everything between now and the closing will go smoothly.