The market is hot!
We have all seen the news headlines about the tremendously hot real estate market we are currently experiencing. I am here to tell you it’s all true! With the massive shortage in inventory and many hungry buyers, it’s no surprise we are seeing competitive bidding wars on homes. Multiple offers are more the norm now than ever. And, it is not uncommon for the sales price to go above the list price.
So if you are searching for a home what do you do to make your offer stand out?
Price is one way to adjust your offer but not the only one. Let’s discuss some options on how to make your offer more attractive to a home seller.
- Purchase price – The higher the price, the more likely it is for a seller to accept your offer. But, you don’t want to overpay right? One option is to use an escalatory addendum with your offer. You can choose to make an offer at a purchase price of your choosing. And, include the addendum that states you are willing to pay ‘X’ dollars over the next highest offer up to a certain amount. For example, if you wanted to offer $500,000 for a home, but would be willing to go up to $525,000 to outbid another offer. Then your addendum could state you will pay $500 over the highest price another buyer would pay up to $525,000. That way you can ensure your offer is flexible enough to beat out another buyer.
- Financing – Cash is always king but not everyone is blessed to have the full purchase price of a home in cash savings. If you are getting a loan the most desirable loan for a seller to choose is a conventional loan. These loans come with the least restrictions on the condition of the home for the seller to make repairs. They also allow for a buyer to pay the difference in appraised value versus the purchase price. For example, if the purchase price is $525,000 and the appraisal comes back in at $515,000, then with a conventional loan a buyer has the ability to make up the $10K difference with cash at closing. This is not the case with an FHA or VA loan.
- Waiving inspections or financing contingencies – This option, while desirable for a seller, comes with peril for a buyer. A seller would love for there to not be an inspection on their home or for the buyer to make the purchase not contingent on financing. But, even great homes need repair/maintenance. And no matter how qualified you may be for a loan there can always be a snag that comes along in financing. Waiving these contingencies can be risky to lose your binder deposit or taking on more repairs on a home than you are comfortable with. I normally recommend trying to shorten the days on these periods if making an aggressive offer.
- Binder deposit – Increasing the amount of your binder deposit held with a title company can make your offer look more attractive. This puts more skin in the game as a buyer whereby if the buyer were to walk away a seller might be able to retain the binder.
- Love letters – No, not the kind where you get all smoochy with your partner on Valentine’s Day. I am referring to letters a buyer writes the seller essentially stating their case for the seller to accept their offer. These tend to be emotional pleas where the buyer tries to appeal to a seller’s emotions when accepting an offer. In most cases, I tend to avoid these as they can be pitfalls for fair housing violations. But, a carefully crafted letter can sometimes tip the scales in your favor.
- Closing costs – Paying some typical seller closing costs can look aggressive with an offer. It may be a little more costly but appeals to sellers.
There can be many other smaller ways to adjust an offer that are property or market-specific. Working with a trusted real estate professional is the best way to understand the transaction, market landscape, and timing. We look forward to helping you make a great home purchase. Happy House Hunting!