Losing out on a home you’ve offered on SUCKS. Walking the property, imagining the move, picturing the space as your own…….all to have another buyer swoop in and submit a better offer. No more! Landing your dream home is now about timing, contract structure and submitting the strongest offer possible as soon as you can. With inventory at record lows, competition is as intense as ever and it is crucial that that your offer stands out from the crowd. Here are five ways to make your offer more competitive and increase the chances of getting it accepted.
1. Increase Price
The first item that almost every seller and their broker look at is price. As a buyer you need to understand that real estate pricing is largely about supply and demand. Currently in most markets demand is high and supply is low leaving sellers with the upper hand. If you find a house that you want, now is not the time to play games and submit lowball offers. Multiple offer situations are more and more common and you may not even get a chance to counter and change your price depending on the seller’s circumstances. Your first offer may not be your best, but it should be pretty close. If not, your offer will get dismissed or put to the bottom of the pile. This doesn’t mean you have to overpay, but your first offer should represent how much you want the property.
2. Increase Down Payment and EMD
“Skin in the game” is the name of the game! Now more than ever, it’s important to signal to the seller that your offer is the real deal – nothing says this louder than a high down payment and EMD! Regardless of price sellers want to be assured that your offer will actually close. If you are using lender financing, the more money down the more likely your loan will be accepted. In addition to down payment on your loan you should consider increasing your Earnest Money Deposit (EMD). This is money that you potentially stand to lose if you back out of the deal without justification. With a higher EMD and Down Payment, sellers know that you have MORE skin in the game and are likely not just throwing out offers to every new property that hits the market.
3. Closing Terms
All things equal sellers will likely choose the offer with the strongest closing terms. An all cash offer that can close in days is much more powerful than one with lender financing and a 45 day wait time. If you have the means to liquidate accounts or have cash sitting in an account, now may be time to use it. Do this prior to home shopping so you are ready to act when you see a property you like. If this isn’t an option you need to work with your lender or mortgage broker to get as much of the underwriting done prior to finding a home. There are lenders who will let you submit paystubs, tax returns and credit report without finding a property. This eliminates a large part of the process and can shave weeks off the approval time. Instead of closing in 45 or 60 days you can close in 21. Those few weeks can steer the seller to choose your offer.
4. Reduce/Waive Contingencies
In the eyes of the seller, buyer contingencies are potential obstacles to an easy closing. The more of these contingencies you can remove upfront, the more likely you are to close. The easier you can make the closing process for the seller the more appealing your offer is. There is a fine line between making a reckless offer and knowing what to eliminate. In every contract there are standard contingencies, the main ones being the following..
If you are paying cash and plan to knock down walls, the inspection isn’t that important. You can eliminate this to expedite the process. If you are using financing you can have the inspection done in 48 hours to minimize the wait time. Unless you find major issues with the foundation or other underlying issues you should accept minor deficiencies with the property. Eliminating the appraisal contingency assures the seller that, regardless of where the value for the value comes in, you’ll do what’s needed to close the transaction (even if that means bringing more $$ to the table to cover the difference!) Now is not the time to haggle for a minor repair credit or ask for certain items to be taken out of the property. While it’s more common to negotiate under normal markets conditions, highly competitive markets but when there is high demand you need to accept that there will be some items pointed in the sellers favor. Eliminate contingencies in your offer to maximize its strength in the eyes of the seller!
The MLS is the largest and most popular source for new real estate listings. Every time a property hits the market, agents and brokers are instantly notified. A savvy agent can get an alert on their phone at 9 AM, set up a showing at lunch and have an offer submitted by dinner. This competition doesn’t give you the best chance at finding a property and getting your offer accepted. In these times you may need to get creative and find as many alternative listings sites and opportunities as possible. Word of mouth has always been a great way to find deals. Investors and home flippers often have a pipeline of off-market inventory that could be a huge source of opportunity for buyers looking for less competitive situations. Here it CT Homes we’ve pre-sold many of our recent listings to buyers who have approached us off-market. The buyers skip the chance at entering into a bidding war and get a quality home! Getting creative and knowing where to look can be vital to exposing you to deals you otherwise would not have a shot at buying.
Now more than ever it is critical to know how to strengthen your offer to edge out your competition. Use the tips above and make the seller an offer they can’t refuse! Good Luck and Happy House Hunting!