Today’s homebuyers are faced with a strong sellers’ market, which means there are a lot of active buyers competing for a relatively low number of available homes. As a result, it’s essential to understand how to make a confident and competitive offer on your dream home.
Here are 9 ways to make your offer more competitive:
- Get pre-approved
Pre-approval is a more rigorous process that will look at your credit report, verify pay stubs, bank statements, and other financial documents. If you pass their underwriting requirements, the lender will give you the actual numbers for the loan you’ll be able to get once you find a home (and then provide you with a letter to provide as proof).
- Be one of the first to view the home and make an offer
Staying in touch with your real estate agent pays off big. They’ll let you know as soon as homes enter the market, especially if they have many connections to other agents. Sometimes, agents will hear directly from other agents about a home that’s about to get listed — or that won’t enter the MLS at all (this is typically called a “pocket listing”).
- Keep your offer clean and simple
Keep your contracts clean and easy for the seller to understand. It will convey signs that you and your agent are easy to work with. Only add extra words if they are necessary and help strengthen your contract.
- Offer above asking
This is not the market for making low offers and hoping someone will bite. You will have to make your offer strong enough to beat out a multiple-bid situation. Making an offer above asking price won’t end up costing you much in the long run. What you put down and what you pay monthly on your mortgage will only change significantly if you offer an unrealistic amount above asking. Keeping your offer aligned to the home’s value, while still above the asking price, will help you secure the home you’re interested in.
- Have a larger down payment
When sellers review contracts from buyers, they consider the downpayment as a sign of financial strength. Buyers putting more cash down have more money in the bank to access if an issue arises. Low appraisal value or expensive repair costs are less likely to sabotage a deal if the buyer has more cash.
- Increase your earnest money deposit
Earnest money is offered with a sales contract to help the seller justify taking their house off the market. It’s a way of proving that the buyer “earnestly” wants to purchase the property beyond the contract alone. If you offer more than the standard amount of earnest money requested, you are showing strong intent.
- Waive financing contingencies (be prepared for an appraisal gap)
Sales contracts will usually have provisions for the buyer to receive their earnest money back if the mortgage financing falls apart. If this happens, the seller ends up putting their house back on the market and starting the whole process over. Waiving the financing contingency allows the seller to inherit the earnest money if something goes wrong with your financing. This strategy is very appealing to sellers and helps strengthen your reputation as a strong buyer.
*Important to note that if you choose to do this, you should also prepare for an appraisal gap. If the home appraises for less than what you offered, an appraisal gap will state buyers have extra funds available to fill in the gap between the appraised value and the contract price. This perk gives the seller extra assurance that they won’t be in a situation where they have to drop their home price.
- Shorten financing and appraisal contingency periods
If you offer a shorter window for inspection, such as a 3-5 day inspection period compared to a 10-day, a seller might accept your offer over others. They know that if something comes back bad from the inspection, they can go back to market sooner rather than later.
- Close on Seller’s terms or as fast as possible
When buying a home in a competitive seller’s market, it’s wise to have your Realtor contact the listing agent before submitting your offer. Your agent can ask the seller’s agent precisely what their client is looking for in a contract. If your agent can get this information, you can tailor your offer to the most appealing terms for the seller. This method will put your bid at the top of the list every time.
Depending on your individual situation, we can mix and match these strategies to put your best foot forward. If you have questions about any of these, text, call or email me anytime.
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