How to Write a Winning Offer in a Seller's Market
Buyers Be Aware
Forget the spin. Take off the rose-colored glasses too. Let’s be honest. Most buyers hoping to score a home at the lower pricing tiers of the current real estate market, face fierce competition, creating a process fraught with disappointment.
That’s the bad news. But I am by nature a confident guy, a problem solver and a believer in the philosophy that winners never quit. So here is the good news. A buyer with a savvy agent can write an offer that a seller will find hard to refuse.
Be Ready to Act Fast
Desirable properties often have multiple offers a couple of days after hitting the market. There is no margin of error for indecisiveness or being unprepared to make an offer on a hot property as quickly as possible. That means you should not even consider making an offer on a home if you do not have a preapproval letter from an accredited lender.
Don’t Be Coy
In this market, you can feel reasonably confident that if you have fallen in love with a home so have other buyers. The occasion calls for an assertive approach, not a timid one. Open with your best offer which should at least equal the asking price or higher. Your real estate professional will provide insights based on competitive properties also for sale in the neighborhood as well as homes that have already sold.
Go Above and Beyond
Let the sellers know your degree of commitment by upping the earnest money to 3% of the sale price. Doing so will instill seller confidence that you will not be likely to walk away from the deal since you have more money at risk. Another enticement is to make the earnest money offer non-refundable should you as the buyer cause the deal to fall apart for any reason.
However, let me insert a caveat here. Consider the option carefully and talk it over with your agent and lender. You would need to prepare to forgo other contingencies to make this work.
It Isn’t Only About Money
Another way to sweeten the pot for a seller is to remove as many contingencies as possible. Examples include a home inspection. If you are uncomfortable with doing so, consider shortening the length of time you are requesting to get one done. You can also agree to up your down payment if the appraisal falls short of the agreed-upon price of the home. Again be advised this is a risk you should consider carefully.
An experienced, assertive agent will find out as much as possible about the seller's situation to write an enticing offer. If they are anxious for a quick sale, offer to get to the closing table as soon as possible. If the opposite is the case and they might appreciate a few extra days after closing to move out, give it to them. Do the sellers want to exclude that antique light fixture in the dining room that is a family heirloom don’t even think of being disagreeable to the request.
Appeal to Their Emotions
Many of today’s buyers include a personal handwritten note to the sellers along with the purchase offer. Appeal to their emotions by listing the reasons you love the home and why you will be the best person to buy it. Don’t go overboard, limit your letter to a couple of paragraphs. It may not work, but then again, you have nothing to lose for trying.
Include an Escalation Clause in Your Offer
Escalation clauses are becoming more popular than ever when a hot property comes on the market that will undoubtedly draw multiple offers. It’s a method a buyer can use to put more money on the table (with increments of $1000 for instance) while edging out the competition while setting limits with a cap.
Let’s assume there is a desirable home in a highly sought after neighborhood listed for $299,900. Our buyer and his agent both know this property will generate several offers and conclude that the highest may come in at $310,000. The stage is set for a bidding war which our buyer fears he will not win so instead she opts to add a clause that says she is willing to go $1000 above the highest offer received up to a cap of $316,000 hoping the seller will take the $311,000 rather than counteroffer.
The success or failure of using the escalation clause as an element for a successful offer depends on the seller’s situation. Someone who has already moved to another home may be eager to sell and not risk losing the highest and best offer. A homeowner that is not in a hurry to make a move may go with counteroffers or even taking the home off the market and relisting at $316,000, which was the cap on the escalation clause.
Have a Strong Team Advocating for You
In a market where competition is intense, timing can be the difference between having an offer accepted or rejected. You need an experienced professional team working on your behalf. When choosing a lender, make sure they will be ready to fast track your loan through underwriting and approval. Hire a real estate professional who knows the intricacies of the market and has a proven track record of success writing winning purchase offers for buyers.
As always, thanks for reading.
You know where to find me. Joe Houghton
Other posts you might find useful: Homebuyers Take a Closer Look Before Making an Offer, 5 Ways You Should Never Compromise When Buying a Home