Do you want to increase your odds of getting an offer accepted on a home?
If you are trying to buy a home in a seller’s market, offering the asking price may not be enough. With more competition from buyers, the seller has more options, and you will need to do more to get the house you want.
Getting a house under contract is challenging, with bidding wars becoming the norm and not the exception. Sellers are in the driver’s seat, and they know it.
Housing markets across the country have been disrupted due to a number of factors including the Covid-19 Pandemic.
To make sure you are the winning home bidder, there are things you can do to improve your chances. Let’s look at how you can increase your odds of being the next winning bidder.
Make Your Offer as Straightforward as You Can
If you want to give yourself a better chance of having your offer accepted, making it as clean and straightforward as possible will appeal to the seller. Any proposal full of contingencies or seller concessions isn’t going to look as good.
An offer contingent on you selling your home could easily lead to delays and isn’t be something that the seller will want to agree to if they have other options.
Removing the appraisal contingency is another option, though you need to be sure you can cover any appraisal gap.
Offering an appraisal gap guarantee does ease a seller’s mind when you’re not making a cash offer. It’s something you really should consider to make your offer stronger.
Make a Strong Bid
When you have a lot of competition from buyers to get to the under agreement stage with a seller, there isn’t much chance of success with a lowball offer.
In a seller’s market, you are more likely to need to bid above the asking price to be successful.
In order to be the winning home bidder, you might only need to offer quite a bit over the asking price. Consulting with your real estate agent on what has been typical will be crucial. Are homes selling $10,000 over asking or $50,000?
All real estate is local, so it will be essential to know what is happening with the local market. When you understand the market well, you can craft a powerful offer that the seller will find attractive.
Ask your buyer’s agent to put together a comparative market analysis for the home. Look carefully at any market statistics on recent appreciation rates.
When you make a very strong offer, the seller will realize how badly you want the property.
Offer a Larger Earnest Money Deposit
Your earnest money is a way of showing the seller that you are a serious buyer. This deposit will be placed in an escrow account, and if things go successfully, it can later be used as part of your down payment or to cover closing costs.
Typically, the earnest money is 1% to 5% of the purchase price. But if you offer to put down a larger deposit, it can indicate to sellers that you are more likely to complete your purchase. A larger deposit is much harder to walk away from.
However, this money is at risk should something go wrong, with this money going to the seller. There is more considerable risk if you don’t have many contingencies that would otherwise return the deposit to you if you walk away from the purchase.
Make sure you’re confident there will be no problems that could cause you to back out.
Increasing Your Down Payment
Another way of showing the seller that you were a serious contender is with a larger down payment. While your home loan might only require a small down payment, the more money you can commit to this, the more attractive you will look as a buyer.
As a bonus, it will also reduce your home loan costs, giving you lower interest rates and saving you thousands of dollars. In the strong seller’s market, we are experiencing higher down payments is much more preferable due to the chance of the home not appraising.
A higher down payment makes it less likely a lender will have an issue. Some lenders may even decide to waive the appraisal if you’re putting down more than twenty percent.
Don’t Ask the Seller to Include Excluded Items
Even if you like an item of furniture or a feature in the house that has been excluded from the sale, don’t push for it. Asking for something that the seller doesn’t want to include will only make your offer look worse and make your chances of an under-contract agreement less likely.
You could be seen as a problematic buyer to deal with if you push too hard for something.
Cash is King
A cash offer will be more appealing to a seller, promising fewer problems and speeding things up. Being a cash buyer means no finance or appraisal contingencies and will look better than lender-financed bids.
Many people can’t pay cash. The next best thing would be waiving your financing contingency, so you look like a cash buyer. Just know you’ll need to be confident of getting the mortgage, or you risk your deposit monies.
Using an Escalation Clause
An escalation clause is a way of outbidding other buyers up to a specific price. Your bid will automatically be raised should another buyer offer more.
You will need to have your real estate agent write this into the contract, setting the maximum price you are willing to pay.
Offering the Seller One Month Rent Free
It could be attractive to the seller to remain in the home for a little longer. Offering free occupancy could be a way to make your bid stand out, though you need to have the terms clearly stated in the agreement.
Without a written agreement about occupancy, you could find yourself with an unwanted tenant – the former owner – in your new home. A more extended closing is also another option that may be attractive to the seller.
Make Sure Your Offer Beats the Competition
When you’re buying a property in a seller’s market, you’ll need to move quickly to secure the home you want. You also need to ensure that your offer is more attractive by doing more than other buyers. If you get this right, it will increase the chances of having your offer accepted.
Lean on your buyer’s agent for counseling and advice. They should know the market well enough to give you sound real estate advice.