As we head into the spring buying season, traditionally the busiest time of the year in the U.S. housing market, buyers are faced with the prospect of scant inventory and strong demand for the few homes that are for sale.
As a result, those who are absolutely determined to move may be tempted to go to extra lengths to ensure that their bid on a home is accepted. But what can buyers do to sweeten their offer and increase their chances?
To answer that, realtor.com spoke with a number of agents to find out how they’re helping their clients to make offers that stand out, besides simply trying to outbid the rest of the competition.
One good idea, according to realtor.com, is to put down more earnest money than is usual. Home sellers may look more favorably on an offer that does so. Earnest money is the nonrefundable deposit that the homeowner is entitled to keep, should the deal be accepted and later fall through.
Earnest money is usually about 1% to 3% after an offer is accepted. “Buyers can get a leg up by putting down more earnest money and making a portion, if not all of it, guaranteed,” Mike Opyd, managing broker and owner of Chicago’s RE/MAX Next, told realtor.com. “Yes, this means the sellers get to keep the money if the deal falls apart for any reason at any time. However, it makes a buyer look a lot more committed to doing whatever it takes.”
Other agents suggested adding a leaseback option in the contract. It makes sense because sellers are face exactly the same problem as the buyer: the difficulty of finding a home to buy after quickly selling their property. Buyers can offer a leaseback that allows the home seller more time to find a new place. “If the seller is living in the property, the buyer can offer to lease it back for 60 to 90 days, at no charge, to allow them time to find their next place,” said Glen Pizzolorusso, an associate broker with Compass in Fairfield County, Conn.
Last but not least, agents say buyers can consider adding what’s known as an “escalation clause”.
This is a contract addendum that can be used when a bidding war is likely. It will increase the buyer’s offer amount if the seller receives multiple offers that increase the amount of the most likely successful offer. It will raise a buyer’s offer if competitive bids roll in.
Some real estate professionals are torn on this tactic as it does tip the buyer’s hand on how much their client is ultimately willing to pay. Still, if a buyer is really willing to pay more for a home, an escalation clause could give them flexibility if other bids come in, and they wouldn’t lose out on a purchase because the first amount in their offers was lower than the maximum they would have been willing to pay.