In a hot real estate market it’s very common to have buyers bidding with other home buyers for a home. Here are a few strategies you can use to strengthen your offer.
Make sure you have a pre-approval letter and not a pre-qualifying letter. The pre-approval letter is much stronger and shows the sellers that you and your lender have done the leg work up front to reduce any hiccups in the lending process.
Contact the sellers through your real estate agent and see what’s important to the seller. Price isn’t always the number 1 driving factor for sellers.
Write the sellers a personal letter. It should come from the heart and write it like you mean it. Imagine your life in the home and write about it.
If possible conduct a pre inspection so you can eliminate the inspection contingency in your offer. This will cost a little money upfront but it’s well worth it depending on how many offers there are. For example, if there are 10 offers and you know some of them have escalation clauses and you are only willing to go up to full price, then it’s best to save your money.
Increasing your earnest money will show the sellers that you are really serious. It’s normal to put down 1% of the purchase price for earnest money when you make an offer. Bump the earnest money up to 3 – 5%.
You can release all or part of your earnest money early to the sellers. This is a risky move that can pay off big. This shows the sellers that you are going to do whatever it takes to close on the home.
Paying cash for a home will strengthen up an offer considerably. It gives a buyer the ability to eliminate the financing contingency and close much quicker than a buyer getting a loan.
Talk to your lender and see how fast they can get loan documents out. Try to close as quickly as they can turn them around. Have your lender put the closing date in the pre-approval letter.
If possible use an escalation clause. An escalation clause basically states the buyer will beat the best competing offer by x amount up to x amount. Think about the amount you are willing to beat out another offer by. $100 most likely won’t beat out a cash offer and it’s still up to the seller to decide who to work with.
Paying your own closing costs shows the seller that your financing is strong. Asking for closing costs during a bidding war is a sign of weakness.
Many times home won’t appraise for the purchase price value after a bidding war. If you really love the home, offer to pay the difference between the purchase price and the appraisal if the appraisal comes in low. A lot of times a low appraisal will hold up closings.
Do your due diligence up front and eliminate as many contingencies as possible. It’s usually possible to get most of the contingencies done upfront.
You can usually get the sellers disclosures sent to you by the sellers agent or your buyers agent. You can go through the sellers disclosure before submitting an offer and work through any questions with your agent or the seller. Normally you have 3 days to retract your offers based on the sellers disclosures ( form 17 ). If everything looks good after reviewing the Form 17 then waive your right to revoke your offer based on the sellers disclosure. Waiving your right to revoke your offer will make your offer a lot stronger.
In the purchase and sale contract there is a clause that states a buyer can revoke their offer based on what was disclosed on the listing. This can be the taxes, sq. footage, number of bedrooms, schools, etc.. With a little homework upfront you can verify all of this before putting in your offer and waive your right to revoke your offer based on what was disclosed in the listing.
Shortening time frames for contingencies can include the inspection, financing, title, etc… See which contingencies make sense to shorten.