So, you’ve figured out where you want to live. You have a real estate agent, you’ve looked at a bunch of properties, and you’re ready to make an offer. There’s only one problem: Your location of choice is in an intensely competitive seller’s market.
Buying a home is frustrating enough as it is, but it’s even harder when you’ve made offers on multiple homes only to lose out each time. Here are some tips on how to write an offer that will give you an edge over other home buyers.
1. Get on the Seller’s Good Side
For some people, selling a home is purely about the money. But for many, especially sellers who have lived in their home for many years, it’s an emotional process. Even if you’re the highest bidder, you might still lose out because the seller just didn’t like you as much as another buyer.
Don’t forget that buying a house is a human experience. Try to connect with the seller and make a good impression.
- Set up an appointment to see the property and keep it. If something comes up and you can’t make it, cancel that appointment. It shows that you’re responsible and thoughtful.
- When you visit the property, be respectful. Keep negative comments to yourself. You can share your concerns with your agent after you leave. A disparaging remark about the wallpaper might destroy the chances of your offer being accepted.
- Write a thank you letter after you’ve seen the property. When it comes time to submit your offer, include a personalized cover letter about why you love the home and your plans to take care of it.
2. Improve Your Chances with a Lower Loan Amount
The more money you put down, the less worried the seller will be about you being able to qualify for a mortgage loan. Paying entirely in cash will give you a huge advantage over other buyers.
But not everyone can afford that. Fortunately, there are a few other ways to show you’re serious about buying.
Offer to make a large earnest money deposit. The earnest money deposit acts as a kind of insurance for the seller because if they accept your offer and if you back out for a reason other than what’s in your contract, you could lose your deposit. If the deal goes through, the earnest money deposit will go toward your down payment. Typically the earnest money deposit is one to three percent, but if you can pay more, it might help you win the bid.
Similarly, making a down payment larger than the typical 20 percent will go a long way to assure the seller that you’re committed.
3. Don’t Ask Too Much of the Seller
Make the terms of the contract as favorable to the seller as possible. That means giving up provisions like asking the seller to cover closing costs or repairs.
“Keep the offer as clean as possible. Don’t put in a lot of contingencies,” said Nicole Haley, a Movoto real estate agent in Chicago.
Contingencies are designed to protect you and your earnest money deposit in case something goes wrong, like not being able to get a mortgage in time. Although financial and inspection contingencies are common in most contracts, waiving them assures the seller that you’ll be able to come through with the money even if your lender doesn’t and you won’t ask them to make home repairs.
Only waive contingencies if you’re comfortable with the idea of losing your deposit if you decide not to buy or are comfortable completing any needed repairs to the property after you’ve purchased it.
4. Keep Your Contingency Periods Short
If you decide you want to keep contingencies in your offer, try to keep the periods of time you have to get your loan, an inspection, and an appraisal as short as possible. For example, if it’s the normal custom to ask for 14 days to complete all inspections on a home in the neighborhood you’re looking in, consider only asking for 7 days.
Here’s how you can speed up the loan, inspection, and appraisal periods:
- Do most of your loan due diligence up front. Ask the lender to help you get your automated underwriting (AU) approval, which basically tells the lender that offering you a loan is low risk.
- Schedule a general home inspection the day your offer is accepted. That way if the home inspector points out something that needs further inspection by a specialist (such as the foundation, roof, or chimney), you still have time to bring in that additional inspector.
- Ask your lender to order the appraisal the day your offer is accepted.
Making a successful offer in a seller’s market can be tricky and frustrating, but with persistence, know-how, and a little luck, you’ll soon be in your new home.
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