There are steps to get your offer accepted when you are in a multiple-offer situation. When there is a lot of competition in the real estate market, buying the home you want is going to be difficult. With the very low inventory, it is common for a real estate Broker to receive numerous competitive bids over asking. If the seller has multiple offers to choose from, why would they choose yours?
But there are things you can do to get your offer accepted even in a seller’s market which is an extremely competitive housing market. Let’s take a look at some of the things you need to do to get your offer accepted!
Offer to Pay a Higher Price
A first step to consider is when you are making a purchasing offer on a property, offer to pay a higher price. It is very common to see properties being sold for over-the-list price. You can decide how much over asking you are willing to pay. Generally, you can get an idea about the amount of offers the seller will receive by the traffic outside the home. Ideally, the offer that you are making is going to be highest offer that the sellers will receive and you will win!!
Get Your Offer Accepted with An Escalation Clause
If you really want the home, an escalation clause allows your offer to be raised automatically. When you and at least one other buyer are making offers on the home, the escalation clause pushes your contract price higher without submitting a new contract. An escalation clause is a clause that allows the buyer’s offer to go a certain amount over and above the original offer.
Should you decide to utilize an escalation clause in the purchase agreement, this is something that should be discussed with your buyer’s agent. When you make an offer on a home and another higher offer comes in, you need to have a plan in place. You do need to be able to afford to pay over the asking purchase price. Otherwise, you could be committing to buy the home for a price you can’t really pay.
An earnest money deposit gives the seller some protection to take their home off the market when they receive an offer. This deposit is typically 3% of the offer amount. The earnest money is deposited into the escrow account.
If you are willing to provide additional earnest money, it shows you are more committed to buying the home and may convince the seller to go with your offer. If you can also waive the related contingencies, where the deposit could be returned, this will be more attractive to the seller.
An Appraisal Gap
In a hot market where multiple offers are pushing the price up, the sale can run into problems when the appraisal takes place.
In these circumstances, not having an appraisal contingency removes a lot of problems. The buyer should also state that they have extra funds available to cover the difference should the appraiser find the home is worth less than the offer. There are reasons why a home may not appraise, as there may not be supporting comparables sold properties in the immediate area to substantiate the price or market value.
Sometimes purchases can collapse before closing, but a leaseback offers the seller some protection. The seller can then move out after closing, removing a lot of the risk for them.
Though this sort of arrangement needs to be handled carefully, with a lease agreement and a security deposit. If the market is particularly competitive, you could also waive these requirements.
If you are the first person to be shown the home and make an offer, this will be a positive step to get your offer accepted. You want to make your highest and best offer in order to be competitive in a bidding war. For this to happen, you will need the assistance of a willing real estate agent who will schedule showings for you very quickly after they have been listed.
Listing agents are utilizing showing time to schedule block showings of the house. Generally speaking, the showings are scheduled every 15 minutes so that does not allow a lot of time in the home. So buyers need to be on time and prepared to thoroughly inspect the home during their time frame.
Another thing that a buyer needs to be prepared is to show their pre-approval letter prior to being granted permission to view the home. These additional steps are now part of the home buying process.
Shorten the Escrow Period
Another way to create a more competitive offer is to shorten the escrow period. It is common to now see buyers offering to shorten the contingency for the home inspection contingency, appraisal, and a financing contingency. Also by shortening the contingency period, the seller knows the closing date. Many buyers are using 21 days for an escrow or even less. It is super important to use a lender who already has all of the buyer’s documents and is able to get the loan processed in this time frame. The lender should also have the buyer’s credit score and loan application to ensure they have a completed loan application package.
Communication upfront is one of the best ways, and create a plan with the buyers to ensure that once a property comes on the market, the buyer is ready to view it, write a competitive offer in a timely fashion. Having a fast closing can be the thing that tips the scales in the buyer’s favor.
There are traditional closing costs where both the buyer and seller pay for the closing costs. However, there are buyers who are willing to pay the sellers closing costs. This can be expensive, and buyers really need to understand what they are offering. Serious buyers may choose to consider this plan of paying for the seller’s closing costs. A buyer will need to have extra cash to pay for the seller’s closing costs. Paying the closing costs for a seller could create the winning offer.
If the home is occupied, offering to pay moving expenses for the seller could swing their decision your way. This is an unusual approach and could be more effective as a consequence.
The seller gains a benefit from choosing your offer without the price of the home increasing. This avoids appraisal or mortgage issues, so will sidestep common problems that end purchase offers.How to Get Your Offer Accepted in a Bidding WarClick To Tweet
If you are in a position to make a cash offer on the home, it is likely the seller will consider that strongly. There is no loan contingency and no appraisal contingency. This can be much more appealing to the seller as those are two pretty big contingencies. A potential buyer making a cash offer is a very favorable offer. Home sellers are looking for not only the best price on the home but are also looking for the best terms that a potential buyer can offer with their offer.
You might have heard that a great way to persuade sellers to go with your offer is to write them a personal letter. However, this is out-of-date advice that has led to a few lawsuits and violates fair housing.
Real estate agents would include a personal letter and even a family photo to create an emotional connection. This did lead to some buyers believing that the seller rejected their offer due to race or class prejudices, with lawsuits following.
Most sales contracts will include contingencies to protect the buyer and allow them to get their earnest money back should something go wrong during the sales process. These contingencies can hold up sales and are normally only beneficial to the buyer. If you can waive some of these, the buyer might look at your offer in a better light.
Contingencies for the home inspection and financing are often stumbling blocks stopping a sale in its tracks. As a buyer removing these does present risks, but in a hot market, it could make a big difference that will make your offer stand out.
Another thing that buyers are waiving is the home warranty. A home warranty is suggested for buyers purchasing a home. Waiving a warranty is another expense for the seller when they are making an offer on the home.
If you can put more money towards the down payment on the property, it will show lenders and sellers that you are in a good position to buy the home. Having a larger down payment will also give you better terms with the lender with lower interest rates and lower fees. The seller’s agent will educate the sellers that the sale is more likely to avoid problems because you have a higher down payment amount.
Buying a new home in a seller’s market isn’t easy, and there can be a lot of disappointment when you don’t get your offer accepted on a home you had pinned your hopes on. Writing a clean offer will make a difference with some of the items listing above such as shortened contingencies periods. You want to avoid making mistakes buyers make in a multiple offer situation. But if you take a slightly different approach, you might find you get the home you want ahead of other buyers, sometimes even if you aren’t offering the most money.