Stuck in a bidding war while buying real estate? Here are 9 ways you can strengthen your offer and win the home you want!
Buying a Home / Chris
I just heard a real estate broker say recently, “asking price is the starting bid” and that couldn’t be more true on hot properties here in Naples. We are seeing properties hit the market and have multiple offers in the first couple of days. The very first item sellers will look at on an offer is the price so coming in strong is incredibly important.
All offers in Naples need to be accompanied with either a prequalification letter or preapproval letter. The prequalification letter doesn’t carry much weight as it is simply a letter stating that based on the buyer’s description of their credit score, income, etc., the buyer could purchase the property.
A preapproval on the other hand is far more solid. It is based off of verified financials and credit. By having a preapproval letter accompany your offer, the seller will feel there is less risk that you won’t be able to qualify for a mortgage.
Although it takes a little more time and effort to get the true preapproval, it is worth it in this tough seller’s market.
Too many agents ask their buyers when they want to close. In this market, it’s much better to ask the seller when they would like to close. By closing on the seller’s timeline, you gain some brownie points as they’re reviewing the contract.
As an example, I had a seller I was representing that needed to move into her new construction condo. He closing date was a couple of months away and we received a number of great offers on the first day the property hit the market. Only one of the buyer’s agents asked me when the seller would like to close and that was the date she put on the offer. Needless to say, my seller breathed a sign of relief that this buyer would let her stay in her home until her new condo was completed. Needless to say, that offer won based on the terms.
The inspection is one of the main factors that cause a deal not to close. It is usually a 15 day window of time that begins once the contract is fully executed.
Many buyers take their time scheduling the inspections yet this is a problem for the seller because their home is off of the market for all of that time and sometimes the deal falls apart due to conflicts between the seller and buyer. Therefore, making an offer with a shorter inspection period so the seller doesn’t have their home off of the market as long.
One of the ways buyers can show their commitment to a deal is by making strong deposits and making them in a very quick manner. Generally, we see the first deposit within 3 days having an executed contract and a second deposit after 15 days. Putting more money into deposits will make your offer stand out and making those deposits sooner rather than later will also show your good faith intent to close.
When creating an offer, the buyer can choose to finance the property and have a financing contingency that allows the buyer to walk away should they not be able to obtain financing. Or, the buyer can go in as a cash deal.
A cash deal looks so much better to the seller and can help you get your offer selected. There are risks though with choosing cash yet getting financing. If your lender says they cannot give you a mortgage, your deposits are likely gone. You wouldn’t have a way out of the contract. However, if you’re financially as sound as can be and the lender doesn’t see any issues, choosing cash as your payment method yet getting a mortgage behind the scenes is a great way to get your offer chosen.
The appraisal contingency isn’t part of the contract but rather an addendum that the buyer can choose to use. This simply allows the buyer to walk away should the property not appraise for at least the sales price. Waiving the appraisal contingency is great if you aren’t worried about having to come up with more money should the property not appraise.
An escalation clause works to automatically “bid” on your behalf against the other offers. You define an amount for each bid increment and the most you will pay and the escalation clause does the rest.
Let’s say a home is selling for $300,000. You could bid $300,000 but include an escalation clause up to $315,000 in $1,000 increments. Should someone else bid $305,000 for the property, your escalation clause kicks in and you would go to $306,000.
The good part is that the escalation clause in theory can keep you from overpaying. In the example above, you’d hate to bid $315,000 (your maximum) and find out that they would have taken $306,000.
The downside to the escalation clause is that you may be showing your cards to the seller. The seller could simply counteroffer at your highest point since you’ve in theory agreed to pay that much.
This is last on the list and for good reason. I would almost never recommend this to a buyer I’m working with. It’s simply too hard to know what condition a property is in before making an offer.
The only time I could see this working would be someone with construction knowledge, such as a general contractor, buying a home. Still, you wouldn’t have the detailed look that you need to feel really confident entering into a purchase.