In April, Kim Nix gave us some stellar blog tips [found here] on Being a Competitive Buyer in a Seller’s Market. Now that we have that under our belts, it’s time to round out the process by making the seller an offer they just can’t refuse! While the offer price is important, it isn’t the only thing sellers consider when looking at an offer. Here are few of Kim’s tips for making a strong offer when you are in a competitive situation:
Put your best foot forward: When you make an offer, start strong. You may not get the chance to revise your offer, so lead strong and with your best foot forward! An escalation clause is another way to accomplish this if you anticipate the property will have multiple offers and sell above the list price. Keep in mind, if you are financing, the property will have to appraise at or above the sales price, which is a good gut check for everyone involved.
Show your serious side: Increase your deposit. 1% of the sales price is typical for an Earnest Money Deposit, but increasing that deposit communicates to the seller that you will not easily walk away and that you are a serious buyer.
Let your money talk: Use Cash or a Conventional loan, if possible. As they say, “Cash is King,” so if you have the ability to do it, then go for it. However, for the majority of us, financing will need to be involved. The perception is that a buyer that qualifies for a conventional loan with 20% down is stronger than an FHA buyer; but, there is some debate as to whether that is true. In the end, the type of loan used can be a deciding factor when you are in a competitive offer situation.
Prepare to flex: Timing is an important term of the transaction, and closing sooner or giving the seller a little more time can be attractive depending on their situation. Sometimes offering a scenario in which the seller can “rent back” for a few days or weeks is helpful. Shortening your timeline on the inspection can also help. Instead of 14 days, commit to wrapping that part up in 7 or 10 days, for example.
Warm up your wallet: Often a sellers’ closing costs are not that expensive! If you have the cash and can make it work, offering to pay a sellers closing cost could really give you an edge! Outside of the commission, the sellers’ costs generally run between $300-$500 for closing fees, the termite inspection is usually around $75.00 and the grantors tax–which is based on the sales price–is determined using an easy formula: Sales Price times 0.1% (for example on a $400,000.00 sales price the grantor’s tax is $400.00). Offering to pay the sellers’ closing costs could really make your offer shine!
Get personal: Introduce yourself to the seller through a letter and explain why you would like to purchase the house. House selling and buying can be an emotional proposition for many, and some people have deep attachments to the house they are selling–especially if they have had happy years there. Personally, I have seen this strategy work on more than one occasion and have even seen sellers decline higher offers and go with my clients because of an endearing personal letter. So pull out your stationary, pick a sweet family photo, make your third grade teacher proud, and get to writing—the house of your dreams may be just one sweet letter away!
[All photos in this blog post are from homes sold by the Kelly Blanchard Real Estate Group.]
Check Back for Part III of this series which will cover the details of financing your new home . . .