How to Make an Offer on a Home; Getting Accepted
Frustrated by getting beat out on your offers on real estate, wondering how to go about getting your offer accepted?
I hope you've never experienced that kind of frustration, but whether you have or not, I'd like to spare you that grief going forward. There are several sound tactics that home buyers can use to make the most attractive and compelling offer, and that doesn't necessarily mean offering more than other buyers.
What most first time buyers have no experience with is how to make a powerful offer out the gate or the most attractive offer for sellers to select from in the case of multiple offers.
First, you need to find and choose a great Realtor. Secondly, it will help you to learn about what's attractive to sellers beyond just the asking price.
Look for my post series later this week about how to make offers on different types of property; HUD, Fannie Make, Short Sales, etc.
But let's go over the basics for making strong, appealing offers.
1. Effectively Demonstrate Your Buying Power - Regardless of what type of home loan you use to purchase, no down like USDA or VA, low down like FHA 3.5%, or using OHFA down payment assistance or grants, conventional or other type of home loan product, you need a pre-approval letter from a qualified lender. Sellers will not entertain financed offers without it. You're offer will be laughed into oblivion. Making a decent earnest money deposit will help too. This "good faith" sum shows the seller you are serious. Amounts vary, consult your Realtor.
That being said, here's how to offer less, play it closer to the vest and still be attractive to the seller. Let's say the home is $300,000, and you're preapproved for $350,000, don't provide that particular preapproval letter. Have the lender prepare asap a preapproval letter for $300,000 to $310,000. If a seller knows you're capable of much more, much more could be asked. Pre-qualified is better than pre-approved. Ask your lender.
2. Be Careful of Asking Too Much - Put yourself in the seller's shoes. You're offering 2-5% below asking, want your closing costs covered and then start asking or demanding cosmetics or additional incentives. It's one thing to land a deal, but quite another to attempt to gouge a seller. Most likely, you'll just incur their disdain and they will move on to other offers. Keep your requests simple and reasonable. If a home has been on the market for a long time compared to other similar properties, that's your queue that asking for more might be palatable for the seller. Particularly if you follow these other suggestions for making an offer on a home.
Check with your Realtor, but don't be deceived or disillusioned about what kind of discount off the asking price you can expect. Back in 2010 through 2013 following the crash of 2008 deep discounts of 10 or 15% were entirely possible. In today's more balanced market, you can expect 2-4% off the asking price unless the home is obviously overpriced. The more you ask for in addition to less to asking price degrades the power of your offer. Again, consult with your Realtor. Having your agent ask the listing agent whether they prefer to make repairs or come down in price, for example, is wiser than just brashly trying to dictate terms.
3. Appeal to the Sellers' Emotions and Attachment - Sometimes, for a seller, listing and closing is all about the net profit of the sale. Be aware though, many sellers have strong emotional attachments to their home or property. Memories, all the work they put into it, children raised in the home, etc.
Even if you bid higher than others, you could still lose out to a buyer who's expressed a sincerity with how the property will be loved and cared for, or expressed appreciation that the home is special and deserves the best of care from the next owner. Gardens, special rooms a tree with a rubber tire swing ... it's quite emotional for some. Connect with the seller on an emotional level. Write a letter and express your feelings and intentions through your real estate agent.
Be considerate and responsible. If you set a showing appointment but can't make it, make sure to cancel as soon as possible with plenty of notice. Not doing so can be construed as quite rude. While you are at the showing, whether the seller is there or not, stay quiet or at the least be very discrete with negative comments if you're even remotely considering an offer. If it's something than can be handled after purchase, don't bring it up. Though you share any thoughts with your agent, ask they not share negative comments with the seller about things you can handle down the road.
Who doesn't like to hear "thank you?" When you have your agent submit an offer, be sure to include a warm, heartfelt than you letter. Personalize it and express genuinely what you love about the home, respect the memories or work that went into it, and how you intend on lovingly caring for the property.
4 Contingencies are Contentious - Contingencies should be kept as short as possible. What is a contingency? Well, probably the worst is "Accept my offer, I can close on your home, but only after my current home sells". Though that should not need explanation, the seller has no idea if your home is priced correctly or what kind of job your agent is doing marketing the property.
Other contingencies that break a real estate transaction goes back to making sure you're not asking for too much, but also includes items like having the seller cover your closing costs. While common, and reasonable with offers close, at or above asking price, it can adversely affect your chances if you're already offering below asking price.
Another type of contingency is inspections. Often offers are written "upon satisfactory inspections", however, you could choose to waive this but still ask for the right to have inspections done for your own satisfaction. If there is some type of repairs needed, the seller may not want you to ask them to have the repairs done. This is sort of a grey area with making attractive offers, and buyers assume risk based on how inspection clauses are written. Consult your Realtor.
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