You've taken the plunge and decided to buy a house. But despite your best efforts, months later, you're still looking for a house. Who knew it cold be so hard to get an offer accepted? Take heart, you're not alone. Here in Denver, the spring frenzy has started early this year. Inventory is low and demand is sky high. Many houses that are priced well and are move in ready go under contract very quickly leaving behind a number of discouraged buyers who wrote great offers but still got beat out. What does it take to get an offer accepted in this market?
When a listing agent and seller review offers, they are looking for the offer that is most likely to close and provides the best price and terms. Here are 6 tips you can consider that could help get your next offer accepted.
Disclaimer: The following strategies have certain risks associated with them that would need to be evaluated on a case by case basis. Make sure to consult with your Realtor on what is best for you and your unique, individual situation.
1. Increase Your Earnest Money Deposit
Your offer has to stand out to have a chance. It has to offer something of value thats different than your competitor's offers or communicate strength in some way. Typically sellers ask for an earnest money deposit in the amount of 1-3% of list price. If you were to offer substantially more than that, say most or all of your down payment as earnest money, it communicates that you're serious about buying. How much money does it actually take to buy a house?
2. Offer A Shorter Closing Period
Closings normally take 30-45 days. During that time, there is opportunity for the buyer to change their mind for whatever reason and go elsewhere. If your lender is able to do a shorter closing, say 21 days, it will certainly appeal to the listing agent and the seller. A shorter closing communicates that the buyer doesn't need as much time to work through the contractual contingencies and is serious about buying.
3. Reduce Contingencies
If a buyer willingly reduces the number of ways they can get out of the purchase contract, it increases the likelihood that the transaction will close. For instance, In our seller's market, buyer's sometimes choose to waive their right to terminate due to inspection. This means buyers can't terminate due to any inspection related problems. Since inspection is by far the most buyer exercised contingency, sellers tend to be very attracted to offers that waive inspection. I personally do not recommend waiving inspection to my clients; its up you and your Realtor to decide if this is right for you.
Another common contingency is the conditional sale contingency. If you're planning on selling your current home and using the proceeds from that sale to buy a new home, the offer you submit would have a conditional sale contingency. Listing agents and sellers are wary of these offers because if anything were to happen with the sale of your current home that caused it not to close, say there is an unresolvable inspection issue, you could terminate your contract to buy and the seller would have to put their home back on the market.
So, if you have to write a conditional sale contingency into your offer, it's better that your house is under contract already versus sitting on the market or not even listed yet.
4. Include An Appraisal Condition
An offer that contains a clause stating the buyer is willing to cover the difference if the house does not appraise will be set you apart and be hard to pass up. In multiple offer scenarios, its not uncommon for a house to go under contract for over list price. If a property starts to receive offers for $10,000-$20,000 or more over list price, getting it appraised at that value becomes a concern. An appraiser's job is to determine the value of the home and lenders will not lend more than the appraised value. For example: if a home is listed at $340,000 and the seller accepts an offer for $360,000, and the appraiser values the home at $355,000, the buyer could elect to terminate under the appraisal contingency since the lender will only loan $355,000.
If this happens and the buyer does not terminate, the seller can lower the price (not likely in our market) or the buyer can bring more money to the table. In the this scenario the buyer would bring an extra $5,000 to be able to offer $360,000. To do this, you would need to have extra cash available not already tied up in your down payment.
5. Don't Ask For Seller Credit
If you're in a multiple offer scenario, it's better not to ask for seller credit. Just don't do it. Commonly, buyers might ask a seller to help pay for their closing costs or various other items. If you need help covering closing costs, ask your lender might be able to provide other options.
6. Meet The Seller's Needs
Do they know the garage door is broken and don't want to replace it? Great. Do they need to live in the home for a few weeks after it closes? No problem. Are they looking for your highest and best offer? Don't low ball them or come in looking to see what you can get away with. Find out what the seller needs and offer to accommodate them.
Questions? Feel free to leave a comment or send me an email: