If it is a seller’s market, simply finding your dream home and submitting a standard offer might not be enough. When there are more buyers than there are available homes for sale you need to prepare for a competitive bidding war. Luckily, there are strategic moves you can use to guarantee success. Follow the five tips below to push your offer to the front of the line.
Make a clean offer.
This means the offer should have as few contingencies as possible. Though some contingencies are fairly standard such as inspection or pending sale, with each additional condition you are providing reasons why you might break contract. This could cause them to lose confidence that you will follow through on the transaction. It is important to show the seller you are motivated and committed to purchasing their home. On the other hand, your offer could be refused because you have asked for too much. Another, less demanding offer will become more attractive.
Add an escalation clause.
An escalation clause in the contract shows you are willing to outbid other offers – up to a maximum price. For example, if you offer full price for a $200,000 home you can add an escalation of $2,000 up to a specific amount you determine. It’s a safe way to make your offer stand out by letting the seller know you are willing to pay more for the house, but without the risk of offering more than what is needed to get a contract.
Get preapproved for a conventional loan.
Providing a preapproval letter with your offer demonstrates to the seller that a lender has verified your income and all required documents, (this is not to be confused with a prequalification letter which only states based on information provided you could qualify for a loan). In some cases, sellers prefer buyers to have a conventional loan rather than a FHA or other government loan. Although both loans are acceptable, the larger down payment conventional loans require can boost a seller’s confidence.
Offer the seller one month of free occupancy.
When you purchase a home with a mortgage, the payment doesn’t come due until a month after closing. If you aren’t working within a strict timeline, offer that extra month to the seller as free “rent”. Having to vacate a property in a short amount of time is stressful, so why not give them extra time if it means a stronger offer?
Write a letter.
Letting the seller know why you want to live in their home will improve your chances of winning the bid. If you’re not sure what to write, speak from the heart to connect on a personal level. Tell the seller how important their house is to you; that you will take good care of it, or how you see your family growing in their home. Sellers are more inclined to give their home to someone they have something in common with or know. Sellers love their home and leaving is an emotional experience. Providing the “human factor” during the transaction could be what sets your offer apart from the rest.