When it comes to buying a house, the highest offer always gets the house — right? Surprise! The answer is often “no.” Conventional wisdom might suggest that during negotiations, especially in a multiple-offer situation, the buyer who throws the most money at the seller will snag the house.
In reality, however, it doesn’t always end up that way. Sure, a hefty sum is the first thing every seller wants to see, but any good real estate agent will advise a seller that each offer is a sum of its parts.
Here are five reasons why your lower offer might just beat that higher one after all.
1. Cash is always king
If you can pay cash, you’ll likely win out over a higher-priced offer, every time. It may sound impossible to make such a huge purchase without any financing, but many people do it.
According to RealtyTrac, 43% of all home sales in 2014 were all-cash deals. That’s because with an all-cash buyer, there are no mortgages and lenders involved, escrow closes faster, and there’s no appraisal to worry about.
2. The next best thing to cash: a preapproval letter
A preapproval letter is the confirmation you’ve acquired from your mortgage broker or bank that confirms you’re ready to buy in a set price range and have been preapproved for the loan.
In essence, the preapproval letter turns you into a virtual cash buyer, as mortgages can be harder to come by these days. Other buyers could still make a higher offer, but if they’re not preapproved, you may have the leg up — even at a slightly lower price.
3. Timeline flexibility
Typically, the closing period lasts 30, 45, 60, or 90 days. Customizing the length of the closing to suit the seller’s needs can often help seal the deal over a higher offer. Sellers almost always want fast closings, usually 30 days. If you have all your ducks in a row, you may be able to do this.
However, there can be extenuating circumstances. What if the house they want to buy won’t be ready for 60 days? The sellers will need more time. Find out what they need and then offer it to them. I’ve seen many lower offers win using this tactic.
4. The “Please let me buy your house” letter
I know, I know, you think this plan is cheesy. Hear me out: A friend of mine had three similar offers on the table when he was selling his house. Two of the offers came with very heartfelt letters. He was actually put off by the buyer who didn’t send a letter, since the other buyers did. That small piece of paper made a huge impact — and he sold to one of the letter writers, even though theirs was a slightly lower offer than the non-letter writer’s.
Writing a letter may not get you the deal, but pay attention to trends in your market. If yours is the only offer that doesn’t include one, your house hunting days could be extended.
5. Not overloading on contingencies
Contingencies are negotiating tools that give you an opportunity to walk away without consequence. The most common contingencies are the inspection, the financing, and the appraisal.
However, every contingency you add has the potential to make your offer look weaker, because each one can make it that much harder to close the deal. Make sure you really need every contingency before building them into your offer.
Here are some details on specific contingencies and how to handle them.
Contingent upon inspection: Some experts suggest skipping the inspection contingency to make your offer more attractive. Here’s my advice: never give up this one. After your inspection, give the seller your list of problems along with the opportunity to fix them, make a price adjustment, or give you a credit. If the seller doesn’t agree to your requests, you can walk. You take a huge risk if you waive this one. A much better option would be to tighten up the timeline. Offer to have the inspection completed in the first few days after opening escrow and to give a response to the inspection results within a few days.
Contingent upon financing: Again, this is a contingency you should never omit, unless you’re paying in cash. With most 30- to 45-day closings, you will have 17 to 21 days to get your mortgage approval. Having that preapproval letter will make this financing contingency less of an issue for your seller.
Contingent upon appraisal: It’s possible that the house you’ve fallen for could fail to appraise for what you have offered to pay. However, if you’ve done your homework, analyzed the comps, and are comfortable with the price you’ve offered, then you might consider waiving this one. The downside (which can be significant) is that you’ll have to make up the difference of the agreed-upon sales price. But waiving this contingency can give you a big leg up over the competition — especially in a hot market.
Sellers, what was it about an offer that made you say yes? Buyers, what tactics are common in your market for sealing the deal? Share in the comments below!
