As home prices continue to rise and inventory levels drop, competition for a great deal on a home can get tough. According to Trulia’s recent Trends report, prices are up 8.1% nationally, and the climb continues to be widespread, with 97 of the top 100 largest metros posting year-over-year gains. In a hot market, the inventory of affordable homes is limited, and more buyers are fighting for fewer homes.
In this scenario, making a perfect offer is key to securing your dream home.
Here are eight ways to make your home offer home offer stand out:
1. Cash is king
If you can buy a home with a full-cash offer, you will win out over other offers with mortgage requirements. This may seem like a daunting prospect, but according to the National Association of Realtors, 43% of homes purchased in 2014 were purchased with all cash. Savvy sellers know the benefits of an all-cash buyer. There is no issue involving mortgages, the escrow closes faster, and there is no appraisal requirement.
2. The next best thing to cash: a preapproval letter
A preapproval letter is confirmation from your mortgage broker or bank that you’re able to borrow the money necessary to finance the home. Preapproval for a specific dollar amount indicates you are able to obtain the loan. While not the same as a cash offer, the loan has essentially turned you into a virtual cash buyer, as mortgages can be difficult to secure.
It shows a seller that you’re not only qualified but also prepared and serious about purchasing their home. Another buyer may offer to pay more, but if they aren’t preapproved, you’ll have the leg up.
3. Prequalification opens the door too
Being prequalified by your lender is not as powerful as being preapproved, but it’s still useful in the offer-making process. It’s an informal, albeit professional, assessment indicating you’re qualified financially — but it is nonbinding. Always try to get a preapproval letter, but settle for a prequalifying letter if you have to.
4. Timeline flexibility
Closing generally takes place within 30, 45, 60, or 90 days. Customizing the length of the closing to suit the seller’s needs can often seal the deal over a higher-priced offer. Unless there are extenuating circumstances, a seller will want a fast closing, usually 30 days. But if their new house won’t be ready for 60 days, determine their needs and try to accommodate them. I’ve seen many deals sealed over this concession.
5. Tighten up on the inspection contingency
I’ve heard some experts advise buyers to forgo an inspection contingency to make their offer more attractive. My advice is to never waive that contingency. After your inspection, provide the seller with a list of issues and the option to address them by fixing them, making a price adjustment, or giving you a credit back.
If the seller does not agree to your requests, you can cancel the purchase. But don’t be coerced into forgoing this contingency; you would be taking a huge risk.
6. Contingent upon financing
This is another contingency you should never omit in your offer, unless of course you are paying all cash. Generally speaking, a 30- to 45-day closing usually has a 17- to 21-day period for a mortgage approval. Your preapproval letter will make this finance contingency less of an issue for your seller.
7. Contingent upon appraisal
It’s very possible that the house may not appraise at your offer price. However, if you’ve done your homework and are comfortable with your offer, you might consider waiving this contingency.
The downside is that you may be on the hook for the price difference under the negotiated sales price. Waiving this contingency gives you a leg up over the competition, especially in a hot market where the seller is trying to get top dollar.
8. The “please let me buy your house”letter
If you’re not a believer in the power of a handwritten note, you may think this tactic has no merit. However, a friend was selling his home and had three similar offers. Two of the offers came with very heartfelt letters, and one did not. He was put off by the buyer who didn’t send a letter because the others did — so he sold to one of the letter writers. Writing a letter may not get you the deal, but if yours is the one offer that doesn’t, it could be a deal breaker.
Selling a home is an extremely emotional process, especially for those who have lived in their home for decades or raised a family there. Some sellers may get cold feet if an offer comes through that isn’t quite as high as they were hoping for. Sharing your eagerness to raise a family of your own in their house could pull at their heartstrings … and get the house!
What items did you include in your winning offer? Share your success strategy in the comments.