Tips For Making a Strong Offer in a Seller's Market
In a sellers’ market it can be hard to make your offer stand out from the competition. There are some unique things you can do that most agents and buyers haven’t thought of. Keep in mind that each client, situation and house are different, so please call for specific advice from me or your real estate agent to tailor it to your situation. But for general tips, here are some ideas for winning the multiple offer bidding war.
1. Offer price. Obviously, the offer price is the first thing that sellers look at. It also will be the number 1 thing that gets compared to competing offers in a bidding war. Make sure your agent has run comparable houses and can advise you on what a competitive offer will be without breaking the bank or overpaying for the home.
2. Escalation Clause. An escalation clause is where you offer to beat any competing offer by a certain amount up to the maximum you are willing to pay or wherever your comfort level is. For example: My buyer will offer $400,000 for your home with an escalation clause that they will pay $1,000 over any higher offer up to a maximum of $425,000. This enables you to offer a lower amount and only end up at your highest amount if there is a really good competing offer. This tactic has saved my sellers thousands of dollars rather than just offering $425,000 from the start. You might find that you “escalated” to $410,000 if the highest offer they had was $409,000. Rather than just offering $425,000 you saved $15,000 by using an escalation clause.
3. Find out what is most important to the seller. For most people it will come down to money. The dollar amount offered has to be strong for this to make a difference. I always call the listing agent for my clients prior to submitting an offer to see if there is anything else that is important to them. Sometimes a specific closing date is preferred. Sometimes they want be able to take something from the house that is important to them. You never know what is important to the seller. So, make sure your agent calls to see if there is anything that can be negotiated in addition to the price to make your offer attractive to the seller.
4. Terms. Having some flexibility in your closing date is usually attractive to a seller. They still need to coordinate with movers, jobs, schools, family or any other situation happening on their end. So, having flexibility on the dates might be the difference in them accepting your offer.
5. Home inspection. I do not advise always using this tactic but many buyers will waive the home inspection and not do one at all. You can offer to do one for informational purposes only which means you want the information (and can still back out and have your deposit returned based on what they find) but you will not ask the seller to repair anything found, you are just using the inspection for your own information. You can also have a dollar amount that you promise you will not ask for anything under that amount. For example: a home inspection done to find anything over $5000 or more only. That way the seller knows you are not looking to be nitpicky at the inspection and will not ask them to fix small items. This enables you to do the home inspection and if there is anything the inspector finds that is going to be costly, you can either back out of the deal (and get your deposit back) or ask the seller to make the necessary repairs or give you a credit at closing. Many sellers worry that the buyer is going to ask them to fix every little thing the inspector finds. Any of these strategies can make your offer look stronger to the seller. Make sure you discuss this with your agent. Depending on the house, you might not want to adjust anything on the inspection, this is just an option.
6. Appraisal gap coverage. In this market, the bank appraisal is another hurdle to get over before the loan gets approved. Many buyers have been offering to meet any appraisal gap with extra cash so the offer is not subject to the bank appraisal meeting the offer price. This is just piece of mind for the seller. You would need to make sure you have the cash to cover a gap plus your down payment already needed for the loan before offering this to the seller.
7. I had one buyer submit an offer on my listing, they offered to pay the state tax stamps for the seller. This is just one more thing that showed us how much they wanted the house. The state charges the seller $4.56 per thousand of the sale price at the closing. So, for a $500,000 house, this would be $500 x $4.56 = $2,280. This was not a large amount of money but the buyer just wanted to convey how much they wanted the house in any way possible. So, this is another option you could consider.
8. In condo sales, there is a significant amount of paperwork that the seller needs to provide from the condo association. Some associations charge to get all this documentation for a closing. I also have had buyers offer to get all the condo documents from the association themselves and pay any fees themselves. This just make one less thing the seller has to worry about or add to their list. It’s a small item, but when trying to come up with ways to alleviate any stress on the seller, this might be something they appreciate. It is also something most agents and buyers would not consider, so it is another way to stand out.
Each of these options should be carefully considered depending on the housing market at the time of your offer, the amount of offers you are competing against, your financial situation, the property and the overall condition of the property and how badly you want it. You should consult with an experienced agent to review all options and make sure you understand each one with the pros and cons of what you are considering. I just wanted to provide you an idea of options you could consider to win a bidding war. For more information or to schedule a consultation at my office to discuss any of these options, please email me at firstname.lastname@example.org or call/text 978-407-2568. I am always happy to have a no obligation consultation before you start considering these options.