Want the seller to pick your offer?
10 Tips for Savvy Homebuyers in a
Let's be real guys. This is a Seller's market, which means it is a highly competitive market for homebuyers. Many buyers are bidding on homes against multiple other offers. This gives the Seller the opportunity to sit back, be choosy, and go with the best offer. So even if you make a strong offer, it is not a sure thing.
You just found a home you LOVE!!! So, what do you need to do to make sure the Seller picks your offer? Should you include a photo of you standing in front of their home with a rose in your teeth??? I'm not sure... that could go either way.
1) Be willing to do cosmetic updates.
The first step to getting a great home in this market is to consider the type of home you are looking for. I know, I know... Everybody wants the house that is going to make your Instagram followers jealous. But the easiest way to get a great home and to get the most bang for your buck is to be willing to buy a home that needs some cosmetic updates. A home can be move-in ready while still needing some updating as you move along.
There are folks in Birmingham doing an amazing job flipping houses and there are builders cranking out incredible new homes, but you will pay top of the market prices for these homes, which means your process for building equity in these homes will be slow.
You may want to consider buying a solid, older home that needs new paint, updated kitchen countertops or lighting, or refinished hardwoods. These are all easy things to do and they can save you tons of money. Plus, once these updates are complete, you will quickly build equity, which protects you in the event of a market correction.
Maybe you’re thinking, "But I’m not handy." Folks, you can literally learn ANYTHING by just watching Youtube. (Also, I've got a Rolodex of handymen that would be great for projects around the house if you need it.)
So, don't immediately turn your nose up at that floral wallpaper, those brass doorknobs, or the laminate countertops ... that home could be a gem with only a few updates.
2) Don't be stingy with the Earnest Money.
Buyers submit Earnest Money along with their purchase offer.
An Earnest Money deposit is an act of good faith by the buyer. It is your way to let the seller know that you are a serious buyer. The seller is taking a risk by taking the home off the market and going under contract with the buyer.
A strong Earnest Money deposit communicates trustworthiness and willingness to follow through. Earnest Money helps assure the Seller that you are not going to get cold feet and leave them standing at the altar because, if you do, they keep the money. Ask your realtor what a good Earnest Money deposit is in your market.
3) Be willing to close on the seller's timetable.
Be as flexible as you can with the closing date to accommodate the seller. For example, if you are bidding on a vacant home, be willing to close quickly.
I have consistently seen homes go from contract to close in under 30 days and that includes financed deals. (Cash deals can close even more quickly, but if you are reading this I'm assuming you're not buying homes with cash).
Conversely, if the seller needs a later close date to make their transition work more smoothly, do whatever you can to accommodate to them. This may involve being creative on your part. Maybe you have to be willing to stay a month longer in your apartment? Or perhaps you have to do Air BnB for a few weeks or crash on a friend’s couch? Or maybe this is the opportunity you've always wanted to hike the Appalachian Trail?
4) Get pre-approved before you make an offer.
Listen, guys. If you are not pre-approved, don't waste your time submitting offers. Talk to a lender and get a pre-approval letter and then start the home hunting. You are not a legitimate buyer in the seller's eyes without a letter from a lender. I can put you in touch with several great lenders who will walk you through the process of getting qualified. Let me know if I can help.
5) Be willing to offer asking price or above asking price.
A few years ago, buyers had more leverage, so it was more common to offer well below asking price, but this isn't the market to make lowball offers and hope the seller will bite.
Your offer will need to be strong enough to beat out multiple other offers so don't be afraid to go above the asking price... but just be sure you can afford it.
6) Be decisive because you will need to act quickly.
You need to know how much you are willing to spend on a house before you ever submit the initial offer. What is your walk away number? Knowing what number you are willing to go to does two things:
1) It protects you from making an emotional decision and getting in over your head financially.
2) It allows you to act quickly and decisively, which is a good thing in a real estate transaction.
7) Limit the amount of closing costs you ask for.
It's not uncommon for the buyer to ask the seller to pay a portion of the buyer's closing costs out the net of the sale. In return, the buyer usually offers a little higher than they would if they had to pay all of their own closing costs.
But if you want to stand out among multiple offers, don't ask for closing costs. This will catch the seller's attention!
And if you really want to stand out, you may want to consider offering to pay a portion of the seller's closing costs (up to a certain number). But remember, don't make this up on the fly... talk with your lender beforehand and be knowledgeable about what you can afford.
8) Be realistic with asking for Repairs.
Sellers will not respond well to unreasonable repair requests.
Did a few things come up in the inspection and you want them repaired? That may be ok.
But this isn't your time to ask for the farm. A seller can always turn down your requests and keep in mind they may have a back up offer.
9) Don't ask for Personal Property.
Drooling over the Big Green Egg on the back patio? Don’t ask for it.
Want them to throw in that amazing lawn furniture? Maybe you’d better skip it.
Your offer could be very similar to another offer that isn’t asking for items that belong to the seller. It may weaken your offer to ask to throw in those extras.
10) Add an escalation clause to your offer.
An escalation clause means that your offer will automatically outbid other offers up to a maximum price. This means that you make an offer saying you will pay X price for a home, but if a higher offer is received, you will increase your offer to Y price.
Again, just make sure that you know your budget. Also, make sure to include language in the offer that requires the listing agent to disclose the other offers received.
Lastly, Do I ever recommend people making an offer not contingent upon inspection? Short answer: No. Unless you have a strong construction background... I just wouldn't do it. There is simply too much risk.
Happy House Hunting!