HOW TO GET YOUR OFFER ACCEPTED IN A SELLER’S MARKET.
Author: Heather Connor, Crested Butte Lifestyle Agent
If you are a buyer this topic is for you for very obvious reasons, and if you’re a seller that is actively selling their home or you are about to sell your home, this topic is also for you and you can read further to know why.
In a seller’s market, and there is a lack of inventory, the seller becomes a little bit more in control of what they will and will not accept for an offer for their property. Often times you’ll see that there are multiple offers and they are competing against each other. So we are going to discuss some strategies that you can consider on How you give yourself the best chance to get your offer accepted.
- Make a strong offer and have supporting documents
In a market where properties are receiving multiple offers and often above list price, you will not want to go to a real estate professional and ask to make an offer that is not the absolute strongest right out of the gate. You should swing for the fences; you should give it your best offer. And if you are to walk away without winning that home, and even if it’s sold for $1 more than what you offered, you’re okay with it because you gave it your best offer. Also, it is really important that you perform your basic due diligence. You need to have your supporting documents available.
A seller absolutely will require a few things, and having them ready and submitted along with your offer will give you the best chance.
- If you’re not paying cash, then the best next thing will be to have a strong Pre-qualification letter.
- Some show that the client is a really strong buyer and has performed the due diligence, has given all the documents to the lender, and they have a really strong Pre-approval letter. Some I’ve seen, you can tell from the letter they just initiated the conversation, they have not given supporting documents and the lenders are unable to state that they have when they have it. That letter will work against you if it is not a strong pre-qualification letter from your lender.
- Make sure you set aside time and check in with your lender, make sure you get them everything they need so that they can write you a powerhouse letter (Direct Underwriter).
Don’t be surprised if the buyer’s agent will actually call your lender and confirm what you have and have not given.
- Proof of Funds
This is really important that you want to prove that you have the down payment. If there is appraisal gap contingency, you’re going to want to prove that you have proof of funds to cover any type of gap that could occur in a seller’s market. Oftentimes in a seller’s market, you may find that the value of properties may increase at a more rapid rate than appraisers can keep up with. That means it leaves a larger appraisal gap, which ultimately means that you as the buyer, will need to bring more funds to the table. You’re going to want to show proof of funds, that you have the down payment and you have the considerable amount to cover any gap that could occur.
Parts of a Strong offer
- The Price – You need to understand how many offers are typically being made on a property of your type that could include your location, your price point, Type (could mean condos, townhomes, etc.).
- Submit your highest and best.
- The Earnest Funds – In our market, we usually see the bare minimum is around 3%. We do see folks often ask for 3-5%, that’s a really normal range for us here in Crested Butte. Sometimes, you’ll see a flat rate. It really just depends on the seller or the agent, and what they decide upon.
- Down Payment – “The larger down payment always wins”. The more money that you put down towards a property the stronger that seller feels about your offer
- Flexible Terms – It’s really important to think about what type of terms you want to ask for. This will be a great time to make it really clear and your agent actually can write this in the body of the email or you could put it in the contract if you want. It just basically states and makes your preference known. Just be FLEXIBLE, as flexible as you can.
- Close of Escrow – If you can be really flexible on when you close the property and the date, and you let the seller know that, that is really good for them to know.
- Home Inspection – There are a couple of ways that you can handle home inspection. You can waive it, that would be most ideal for the seller, it is not something I would recommend for you as the buyer. It is something you may have to do but there is an inherent risk. And that would be regardless of what you find, foundation issues, the fireplace is not applicable, electrical issues, etc. And because you waived that contingency, you are not able to negotiate anything in regards to the purchase of the property based on a home inspection. 2. Shorten the inspection time, in this way, you actually keep the inspection contingency. But instead of making it really far into the contract, you make it really early on. And in that way, the sellers know, if there’s anything big that show up that would cause you to want to negotiate may be to such a high degree that it changes the purchase price and the seller’s not interested in negotiating that much, or maybe it makes you want to walk away from the contract. If you make it early on in the contract, it allows the seller to move on quickly without having lost a lot of time on your contract. When you do this, something that is really important would be to talk to your agent and make sure that that is plausible.
- Loan Contingency – The Loan Contingency is comprised of 2 different deadlines, and you can handle how you handle those. You can waive loan contingency and you can make that deadline sooner.
- Appraisal Contingency – This is where you have to be very really mindful because there are 2 things that are going to happen. 1. In a seller’s market, when properties are moving fast at a rapid rate and the increase in seller’s price is increasing at a rapid rate. Often times they may increase in price far faster than an appraiser can actually value it. What that does is essentially create what we call an appraisal gap. If you want to know what an appraisal gap is, and if you want to know some creative tactics on how you can cure an appraisal gap, click here:
Along with an appraisal contingency, what you are going to want to probably do is include the appraisal gap clause. That is the verbiage that essentially says that not only you are waiving appraisal but you automatically agree to bring additional funds to the table that protects the seller. It also leads back to our earlier points about proof of funds. The seller is going to want to know that if you are waiving the appraisal, you are offering to cover the appraisal gap. They are going to want proof that you owned funds, that are liquid enough that you can actually cover that appraisal gap.
- Rent back (Short term) –The fact that you are offering a rent back, makes your offer a lot more appealing to them. And this is something that is not a big financial move, it’s actually like a bonus that allows you to give more options to the seller so that your offer is more appealing to them.
There are so many different ways that you can make your offer more aggressive, and more appealing, it’s not all just the price. There are also terms, and there are some other things that you might not think about like the rent back, that can make their life a lot easier. And maybe someone else actually offered more but they’re not offering them the rent back option, and you are and even though you are a little bit less, they decided to move forward with your offer because that’s just what best works for them in that specific scenario.
Remember, that it’s important to always consult with your real estate professional and sometimes if need an attorney if the topics become legally oriented.
If you have any questions, you can always contact me or my team at 970.440.2975, or email: firstname.lastname@example.org