For new buyers in a competitive market, making an offer — and getting it accepted — requires tactful skill and strategy. No one tip is applicable to every offer situation, but the more “tools” you have in your tool shed, the better your chances are of an acceptance.
Here are five things to consider when making an offer. Consider each of these a tool in your shed.
1. Offer price.
The offer price is dependent on how many offers there are. Your broker will give you insight as to how many offers there are on a house. Your agent should provide you a market analysis which is a report that shows you similar property values as well as a proposed price range that they suggest writing an offer. The offer price in this market is typically a starting point for where sellers begin to see offers. Depending upon the number of Days On Market (DOM) an agent might recommend going over the asking price (again depending on how many offers are on the property). Offers should be only good for a certain amount of time (typically 24hrs) with a fall dead date on them. Why is this? You don’t want to have an offer out there so that they have a chance to “shop the offer” to other agents.
2. Inspection Contingency.
*NOTE: We highly recommend buyers do an inspection; however, in a multiple bid situation, there are some options to consider:
- Waive Inspection (Andersen Group Realty Â typically has a contractor or other professional come into a house with our team on a second showing prior to waiving any inspection to get another opinion)
- Inspection with an inspection aggregate amount of money. These can be as low as $500 or as high as $50,000. An inspection aggregate is an amount of money you put in the offer that shows the seller that you won’t walk away from the purchase or try to renegotiate if there are minor issues that fall under the inspection aggregate amount.
Example: You request an inspection but you and your agent know the roof has to be replaced (approximate cost of the roof is $5,000). In a competitive bid situation the offer may be written with an inspection aggregate of $5,000 so that when the inspection takes place, barring any other unknown issues, the offer won’t be revoked via an inspection contingency.
- For informational purposes only inspection without waiving. Some agents use this approach. The benefit of this is that it gives the buyer a chance to see what might be wrong with the house but is clearly an inspection and can walk away from the transaction.
3. Financing Contingency (Mortgage).
Do home sales contingencies work? In most cases the answer is NO. Savvy sellers guided by their agent typically don’t accept these. Typically a listing agent will ask your agent if the offer is subject to the sale of your home. This approach is typically not going to put the buyer in the best light with the seller/selling agent. This is typically an offer that the selling agent would advise the seller to reject UNLESS there was a strong reason why this may make sense. One might be that the house has been on the market and the current owners has a signed Purchase & Sale agreement fully executed and can provide proof. Some ways to be creative with financing might be:
- Pay cash – This is not typical in our market; however, if you have recently sold and have it in the bank, this makes your offer stronger than others on the table. Note: most agents will ask that you provide â€œProof of Funds to make sure that you have the money that you have said you have. Pros: This is the strongest offer (if you can provide proof of funds). Cons: This leaves you no way to remove yourself from the transaction and you may be responsible for the 5% of the purchase price once you sign.
- Waive the financing Contingency – This means that a buyer may get a mortgage but they are not going to make the offer contingent on financing. Most buyers think that when they waive the mortgage that they cannot submit and get a mortgage. THIS IS NOT CORRECT. What this states is that you are not going to make a mortgage contingency a part of the offer. Pros- This makes your offer almost as strong as a cash offer. In a multiple bid situation the approach to waive this mortgage makes your offer extremely strong. If all things equal: purchase price, closing date and inspection, yet you have a waived a financing contingency, your offer may likely be accepted. Cons: This leaves you no way to remove yourself from the transaction and you may be responsible for the 5% of the purchase price once you sign the Purchase & Sale agreement even if the house doesn’t appraise at the price you are purchasing.
4. Closing Dates
Closing dates are important and relevant to the seller. Be sure your agent asks the listing agent the sellers’ preferred closing date. Sellers want to know that you might be flexible to close when they request (either a quick-30 days or they may want a chance to buy another home and need 6-8 months). Some sellers request more time to close and may not be able to move out to their next destination. Make sure you ask the sellers agent what is important to them so that you can make your offer stand out. NOTE: If you are going to be waiving a financing contingency yet you will will be getting a mortgage you must make sure that you understand RATE LOCKS with your lender. For more information about this ask your buyers agent as accepting a date that is 6-8 months from the offer date there may be issues that could cost you money (sometimes ¼-½% more than a typical mortgage).
5. Excluded Items and Fixtures
Sellers state what is going to be excluded and removed before selling. Typical items we see excluded are Washer, Dryer, Refrigerator. Other items we have seen excluded could be window treatments and hardware, light fixtures and/or exterior plants. This leaves you no way to remove yourself from the transaction and you may be responsible for the 5% of the purchase price once you sign. Often in a multiple bid situation, buyers will ask for items the seller has asked to exclude. Sellers and their agents put these items in the MLS system so that other agents know what is important to them. If you want to make your offer as competitive as possible, DO NOT ASK for excluded items.
Keeping these five tips top of mind when making an offer will greatly increase your chances for acceptance. Being equipped with the right tools in your tool shed is crucial; but keep in mind that having the right agent on your side can make all the difference!
Looking for the right agent to help you navigate the buying process? Contact us today: email email@example.com or call 781-729-2329.