In a seller's market, it's important to come in strong if you're making an offer on a house for sale. Most houses sell with multiple offer scenarios, so you'll need something special to make your offer stand out. These are some ideas Your Property Masters came up with to submit an offer that is competitive with the others.
First of all, when shopping for a property, you'll want to shop a little bit below your budget to account for the extra amount you will have to offer. If you're shopping in the $300,000 price range, you'll want to be able to offer at least $10k over asking price, so you might want to keep your search around $290k! Always consult with your realtor as they are able to see how long certain properties have been available on the market to give you an idea of what you should offer. They'll also be able to consult with the listing agent to try and find out how much activity there has been on the property. Your realtor will also be able to do an analysis on the house and look at other homes similar that have sold, or haven't sold, to see the difference between listing price and what they actually sold for, or did not sell for (which meant the price was far too high).
CASH. Cash is King in a seller's market. Cash offers make the process much easier on the seller, so they'll most often choose the cash offer. If you have the cash to spend, always choose that option. You'll want to still offer a little over asking price, and your offer will be difficult to refuse.
Most often you're not able to spend all cash, and you'll be using financing. If this is the case, you need to find other ways to make your offer competitive. How can you do this? - No contingencies. Contingencies are hold-ups on the contract. Say you have made your sale contingent on your own house selling. If there are other offers with no contingencies, and the buyers can move on the seller's terms, that offer is most often going to be selected. If at all possible, come in with an as-is, no contingency offer to save the seller a headache and make your choice an easy one. - Escalation Clause. An escalation clause is a handy tool to have in a seller's market. Basically, you submit an offer at a competitive price. With it, you'll submit an escalation clause that guarantees that you will escalate your offer to beat any other offers received. Say a house is listed at $400,000 and you submit an offer at $410,000. You can submit a clause with it that says you will go $1,000 higher than any other offer presented. So, if an offer comes in at $415,00, your offer will escalate to $416,000. You can also cap it out and say that if someone offers, say, $420,000, you won't go higher than that and that offer would then beat yours out. - Appraisal gap coverage. With this addition to your offer, you're basically offering to pay cash to cover a gap if the appraisal comes back low. If the appraisal comes back low, you'll only get financing for the amount needed, and you'll have to pay cash for the difference in order for the deal to not fall through. If you guarantee that you'll pay this, that will make your offer more attractive than a regular Joe-Shmo offer. - Increase your earnest money. If you're able to deposit more into escrow, it shows the seller that you're serious about your purchase. The more you put in your earnest money deposit, the more it seems you're fighting to get this property since it raises the risk for the buyer. - Make a connection! While this is important for any buyer trying to get a new house, it's extra important these days. When submitting your offer, it might be a good idea to include a letter introducing yourself and your situation. Perhaps you're a teacher who needs to relocate ASAP, or a family that really prioritizes the school nearby. Making an emotional connection can always help your case, while it won't always ensure that your offer get accepted above the rest.
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