In a hot market with low availability and multiple buyers bidding on the same property it’s imperative that your offer stands out from the rest – or your buyers might miss out on their dream property. Here are 12 ways (plus a bonus unlucky #13 to avoid) to ensure your client’s offer catches the eye of the seller and their agent.
- Make it a clean offer.
The fewer contingencies and concessions included in your offer, the more likely it is to catch the seller’s eye. Instead of writing a long list of requests into the offer, factor the combined cost of those requests into the offered price. That way you can present a clean, simple offer that’s easy to read and analyze.
- Offer a competitive price.
A seller’s market isn’t the time to play hardball on price. Advise your clients on current market expectations and how close to the listing price is realistic. In very hot markets it may not be unusual to offer 10%, 20% or more above asking, so ensure your client’s offer is competitive enough to be seriously considered.
- Make it a cash offer.
Cash offers are appealing to sellers as there’s a much lower chance of funding falling through, and the transaction can move more quickly. If your client can pay cash – or has access to a hard money loan that functions as cash – this can be an effective way of standing out from the pack.
- Increase the down payment amount.
A higher down payment amount suggests financial stability and a greater likelihood of funding being approved. In general, a 20% down will carry more weight than a 3% one – and a conventional loan will often be preferred over other loan types that come with more stringent property inspection and repair guidelines.
- Increase the earnest money amount.
Earnest money is a key part of the initial offer, and helps to indicate intent – while also providing a hedge for the seller in case the buyer ends up walking away. Offering a higher-than-standard earnest money amount can help sweeten an otherwise comparable deal. We give you the entire rundown on earnest money here.
- Offer to pay closing costs.
Requesting that the seller pay some or all of your closing costs can work in a buyer’s market. But in a seller’s market, offering to pay closing costs can catch a seller’s eye. After all, when all is said and done, this can amount to several thousand dollars ‑ or more – in their pocket.
- Add an escalation clause.
An escalation clause lets your client automatically bid against other offers until you hit a specific maximum price. This can keep your offer in play even if other higher offers are submitted, while hopefully preventing your clients from maxing out their budget up front. Even so, a lower offer with escalation clause can still be less appealing to a seller than a strong “best and highest” offer, so proceed with caution.
- Ensure your client is pre-approved.
Financing is a common reason that home sales fall through, and in the wake of the events of 2020 lenders are stricter than ever. Make sure your client is pre-approved, and that their pre-approval note is still valid when the offer is made. You can also help things along by checking that they’ve filed last year’s taxes and that they’re getting to work on gathering all relevant paperwork for the loan application.
- Make sure your client is using a trusted lender.
Ideally your client will be working with a well-known lender that both the seller’s agent and sellers will recognize. Sometimes agents or sellers will push back against clients using smaller lenders for fear that the loan won’t close in time or that there’ll be problems issuing the loan.
- Don’t ask for personal property.
This falls under the “clean contract” provision, but deserves its own nod. Encourage buyers to skip requests for personal property beyond the standard major appliances – although you can strengthen your offer by avoiding requesting those, too! Your buyers can always ask about that riding mower or outdoor furniture after their offer has been accepted.
- Make dates work in the seller’s favor.
Very long closing dates or long timeframes on surveys and inspections can sour a seller who wants to get things moving. Keep survey and inspection timeframes as short as possible so that the seller won’t worry about the house being “tied up” for too long. If possible, set your closing dates based on your perceptions of the seller’s needs – try to gauge whether they’d like a shorter or longer closing, and make the offer accordingly.
- Waive contingencies.
The more contingencies on an offer, the more risker the prospect for the seller – after all, with each contingency comes an opportunity for the buyer to walk away. If your buyer is asking for financing, appraisal, inspection and survey contingencies, see whether there’s leeway to remove some or adjust the language around them. If a home is newer or the seller has provided disclosures, you might be able to waive the inspection report; if your buyer has access to cash or hard money, financing and appraisal contingencies can be waived.
Have your client write a letter.
If all things are otherwise equal, a heartfelt letter from your buyers sharing a little bit about their background, why they love the home, and what their plans are for it can help an offer stand out. Even though the seller is leaving, the property is still their home, and it’s a deeply emotional place for them.
But wait, pump those brakes! There is a reason this is our “unlucky number 13.” Lately these letters have been discouraged by industry groups and even outlawed in some states, as they could raise potential Civil Rights/ Fair Housing Act violations. I know this is tempting to do, but we advise not to send one – and share with the listing agent that they shouldn’t accept letters for the exact same reason. Avoid this one – keep yourself, your client, the listing agent, and the seller out of hot water.
To wrap it up…
Try these comprehensive tips the next time you write up an offer for a client, and let us know how your offer fares!