Summer is traditionally a busy time for buyers and sellers, as we wave goodbye to the winter blues. As you may have heard, this year has been no exception—and with lower interest rates, many homebuyers are finding the competitive environment (more than a little) challenging. With multiple buyers competing for properties (think Survivor: Real Estate Edition), even terrific offers are often being outbid. Enter stage right, your amazing real estate agent with tips to ensure you don’t get voted off the island! Here are five things you can do to make your offer more attractive to the sellers:
- Have Full Pre-Approval – We’re taking a step beyond pre-qualification and supercharging your offer with pre-approval. How does it work exactly? A pre-approval involves submitting your full application to underwriting — your lender will collect all your financial data and submit for review. This is the spinach to the buyer’s Popeye — it is stronger than a pre-qualification; a pre-approval requires the buyer to provide the proof of their ability to qualify for the loan.
- Increase the Earnest Money – Being earnest, means that you have sincere and intense conviction, as does increasing the Earnest Money (the deposit) held in escrow. By taking this step you are basically ponying up and sending a big message to the seller. While the contract will dictate how monies are disbursed in the event of a cancellation, increasing the amount offered can show the seller you’re serious.
- Add an Escalation Clause – In this bidding war there are no paddles and no one dramatically calls out the highest number in existence to win at the last second (as seen in every tv or movie scene with an auction, ever). When it comes to a home buying bidding war, it can be difficult to know what to offer because you want to outbid the competition without going too high. An escalation clause is one way to automatically outbid the others, without breaking your budget. The clause typically offers an amount—$1,000 for example—higher than any verifiable offer, but only up to a specific amount. This gives you an advantage and a cut off point.
- Pay any Appraisal Shortage – When offering more than asking price, sellers become concerned about the appraisal coming in too low. If you are willing to pay over market value, include the amount of shortage you are willing to pay. This will give the seller more confidence about your offer.
- Remove Inspection Contingency – This one is a bit tricky, but if you are planning a large remodel (hello house flippers dream) or are willing to tackle any defects found, then you can make your offer stronger by accepting the home as-is.
In this fast-moving, competitive real estate market, it’s important to make your offer stand out from the crowd. These strategies are great ways to demonstrate to the sellers that you’re serious about buying their home, increasing the chance of having your offer accepted.