If you have obtained the services of a real estate agent, the physical process of making an offer on a house is relatively easy. You’ll tell your real estate agent to make an offer, and let them draw up the paperwork.
What is a bit less straightforward is how you go about making a winning offer, especially in a seller’s market. Here are a few tips for making sure your offer is as strong as possible.
Put Yourself in the Seller’s Shoes
A little empathy can go a long way when you’re considering how you might craft your offer. Why is the seller selling? What are they most concerned about? Will they need a little time to move out of the home?
Do they need to sell quickly? Consider adjusting the closing date. Do they lack the funds to make repairs out of pocket? Your offer to waive repair contingencies may be compelling, even if you’re asking less than the asking price.
Remaining considerate of the seller’s needs and showing you understand those needs can help you set your offer apart.
Offer More Than the List Price
It may not feel fair, but in a seller’s market, buyers who make winning offers generally offer at least 1% to 3% above the asking price tend to have better luck.
There are exceptions, of course. If the home isn’t move-in ready, then you’d be within your rights to offer less, depending on how extensive the repair needs are.
Anything below 20% would normally be considered a low-ball offer even when the house is in bad shape. If you’re that displeased with the state of the home, you might be better off looking elsewhere.
See also: The Pros and Cons of Purchasing an Old House vs. a New House in Florida: 2024 Edition
Set Reasonable Contingencies
There are three contingencies you may almost always add without penalty:
- Making the sale contingent upon final loan approval.
- Making the sale contingent upon home inspection.
- Making the sale contingent upon appraisal.
Any contingencies you add over and above these three may make your offer less attractive. You can demand that the seller take care of some repair issues, but you might lose out to a buyer who is willing to put in the sweat equity themselves.
Sellers are usually willing to put up with the three contingencies above because they know the bank requires them before issuing any funds.
See also: What to Expect During the Home Inspection
Offer Sufficient Earnest Money
The seller must take the home off the market and place it into “pending” status while you are having your home inspections and appraisals completed, and prior to the closing. This means they’ll miss out on other offers.
To reduce the risk for the seller, most people offer earnest money, a relatively small deposit that shows the seller you’re serious. If you back out of the deal for any reason other than the listed contingencies, the seller gets that money.
Earnest money also helps you show the seller that you have the resources to purchase their house.
The rule of thumb is to offer 1% to 5% in earnest money in order to keep your offer competitive.
Consider an Escalation Clause
Worried someone will make a better offer? Add an escalation clause, which will automatically increase the value of your offer if someone comes along and outbids you.
Don’t worry. You can set a cap on the amount you’re willing to pay.
Make Sure Your Financing is Ready to Go
Showing up with a reliable pre-approval letter in hand that ensures the closing will actually happen when you get to the table is one of the strongest ways to ensure you get the home you’re hoping for. Nobody wants to take a home off the market only to watch the financing fall through.
You’ll also have the peace of mind that comes from knowing you are only making home offers within your budget.
Get Help Today
Enter the home offer process armed with the best possible loan for your unique situation. Schedule a one-on-one consultation with Alex Doce today, or call (800) 355-ALEX.
Alex is ready to answer all of your questions, as well as to give you your best chance of securing a home loan.
