How to get your offer accepted in a seller’s market
It may take weeks, even months to find the house of your dreams. Once you do, you will obviously want to make an offer and hope that it would be accepted immediately. After investing a huge amount of time and money in finding the perfect home that is within your budget and suits your needs, it can be frustrating to know that the seller has turned down your offer.
It usually happens when the inventory in your target neighborhood is tight while lots of buyers are looking to purchase homes there. If you have been in this situation, have you wondered as to why another buyer’s offer was accepted, not yours? You will jump to the obvious conclusion that the competing buyer paid a higher price, but this is not the case always. A few things make an offer stand out when there is a bidding war for a property.
Be financially prepared to close the deal
Your offer will not be taken seriously unless you are financially capable of closing the deal. But how do you show to the seller that you are prepared? Well if you are taking out a mortgage, you should get pre-approved by a lender even before you start your hunt for a home. The pre-approval letter should outline how much loan you would be approved and other details such as your credit score and debt-to-income ratio. If you are buying the property for cash, you should be able to provide proof of available funds.
Avoid lowball offers
If you are buying in a seller’s market, the biggest mistake you can commit is to make a lowball offer. It will offend the seller who is considering multiple offers at listing price or higher. You should study ‘comps’ in your target neighborhood and chalk out your offer price and negotiation strategy accordingly.
Don’t be too demanding
If the seller is considering multiple offers, he or she will want to accept the one which promises a hassle-free and quick closing. Depending on the competition, you should determine whether you want to put too many contingencies in the contract. You can offer to waive some of the contingencies such as home inspection and financing. You can offer to buy the home ‘as-is’ and waive off the clause that lets you out of the deal if you can’t get financing. Be aware that you should decide to waive these contingencies only if you are confident you are getting a great deal.
Participate in the bidding war
You can make your offer irresistible by adding an escalation clause to it. What it basically means is that the price you are offering will increase automatically by a specific amount (predetermined in your offer) in case the seller gets an offer higher than your offer price. You can also set the maximum amount by which your offer will be escalated. The seller will have to disclose to you the competing offer in order to trigger the escalation clause. You must however check out the state-specific norms as in some jurisdictions, putting an escalation clause may be prohibited.
Offer incentives
Closing costs can go up to nearly 6 percent of the purchase price for buyers and sellers. You can make your offer attractive by paying the seller’s share of closing costs. You can also waive home warranty.
Be nice and professional
Most sellers are emotionally attached with their homes. They actually care about whether the new owners will cherish the home as much as they did. You can write a personal letter to the seller showing your love for the home and how you will care for it once you and your family move in.
Conclusion
Thinking out of the box is the key to getting your offer accepted. Talk to the seller at length and try to understand his or her challenges. Prepare your offer accordingly.