When buying a home, your offer can make or break the deal. It is the first piece in the negotiation process with the seller, so it’s important to get it right. Work closely with your real estate agent to craft an offer that is attractive to the seller and helps you win the home over other buyers. Here’s what should be included in your offer and how to make yours stand out — especially in a seller’s market, where competition is fierce.
Make your first offer your best offer
First, a word of caution in the current seller’s market — don’t get too attached to any one home. In today’s market, homes are selling quickly and sometimes for much higher than the asking price. It’s likely you’ll have to look at lots of homes and submit several offers before having one accepted. Decide on your top price, and make your first offer your best offer to beat out other buyers. In a seller’s market, it’s likely you need to offer the asking price or higher, but consult your real estate agent for the best way to approach this in your local market.
Note your loan pre-approval
Hopefully, you’ve followed our advice and are already pre-approved for your mortgage. Be sure to include your pre-approval letter in your offer to show sellers you’re serious about purchasing and have the buying power to do so.
The fewer contingencies, the better
A contingency in an offer stipulates that specific conditions must be met in order for the sales contract to be binding. To a seller, too many contingencies can be a red flag. There are many contingencies, including home sale contingencies, meaning you have to sell your home before buying theirs, and financing contingencies, giving you the right to back out of your contract if your financing falls through due to a low appraisal.
In some markets, sellers even expect buyers to purchase the home “as is,” meaning buyers give up their ability to have an inspection and/or ask for any repairs, even on things like a bad roof. You need to make contingency choices based on your individual needs and financial situation, but, generally, offers with few contingencies are more attractive to sellers.
Pay cash or a large down payment
Paying cash can be a huge positive to a seller, as deals involving financing can always fall through. And although you may not be able to make a full-cash offer, the more you can offer in cash through your down payment, the better. After all, the higher the down payment, the more likely your bank is to approve your mortgage — and the more likely the deal is to go through, giving you an edge over other offers.
An earnest money deposit is a deposit you submit with your offer to show you’re serious about purchasing the home. It can sometimes be called a good faith deposit and is typically non-refundable unless noted in the contingencies clause mentioned above. Earnest money reassures the seller that they’ll receive at least some compensation if the deal falls through. A range of 1% to 2% of the offer price is typical, but offering 5% to 10% in a seller’s market may be enough to sway the seller in your favor.
Offer a quick closing
A quick closing may be more important to some sellers than others, but very seldom is it seen as a negative. Generally, sellers want the deal to be done quickly so they can close the deal, move on, and avoid paying for maintaining two homes at one time. Also, there is always a danger of the sale falling through up until the closing date, so sellers are antsy to get final confirmation that their home has officially sold and they can hand over the keys.
Look for other ways to sweeten the deal
When putting in an offer, nothing is off the table. Depending on the needs of the seller and their situation, there may be other ways besides price to sweeten the deal. This might include offering to pay a portion of the seller’s closing costs or not requesting any repairs from the seller.
You don’t necessarily have to offer the most money to have the most attractive offer to a seller. Other factors — such as a quick closing, few contingencies, or a large down payment — can tip the scales in your direction and reassure the seller that you are a serious buyer. The last thing a seller wants is for the deal to fall through, resulting in them having to start over with back-up offers or even putting their home back on the market.