I’ve been working with some buyers who are trying to buy a home in a very competitve area of town. Yes, even today, the real estate market can be very competitive. Especially since low listing prices are attracting the attention of investors who are coming to the table with cash offers.
As a traditional buyers who are financing their home, it is extremely hard to compete with cash offers. Cash offers are atttractive to sellers because the number one reason that buyers terminate a contract before closing is because their financing fell through. With a cash offer, this risk is eliminated. Also, cash purchases are able to close more quickly since there is no loan to be underwritten.
But still, if you are looking to finance a home in a competitve market, you can win a bidding war. Here are some tactics that I’ve found work for buyers in a multiple offer situation.
- Include a pre-approval letter from a mortgage banker. I actually like to include this in every offer my client’s make and suggest that getting pre-approved is the first step they make in purchasing a home- even before they start looking at properties. Including this letter lets the seller know that there is less risk that a buyer’s financing is going to fall through.
- Make a large earnest money deposit. The purpose of earnest money is to demonstrate a buyer’s committment to completing the purchase and the larger the earnest money check, the more committment that is demonstrated. If a buyer backs out of a contract for any reason not covered by a contingency in the contract, the seller gets to keep the earnest money. Earnest money is a sort of insurance for the seller and makes the offer more attractive.
- Be flexible where you can. Although when you submit an offer, you include a closing date, a possession date, a closing attorney and other factors, if you are flexible on these terms, let the seller know. It would be a shame to lose a bidding war because you arbitrarily picked a date for closing and the sellers liked the closing date in one of the other offers better.
- Offer more than the asking price. Usually when properties go into multiple offer situations, it is partially because they are priced below the market making them more attractive to buyers and investors. However, they will likely sell more at fair market value. Have your real estate agent pull comparable properties and help you determine what the house is actually worth and base your offer on that, rather than on the list price.
-In some situations, it’s a good idea to include a personal letter to the sellers. If the home you are trying to purchase is bank or investor owned, any letter would probably fall on deaf ears. But if an individual or family owns the home, they are likely emotionally invested in the property and care about what will happen to the home after they move out. Things that I like to include in these letters are specific details that the buyer loves about the home such as the floors in the master bathroom or the screened-in porch. I also like for the buyers to try to make a connection with the sellers by pointing out things that they have in common such as pets or where they went to college. It is also a good idea to let the buyer know that you are also emotionally invested in their home. Remeber, the sellers were once buyers of the very same home and they can relate to the anticipation of waiting to hear back on an offer. Most importantly, the letter should be sincere and heartfelt. A seller can see through a form letter or a generic letter. If you really want to buy this house, let the seller know why.
All of these tactics will help make your offer more attractive to sellers, but if you don’t win, move on. There are plenty of houses out there and one of the worst mistakes a buyer can make is missing out on other opportunities because they can’t move past a home that they can’t buy. You cannot force someone to sell you their house, no matter how much you want it.
For more help on buying a home, visit the buyers section of the Corners Realty website.