In some markets you need to be very aggressive if you want to close on a home being sought after by multiple buyers. These tips certainly aren’t for everyone. These do work but are both high risk and require that the buyer be in a strong financial position. Try these only at own peril.
Strategy #1. Make your earnest money deposit for the full asking price. Obviously this only works for someone making an all cash offer. This is only for the most experienced and confident buyers. You’ve already eliminated any financing contingency. If you’re comfortable with your own inspection skills and had a thorough look at the property, you can waive the inspection contingency. Typically, the only thing between you and closing the deal is the seller’s clean title.
Strategy #2. Include an escalation clause. You can use this if you are making a full price offer or for below the asking price. Try offering $500 increments above the highest offer. If you offer $105,000 and someone else later offers $106,000, your offer is automatically increased to $106,500. Set a top limit of something like $111,000 so that you exceed the psychological limit of $110,000. Even if another buyer exceeds your top offer, you can bet they’ll get back to you before accepting another offer.
Strategy #3. Pay all of the closing costs. This could be slightly more effective than making an offer above the asking price. As the purchase price increases, the commission the seller pays to the agent also goes up. Paying the seller’s closing costs without escalating the purchase price can actually put more money in the seller’s pocket.
Strategy #4. Waive the appraisal contingency. This works best when you are confident the neighborhood prices will continue increasing and you have ample financial reserves. Even if you are taking out an appraisal-based loan, when you have the cash to make up the difference between the appraisal and sales price, you can consider waiving this contingency clause. Your lender will still require an appraisal but you can waive the contingency that a low appraisal kills the deal.
Strategy #5. Eliminate as many contingencies as possible. Writing an offer contingent on selling another property can be a huge reason sellers prefer other offers. This only works if you are financially strong because you’ll need to come up with the down payment separate from the proceeds of selling your current home. You may also have trouble qualifying for a new loan if you’ll be paying on another mortgage. On the other hand, this may be your opportunity to become a landlord by renting out your current home.
All of the above are high risk and require a strong financial position. However, these are almost certain to get your offer accepted. But there are a few other strategies that are less risky and less cash costly.
Strategy #6. Write a personal letter. This one is becoming so common that it is almost a cliché. However, if everyone else is doing it, you need to as well. Always understand the seller’s motivation to emphasize it in the letter. Also try to structure your offer to best match the seller’s motivation (fast sale, highest price, the right buyer, etc.).
Strategy #7. Include your loan approval letter. Don’t only rely on an agent-to-agent conversation confirming your loan approval. Include a dated copy of the letter with the offer signed by your lender and with lender contact information. If you’re approved for an amount considerably higher than the offering price, you may want to have the letter customized for approval near the offered amount. Otherwise, you tip your hand to the seller as to how much you are fully approved for.
Strategy #8. Make two offers. This one actually works best when you are offering below the asking price. There are several ways to structure two offers. One offer could be for all cash with fast closing at $100,000 when the asking price is $125,000. The second offer might be $115,000 but require financing and 60 days to close. Dropping some contingencies in exchange for a lower selling price is another possibility. One of your goals here is to get the seller to consider which is the better offer rather than on the fact that both are for below the asking price.
There are many less costly and less risky strategies. One might be offering the seller a month’s free occupancy. The cost to you is minimal since you won’t make the first mortgage payment until the end of the first month. Another is assuming the cost and effort to clean up a property strewn with junk. Key to low cost and low risk strategies is understanding the seller’s motivation. It only takes a phone call between both agents to better understand that motivation.
What are your advanced strategies for getting an offer accepted? Please leave your comment.
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