Ahh, the infamous multiple offer situation; buyers hate them, sellers love them. Having a house receive more than one offer is common in a seller’s market. The U.S. has been experiencing a shortage of listings, creating a seller’s market in many areas. Buyers shouldn’t let the amount of competition they experience discourage them. There are ways to get an edge over other buyers. Continue reading for our tips in making your contract stand apart from the rest.
Come in with Your Best and Final Offer.
When a seller receives multiple offers, they can go about choosing the best contract in a few different ways. Some sellers pick an offer without giving other prospective buyers an opportunity to enhance their bid. While other sellers may go back to the lower offers to see if they can get a higher price or better contingencies. To put your best foot forward, I recommend giving your best and final offer immediately. If you are worried about leaving money on the table, consider an escalation clause. An escalation clause is an addendum to the main real estate contract. The addendum specifies the price the buyer will offer if other contracts come in higher than the buyer’s original offer. Speak with your realtor and determine what is your best form of action.
Submit a Large Earnest Money Deposit.
In Virginia, an earnest money deposit goes toward things like your down payment or closing cost. Submitting a bigger EMD check upon ratification only means less money you pay at the closing table. Sellers can get nervous that once they pick a buyer, that buyer may default on the contract. A generously sized earnest money deposit assures a seller that the buyer won’t back out of the sale without going through the proper legal channels.
Go Above Asking Price.
In a competitive market, you will likely need to make an offer above listing price to get the property. However, going too far over asking may not be in your best interest. If you are purchasing the house using a loan, you will need to get an appraisal before closing. An appraisal is the bank’s assurance that you (they) haven’t overpaid for a property. The sellers may consider a lower offer so they don’t have to risk an appraisal issue down the road. Make sure you speak with your realtor to determine the max you can offer without risking the appraisal.
Don’t Ask for Closing Cost Credit.
Closing cost is something buyers don’t typically think about upfront. In the state of Virginia, a buyer purchasing a $250,000 house pays around $7,500 for closing cost. If you have the funds, do not ask for any closing cost credit from the seller. Asking for credit gives the seller the impression that you need a lot of financial help in obtaining the house.
Provide a Convenient Closing Date.
If you aren’t set on a specific closing date, it is best that you remain flexible. Get your realtor to ask the selling agent what a convenient closing time is for the sellers. If the time frame is manageable, make sure you offer that closing date in the contract.
Shorten or Waive Some Contingencies.
I always, always, recommend buyers get a home inspection on a property. However, in a seller’s market, a lot of purchasers are waiving their right to have a home inspector look over the house. If you waive your right to a home inspection then you are agreeing to buy the house as is. This means that if there is a leak in the attic, a broken heat pump, or mold in the crawl space, you are responsible for fixing the issues. Unless you or someone you know can inspect the property before writing an offer, I think it is unwise to waive this contingency. Be aware though, that you may lose out to someone who did waive this right.
To enhance the strength of your contract without waiving your right to inspection, consider shortening the period for inspection and repair request. The typical inspection period is between 7-14 days. Reducing the time frame assures the seller that if something happens during the inspection process that voids the contract, then the seller will be able to relist their house quickly. A buyer also has the right to an inspection for lead-based paint, and can waive this inspection in writing. Speak to your realtor about getting further information regarding lead-based paint.
Use a Reputable Mortgage Lender.
If a seller receives multiple offers with the same bottom line, they are going to begin looking at the strength of the buyer’s mortgage lender. A seller is much more likely to accept a contract that has a local lender financing the loan over an online company they haven’t heard of.
Consider Attaching a Personal Letter.
In a last-ditch effort to get ahead of the competition, consider writing the sellers a letter. A lot of sellers have a personal attachment to their home and want to pick a new owner who will cherish it the way they did. Attaching a personal letter to your offer can show the seller how serious you are about making their house your home.