In a hot seller’s market, making your clients’ offer stand out can make the difference between closing a deal and starting the home search process over. And while offering the best possible price for a property is probably the most common way to ensure your clients’ offer finds its way to the top of the seller’s inbox, it’s not the only way to make sure your offer attracts attention. Learn more about some strategies to write the winning offer, every time.
1. Do Your Research Before You Begin
As you prepare to write any offer, understanding the market and common contingencies in your market are essential to writing a winning offer. Expectations can vary from neighborhood to neighborhood and even be different for different types of properties in the same area. Understanding market statistics and trends can ensure that you’re ready to make the right offer for the market conditions. This can also be a great time to reach out to mentors, friends, and associates to understand what types of offers might be most desirable to sellers in the specific neighborhood you’re investigating.
Before you reach out to the listing agent, review all of the nuances in the listing and do your homework to ensure that you’re not missing out on key information. In a competitive market, having the listing agent on your side can be a critical asset in getting your offer in front of a seller who may otherwise make a different choice. In a competitive market, it’s important to ask the seller’s agent the right questions: is the seller just looking for the highest price? What’s their move-out plan? Do they prefer a quicker closing, or do they need a longer stay? Are they worried about finding their next place, and if so, do your buyers have the flexibility to close on the purchase and rent the home back to the sellers?
Understanding what’s going to make the sellers’ lives the easiest might be the difference between them selecting your clients’ offer, or choosing a competing offer from someone who’s done their homework.
2. Accentuate The Positive
Many agents, when it comes time to write an offer, want to avoid seeming overly eager and consequently losing leverage in ongoing negotiations. However, approaching your early negotiations with a seller’s agent by identifying a property’s negative aspects, or asking questions related to why the seller is selling, can create an impression in the seller’s mind that your clients’ offer is not a serious one, or that a contentious back-and-forth is likely to follow. Even if your buyer is wary about aspects of the property, it can help to accentuate the property’s positive attributes and your buyers’ seriousness early in the pre-offer phase. Call out something positive about the home or the experience to set the stage for a cooperative experience.
3. Make Sure Your Buyers Put Their Best Financial Foot Forward
Your buyers’ financial condition and ability to pursue the deal through closing will inevitably be a major consideration for a seller fielding multiple offers. Getting your buyer into the most advantageous financial position possible is, therefore, a major part of writing a successful offer.
A cash offer is most desirable, but most home purchases involve financing of some kind. Ensuring that your buyers are pre-approved — not just pre-qualified — for their mortgage is an essential first step. A pre-approval from a local lender can be helpful in assuring your sellers and their agent are confident that financing will not be an issue as the deal progresses. Don’t be afraid to show a pre-approval that represents a higher purchase price than your buyers have offered — just because your buyers have access to additional funding doesn’t mean they’re willing to spend it, but it does demonstrate a strong financial foundation and high likelihood that financing won’t be an issue. In addition, having the buyers’ lender call the sellers’ agent directly to confirm the strength of their financing can be very helpful in competitive bidding situations.
In addition, encouraging your buyers to make a larger-than-usual earnest money deposit and down payment can help to strengthen their offer. A large earnest money deposit is seen as a signal that a buyer has “skin in the game” and is motivated to close the deal. Similarly, a substantial down payment can help to put a buyer’s mind at ease that the buyer’s financial condition will not become an issue as the deal progresses.
In the most competitive situations, it may be worth asking if your buyers can afford to purchase the home in cash and then pursue a “delayed financing” arrangement, also called a cash-out refinance. A cash offer is particularly attractive to nervous sellers, and may give your buyers a substantial edge over other bidders.
4. Don’t Over-Ask
It can be tempting, when crafting an offer, to “shoot for the moon” in terms of requesting buyer-friendly contingencies, with the understanding that the buyer will be willing to drop some requests in negotiation. However, this strategy can easily backfire, especially if a seller is likely to receive multiple offers. Sticking to standard contingencies such as the inspection, financing, appraisal, title, and attorney review contingencies, and not looking for the seller to address minor inspection annoyances, is generally a safer way to ensure that the seller is not put off by the offer.
5. Consider An Escalation Or Appraisal Gap Clause
If you’re facing particularly seller-friendly headwinds, it may be time to think about including some unusual provisions in your offer. An escalation clause, which automatically increases the buyers’ offer by a predetermined amount over competing offers, up to a defined ceiling, can be a way for your buyers to make sure their offered price stays above competing offers. This strategy can be effective, but be wary of trying to use this as a way to include a lower-than-market initial offer with an escalation clause — your initial offer should be at least the home’s asking price.
An “appraisal gap” clause can also be a way of setting a seller’s mind at ease. In a standard transaction, the appraisal contingency allows the buyer to back out of the deal without losing earnest money if the home’s appraised value is lower than the agreed-upon purchase price. An appraisal gap clause allows the buyer to agree to pay some amount over the appraised value of the home. For a seller in a hot market, this clause can provide some peace of mind to a seller who is worried that the home will bring in a low appraisal. Be wary of including such clauses, however, as they may interfere with the buyers’ financing. Your buyer should review this concession with their lender before extending themselves.
6. Stay Proactive After The Offer Is Made
When a buyers’ offer is accepted, your work as a broker is just beginning. Getting from contract to close means staying proactive and keeping in touch with both your clients and the sellers’ agent. Letting problems fester can mean the deal you worked so hard to arrange falls apart at the eleventh hour, leaving you to start the process over again, this time with a disappointed client. Stay active to monitor the inspection and attorney review processes, helping to advise your clients regarding reasonable post-offer requests. Shepherding the deal through after the offer, and staying involved, can help to prevent a deal that goes south at the last minute.
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