If you find yourself in a multiple offer situation for a home you love and must have, here are the steps you need to take to make sure you’re the one who ends up with that home.
First, make an offer that’s higher than the list price. In a competitive market, you need to make adjustments, and in a seller’s market, you may need to go all in from the get-go. In 2017, nearly a quarter of all home sales closed by an average of $7,000 over list price. An attractive offer can help you avoid some of the back-and-forth negotiating and help your sale happen quicker. You also need to make sure in this situation that the home will appraise for the amount you’re offering. It’s essential that you have an educated broker working with you in this regard.
Second, get pre-qualified or pre-approved. Taking the initiative to work with a lender before you make an offer will let the seller know you mean business. Getting pre-approved or pre-qualified will also tell you what your budget is, what your monthly mortgage payment will be, and what price range you can afford to shop in.
A pre-qualification is an estimate of how much money you’ll be able to secure a loan for, and all it takes is a 10-minute phone call. A pre-approval means your file has been reviewed and approved and, barring any unforeseen circumstances, you should receive a letter from your lender that you can include with your offer. With a pre-approval, you’ll need to gather documents of income, finances, retirement, credit checks, etc., to be reviewed and verified. Your lender and agent can help you determine whether a pre-approval or a pre-qualification is the best option for you, but in this market, I suggest getting a pre-approval.
Third, waive any unnecessary contingencies. With this step, though, you should proceed with caution. While waiving contingencies like inspections and appraisals can make your offer so much more attractive, doing so carries some risk. If you skip the home inspection, for example, you might end up with a home with termites, a crumbling foundation, or a host of other costly issues. If you waive the appraisal contingency and the home appraises for less than the offer, it’s unlikely you’ll get financing above the appraisal price. In that case, you’d need to increase your down payment to make up the difference and keep your offer viable.
On our team, one of the keys to getting a solid pre-approval is that our lenders can offer shorter contingency timelines or full contingency removals. Our lenders have systems in place where they can get your file approved by an underwriter and give you the most confidence that you’re getting the loan so that you can remove the loan contingency entirely, or at least remove the timeline from that contingency. Sellers are looking for clean, simple offers, and contingency timelines can come into play when dealing with the competition. Every offer is different, and sitting down with a professional to structure your offer is the best way to present it.
Fourth, write a letter to the seller. This tactic has been a common practice for me since I started working in real estate. Making a personal and professional connection to the seller may tip the scales in your favor, especially when they have a strong connection to the home. We’re all human, and sometimes an offer is just an offer. Some sellers, though, might want to know why their home is important to you and have you put a human element behind your offer. So write a letter about your life, your family, and what you love most about the home and the surrounding neighborhood. You can also take it a step further by adding a family photo to your offer. The presentation of your offer is extremely important.
Of course, none of these tactics are 100% guaranteed to make you the winner, but they’ll give you a fighting chance. With that being said, the biggest tip we can offer is to know when to walk away. No house is perfect, and if you can’t make this home yours, there may be another one waiting just around the corner that catches your eye.