You’ve found the perfect house and you’re ready to buy it. But if you’re competing with other potential buyers, it might not be enough to offer asking price and hope for the best. Sometimes you even have to sweeten the pot beyond just the price to make your offer stand out. Keep these tips in mind as you craft an offer that’s hard to refuse.
1. Get pre-approved for a mortgage
As proof that you can put your money where your offer is, you need a preapproval letter from your mortgage lender. This is an official document that shows you can borrow up to the named limit. A preapproval is better than a pre-qualification letter that merely states that you appear to qualify for a loan to a given amount; the preapproval demonstrates that funding is yours for the asking as you make a competitive offer on a house.
2. Limit the restrictions
While there may be times you need contingencies to make an offer on a house, be aware that the most attractive offer to a seller is often the one with the fewest limitations in a multiple-bid situation. Contingencies could be a need to sell your current home before purchasing the new one, requesting a specific move-in date, or asking the seller to perform minor repairs. Sellers want a smooth sale without obstacles.
3. Offer a competitive price
Of course, price plays a part in crafting a competitive offer on a house. A competitive market analysis (CMA) is helpful in this regard. A CMA estimates a home’s value based on the selling prices of similar homes in an area. Your real estate agent is a valuable resource in performing a CMA, so you can make a competitive offer on a house.
4: Be increasingly earnest
To demonstrate your resolve to buy the house to the seller, consider increasing the earnest money, or amount you essentially put down on the home to hold it during the sale. This is sometimes a flat fee, but an amount between 1% and 3% of the amount you offer is reasonable. Provided it is clearly stated in the purchase agreement, this money will go toward the price of the home if your offer is accepted or be returned if your offer is rejected.
5. Consider an escalation clause
If it’s a seller’s market or you know it’s a multiple-bid situation, you might consider an escalation clause to your offer. This automates making a higher bid, up to a capped amount, if another potential buyer presents an offer higher than yours. While an escalation clause can ensure you make a competitive offer on a house, be wary of capping the escalation clause too steeply where you may end up paying more than you should.
6. Make a personal connection
Being friendly and developing a personal connection with the seller can only help you. Find some commonalities with the seller and compliment the work done on the house thus far. Although the seller is planning a move, there are memories in that house, and it’s natural to want to someone else to enjoy it in a similar fashion. If it comes to a close choice between similar offers, the seller may deem the most competitive offer on a house as the one coming from the potential buyer they like best.