Your home: How to make an offer that a seller cannot refuse

Cash

It is January 2014 and the market is already heating up. Inventory is still low and buyers are hitting the streets already in pursuit of a great home. If you ask most buyers about their concerns or struggles in today’s market, they pretty much all have the same two answers: not enough to choose from, and once they do find a great home, how they can win the bidding war.

Yes, I said the bidding war. At last count, my wife Leah was involved in more than 20 bidding wars in in 2013 and I was in about 13. 2014 seems to be trending the same way. In some parts of our city, there are only two months of inventory available which constitutes a STRONG seller’s market.

So when it is such a seller’s market, how do you position your offer for success? How can you make your offer stand out from all of the rest? Or, how can you convince a seller to accept your offer before any other offers come in?

Here are some best practices when creating your offer. I use this same criteria to evaluate the pros and cons to each offer that we receive on our listings as well.

1. You only have one chance to make a first impression. What lasting impression will your offer leave? When inventory is tight, we coach our clients to make a strong offer right away. There is no time for poker here. Make an offer based on actual comparable sales in the area and then take in to account the current inventory. If there is only one or two homes for sale in a highly coveted area, you better be ready to pay top dollar. Please keep in mind that top dollar today is still well below 20 percent of the peak values that we once had in 2006. Also, if the last two or three homes in the area have sold for 103 percent of list price, you might consider offering more than list price to get the sellers attention and to possibly scare away any other offers.

2. Place time on the seller’s side. Allow the seller to name the closing and possession date. Yes, you may want your new home tomorrow, but the seller may desire 60 days before they have to move. Time is money (or can be) in this case. I have seen sellers accept a lower offer on their home simply because the buyer allowed them to set the pace of the closing timeline. Lastly, allowing a few days in between closing and possession is crucial for most sellers. It amazes me the number of offers that we receive on our listings with closing and possession on the same day. Didn’t the buyer notice all of the furniture and belongings in the house when they viewed it? Do they think that the sellers are magicians and can make it all disappear? Abracadabra is a cool Steve Miller Band song, but will not help the sellers move out more quickly. Give them time.

3. Get pre-approved, not just pre-qualified. In a column last September we covered the difference between a pre-approval and a pre-qualification. In a nutshell, a pre-qualification is an opinion based upon a short interview process whereas a pre-approval is credit score driven and all documentation referenced on the loan application has been verified. In my opinion, an offer presented without a pre-approval letter accompanying it is not worth the paper it is written on. I also think that the loan officers cell phone number is important. I always want to speak with the loan officer briefly before presenting it to my clients. Sometimes these offers come in over the weekend. That is why just an office phone number is not sufficient.

Please remember: Cash is still king. No matter how strong the pre-approval is. In a bidding war, it is really hard to beat a cash buyer. Especially if they are waiving their right to an appraisal.

4. Make the offer as “clean” as possible. Just because your sister got all of her closing costs covered when she bought in 2006 does not mean that you should ask for the same. She also paid more for her house in 2006 than she would today. That is because the market has shifted. It is a different world in 2014.

If you don’t need the seller to pay for a home warranty, then don’t ask for it. The same thing goes for closings costs. It may come down to two offers with the same sales price, but one is asking for more financial concessions from the seller.

Please remember that there are no steadfast rules that sellers must follow when considering an offer. Sometimes that will surprise everyone with their response. Just keep in mind, as with most things in life, everything happens for a reason in real estate. If you miss out one house, that just means that there is a better one for you just around the corner.

Photo Credit: ota_photos on Flickr.com

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