Ready to Finally Win the Bidding War? Here Are 9 Strategies To Make Your Offer Shine
Are you tired of losing out on house after house in multiple-offer situations? It can be so frustrating to enter endless bidding wars and come out empty-handed. Though offer price is frequently thought to be the most important factor, there are other fundamental ways to make your offer shine amongst a pile of others.
1. How earnest are you? - The earnest money deposit (EMD) is how you show sellers you are putting your money where your mouth is. This deposit shows sellers you are serious about buying their property and ensures you perform the contract, otherwise you risk losing it all. Some buyers can walk away from a few thousand dollars but many can’t stomach losing tens of thousands or more, so by fronting more cash you can show sellers how serious you are about buying their home. And even though it is more cash upfront, the EMD goes toward paying closing costs and is money you are paying for the home anyway.
2. Cash isn’t king - Some buyers believe that by writing a cash offer that they will automatically win the bid, but that isn’t so. Competitive terms and higher offer prices in offers using loans won’t make a seller lose a wink of sleep in choosing that offer over yours.
3. Put down more money - Putting down a higher down payment shows listing agents that you have more liquid assets and therefore are more likely to have your loan approved. When choosing between two identical offers with one putting down a greater downpayment, the buyer putting more money down poses less of a risk to the seller in case the buyer can’t obtain financing.
4. Your lender matters - Using a local, reputable lender that the listing agent is familiar with is key to put minds at ease. This preference goes beyond sociability— local lenders are able to hand-pick their pool of appraisers, which is paramount when it comes to the appraisal of the property. While lenders cannot pick the individual appraiser, they are able to cultivate a pool of the cream of the crop who are super familiar with the area and will be more likely to have an accurate appraisal. If obtaining value is an issue, the appeal process is more likely to be successful. Listing agents don’t want to see large .com lenders, especially if appraisal contingencies are included.
5. Fewer contingencies, less risk for the seller - There are a variety of contingencies you can include with your offer, and it is all about striking a balance between mitigating risk for the buyer and seller. The more contingencies there are, the more legal outs there are for a buyer in case they want to void the contract. The less contingencies there are, the less risk there is to the seller that the buyer will walk. It is important to include contingencies if you feel as a buyer you need protection, but be aware that sellers will opt for the offer with fewer contingencies.
6. Risk of radon - Montgomery County law stipulates that in every transaction (with a few exceptions) a copy of radon test results are provided prior to settlement. If the buyer chooses to include a radon contingency and higher levels of radon are found in the house, then the seller must pay to remediate the radon and pay for a retest. Without the contingency, the seller must pay for the radon test but is not required to remediate should higher levels of radon be found. The cost of remediation is generally $1,500. If you are trying to make your offer more attractive and you know you are competing against other offers, consider not including the radon contingency. Put another way— are you willing to give up the house you are writing on over $1,500?
7. Timing matters - When you do choose to include contingencies in your offer, making those periods shorter will improve your offer in the eyes of the seller. The larger the timeframe, the more opportunity the buyer has to void the contract under that contingency. Closing the contingency windows ASAP is important for sellers to minimize their risk and get their house sold.
8. Not sure? Ask! - When choosing settlement dates and title companies to handle closing, it is a good idea to ask the listing agent what works best for the sellers. By including a date that fits the seller’s timeline and a title company they prefer to work with, you are making your offer more attractive because it is more convenient for the sellers.
9. Escalations - If you include an escalation clause to push your offer price over your next competitor, using a higher escalation factor is an important yet frequently misunderstood tool to increase your chances of offer acceptance. The escalation factor should put you the greatest distance ahead of another buyer. If your escalation factor is $1,000 and you are only put that far ahead of the next buyer and they have better terms than you do, don't be surprised if your offer is not chosen. But by including a larger factor like $5,000, then that puts a greater distance between your offer and your competition and makes your offer more impressive. For more nitty-gritty tips on how to make your offer stand out, call the Tamara Kucik Team at 301-780-HOME (4663).