Inventory is low and it’s a seller market. Good for sellers but bad for buyers. Here in Atlanta we are currently experiencing this for the third year in a row. Given this reality, if you are a buyer, it is very likely that you could end up in a multiple offer situation or bidding war on the home of your dreams. Offering asking price and beyond is a great strategy, but here are a few other additional tips that will help your offer stand out.
- Payment- If you are able to pay cash, pay cash as cash is King. This always strengthens an offer. If you are financing, have everything pre-approved, your down payment and your paperwork ready. Ask you lender for a letter for the specific property and include this in your offer. This strengthens your offer to the seller.
- Escalation Clause. The last resort when involved in a bidding war is to use an escalation clause. This is the clause that will increase your offer over any others, in specified increments and up to a specified amount. If you’re financially able to use this tactic, you may choose to do so, but make certain your offer includes a limited time frame when including such a clause and that the seller is required to show you all written offers once your offer has been accepted.*
- Cleaner the Better- When writing an offer, do not nitpick on things, try to have as few stipulations as possible. This will make the offer cleaner and thus more attractive to the seller. Examples might be not having a contingency to sell another property, try to sell that property first before you write the offer for the new property.
- Inspection & Repair.- Most buyers are uncomfortable, and rightfully so, with excluding an inspection, but it is possible to exclude the inspection clause and still be protected. Just have your agent write in a specific time frame 3-7 days for your acceptance, during which time you can have the home inspected and determine whether or not to proceed with closing. You can also include an “as is” clause, insuring the seller that no requests for repairs will be made or as an alternative, you can place a cap on the amount of repairs you will ask for after inspection.
- Why Do you Want the House?- Write a brief letter of what the house means to you and your family, how you plan on using it and how it meets your needs. Adding this level of emotion to an offer can sometimes sway sellers. Putting a story and pictures with an offer can help influence sellers.
- Flexibility- Try to have your agent find out as much as they can about the needs of the sellers and then tailor your terms etc. to those needs. Being flexible with your seller will make your offer more attractive.
- Put Your Money Where Your Mouth Is- An increased amount of earnest money show a seller that you are very confident in the purchase of the home and that you are very serious. A sellers in a multiple offer situation does not want to put their house back on the market due to the buyer having cold feet.
- Closing Costs. Consider offering for the seller to pay none of the closing costs. While your purchase costs will increase, so will the likelihood that the seller will choose your offer.
- Offer Odd-As an example...If the asking price is $800,000, and you are in a multiple offer situation, offer an odd number as an example $805,789. Offering an odd number makes you stand out from the rest of the offers.
- Be Gracious- Don’t be demanding or critical of the seller's home. This is a huge turnoff and will get you no where. Some sellers may eliminate your offer even if it is for more money if they feel you are being demanding.. Always be cordial and as agreeable as the situation will allow.
Buying in a sellers market can be tough especially when inventory is low, but following these tips above and being creative by understanding the sellers needs can help sway some of the most keen sellers into selling to you.
*Escalation clauses can significantly increase your risk. But if you must have the house, and are able to pay more, then an escalation clause is the one way to increase your chances of acceptance, especially in situations of multiple offers. Such a practice, however, also increases the potential that you will pay more than a property is worth, it can also may mean that you may have to increase your down payment if the home fails to appraise for the purchase price.