You’ve decided on a home and are ready to make the offer. Do you know what you are doing? Do you know what sellers want?
Even if you work with a realtor (which we recommend), it’s important to know what makes a great offer. We outline the steps for you below.
Get a Pre-Approval
Before you look at homes, find a reputable lender and get pre-approved. This step saves a lot of time and frustration.
Sellers will take your offer more serious because you have proof that you can afford the loan. You’ll also know what you can afford. This helps narrow down your choices when looking at homes. Why waste time on homes you can’t afford?
Think About What You Need
Placing an offer on a home is about finding the balance between what you need as well as what the seller needs. If you make the offer too selfish, a seller may ignore your bid. But, if you give the seller too much, you may feel taken advantage of.
Work with a reputable realtor to work out the details of what you need. Rank your needs in order of importance. For example, is the move-in date a high priority? If so, give up in other areas, such as an appraisal contingency. If you ask the seller for every contingency under the sun, they may move on to the next buyer.
Consider these factors when creating your offer:
- When do you need the home?
- How sure are you of the home’s value compared to the price you bid?
- How important is the home inspection?
- Do you need the seller’s help with closing costs?
- How much do you have to put down as earnest money?
- What appliances and fixtures do you need included?
Rank these factors in order of priority. In other words, be willing to give and take in order to craft the perfect offer.
Make the Offer Personal
Sellers are giving up a part of their life. They want the home to go to someone that cares about it as much as they do. Sometimes writing a personal letter will help give you the edge on the competition. Let the seller know why you want the home or what attracted you to it. You never know when some small detail will make the seller connect with you and accept your bid.
Include an Escalation Clause
If you are looking for a home in a seller’s market, you have competition. Sellers could easily pass over low offers for the next one in line. If you want to up the ante, consider an escalation clause. This allows the realtor to increase your bid by predetermined increments to beat the highest offer.
Make wise choices with this option, though. Set a maximum amount that you can bid on the home. In other words, don’t go over your pre-approved loan amount. Make the increments affordable too. For example, don’t increase your bid $5,000 over the highest bid, that’s a bit extreme. Keep it around $2,000 to see how things work out.
Give a Large Earnest Money Deposit
Earnest money shows sellers your interest in the property. You’ll get it back to use as a part of your down payment, so why not show your seriousness? Promise the seller a high earnest money deposit. Just make sure you protect your interests. Have enough contingencies that allow you to back out of the contract with your earnest money in hand should you need it.
Your real estate attorney can help you decide the perfect amount and which contingencies work best in your area.
Offer the Seller Some Help
Sellers may also be buyers. Think about their role in the process. Do they need more time to live in the home? Maybe they are having a home built and it’s not ready. Maybe their current home sold faster than they anticipated and now they have nowhere to live.
Give the sellers the option to choose the closing date or to rent the home from you. This shows your concern for everyone involved and may give you the leg up on the competition.
Use a Realtor and Real Estate Attorney
Cover all of your bases when bidding on a home. A home is one of the largest investments you’ll make in your lifetime. Using a reputable realtor and attorney will ensure that you bid the right amount, make the right choices, and protect yourself too.
Bidding on a home is stressful. Let a realtor do the bidding for you, while you make the decisions behind the scenes. Follow the steps above, consult with your attorney, and make the bid that allows you to buy your dream home.