There is a war going on in our local real estate market again this spring. The shortage of homes for sale in Indianapolis and surrounding counties, leads buyers to battle over what little inventory there is. The good homes are snapped up within hours, usually receiving multiple offers. What is a buyer to do? Be prepared, act quickly and work with an agent that has a strategy in place to write a very competitive, winning offer.
Act Quickly
View the Property ASAP
Be flexible and do your best to view the property the same day it goes on the market. You also need to be working with a flexible agent or better yet, a team of agents who back each other up and do whatever it takes to act quickly.
Be Prepared to Make a Decision
In a slower market the buyer may have the luxury of “sleeping on it” before deciding if this house is “the one”. In today’s market, the winners know what they want and are prepared to move on it quickly when they find it.
Get Pre-approved with a Lender First
Once you’ve decided this is “the one” and you’re ready to write an offer, the last thing you want is to get delayed waiting on a pre-approval letter from your lender. Have this in hand BEFORE you look at homes.
A Winning Offer – It’s a Strategy — not just a Price
When the market is hot, you need to present a competitive offer to win and it’s about more than just price.
When a seller is comparing several offers they evaluate all of the terms and conditions of each offer. Here are some strategies our team uses to help our buyers win in multiple bid situations:
- Submit your offer with the magic of an Escalation Clause
What is an Escalation Clause? It is an amendment to the purchase agreement that tells a seller (in a multiple offer situation) that you will pay more for the home than other offers – but with specific conditions.
The list price for a home is $200,000 and you really, really want it. It’s perfect: down the street from friends; in the right school district; it even has the fenced backyard and community pool that were on your wish list! You tell your agent ….don’t let me lose this house! How could a escalation clause turn your offer into the winning option?
You submit an offer for the list price $200,000, but also attach an escalation clause that says you will pay $1000 more any other offer up to a max of $210,000. The escalation clause allows you to enhance your offer, but with specific conditions.
What happens next? One of these three things are most likely:
If there are no other offers over $200,000 your offer would remain at $200,000.
If there is another offer at $204,000 your offer would be magically transformed up to $205,000.
If there is another offer of $211,000 your offer would be capped at $210,000. (You wouldn’t “win” in this case, but you won’t lose by over paying, either!)
- Don’t ask the seller for closing cost assistance
Over the years, it has become too easy and convenient (almost routine) for buyers to casually ask sellers to provide $2500 to $3500 in assistance toward their closing costs (most commonly lender fees).
Our advice? Don’t do it, if at all possible. Requesting closing cost assistance is the # 1 deal killer in a multiple offer competition.
We’re talking about real money to the seller. Even if you raise the purchase price to account for those dollars, then the home has to appraise at the higher price. That introduces added risk into the equation for the seller – which is often a killer in a multiple offer scenario.
If you don’t have the cash right now to cover the down payment and closing costs, don’t give up! Consider other options such as a gift letter from a family member or let us to introduce you to Keller Mortgage as a lender option. They offer zero lender fees and up to $1,000 toward third party expenses at closing for Keller Williams clients! (find out more)
- Be flexible with the closing date and/or offer days of possession
If you have some flexibility, allow the seller to select the closing date or offer them a couple of days after closing to move their personal belongings. This enables the seller to make a plan that works for them – which can sometimes seal the deal!
- Buy it “as is”
Another winning strategy is to purchase the property “as is”. You can still make the offer contingent on an inspection and if something major arises you can walk away from the purchase and get your earnest money deposit back; however, the seller understands up-front that they will not need to make any repairs. This provides a busy seller with a level of relief that they won’t have to worry about messing around with minor inspection repairs. This is a great tie breaker in a multiple offer situation.
- Don’t ask for other unnecessary items
For instance, don’t ask the seller to pay for a home warranty. Warranties go for $450 to $700 these days. If you really want one, consider paying for it yourself.
Pick up the tab for the closing fee (a closing fee is what the title company charges to hold closing). A typical closing fee is around $300 and can be a buyer expense, seller expense, or shared equally. To make an offer more attractive, don’t add seller expense – take on the $300 cost and be more competitive.
Don’t ask for additional personal items like furniture, pool table, or the washer and dryer to be included in the sale, unless they are listed on the MLS as something the seller plans to leave behind.
- Send a personal letter or note to the seller along with your offer
Sellers are often emotionally attached to their home. They have built a life within those walls – holidays, dinners, family events, children, pets, and more. They often say things like: I hope a young family buys this home and has as much fun here as we have had over the past 30 years.
Make it difficult for them to say no. It doesn’t cost anything and we have represented sellers who selected a lower offer, just because a letter pulled at their heartstrings. Here are some examples of things we have seen in letters:
- We can’t wait to bring our new baby home to this nursery!
- We will take great care with the perennial flowers you have in the front yard!
- This home is perfect for when our entire family gets together each summer!
- My spouse is in the Marines, and when we saw the military pictures in the study we just knew this was the one! It was like a sign telling us – here it is!