In strong markets, but also with lower-priced properties (e.g., HUD houses), buyers sometimes have to compete with each other in order to purchase a property. Some bank-owned homes are priced low, and the bank accepts the best and highest offer. Your realtor should know what price to offer right from the start. Here are some points to consider:
- Offer the highest reasonable price you can. While you’re always looking for a great buy, you should be prepared to pay a fair price. You or your realtor have already checked comparables, so you have a good idea of what similar houses in the area have sold for. You therefore also know if the listing price was reasonable. In a seller’s market, you would be wise to get as close to the asking price as possible, and even add something to it if you think the listing was low to start with.
- Price does not always win the home. Terms, including cash versus bank financing, can make a lower-priced offer more appealing to a seller. Again, your realtor will know how to advise you about this.
- Make sure you are pre-approved for a mortgage loan, not just pre-qualified. It makes a difference to a seller. Once your offer is accepted, the buyer is committing the sale to you and most likely with the contingency that you will get financing. If you don’t get your financing, the seller is left with nothing and has to start all over again. He may even has to return your earnest money deposit. Imagine, then, if you were the seller and two fairly equivalent offers came in. One was from a pre-qualified buyer and the other was from a cash buyer. The latter offer is a much safer one to accept, especially if proof of funds from the bank is attached.
- Present the seller with a large an earnest money deposit to show you are serious. If one buyer sends in $500 with his offer and you send yours in with $1500, guess which one will receive better consideration?
- Only include contingency clauses that are really necessary, like a home inspection or financing. What you can do to sweeten your offer, though, is to tighten the deadlines for these contingencies. For example, while you must have a home inspection within ten days of your offer’s acceptance, you could narrow that time frame down to seven days.
- Show flexibility and good faith where you can. While you will typically include tentative closing and possession dates in your offer, you can state them in such a way that lets the seller know there’s leeway. For instance, you can state that the seller can have an extra three or four days in the home after the closing at no charge in order to move out.
After you submit your best offer, the seller may come back with a counter offer. And if he is countering your offer, he might also be countering other offers, as well. In this case, your best strategy is to do whatever you can to meet the seller’s proposal, and do it as quickly as possible. Always talk with your realtor to discuss which points are probably most important to the seller, and try to meet them. Or meet half-way if you can’t accept them.
In a buyer’s market, it’s still possible that a seller will receive two offers at the same time. Therefore it’s important in every situation to make sure your offer is a fair one, even if the seller’s situation is such that you can get a good bargain on the home. For instance, if it’s an estate sale, you can offer a low price, but also offer the out-of-state owner(s) plenty of time to move out or to run an estate auction before you took possession.
Most of all, don’t do all this by yourself: talk with your realtor. She has years of invaluable experience with purchase offers and counter offers. Call Susanne today at 614-975-9650 to talk through your best strategies for winning a bidding war!