Buying a home isn’t as simple as saying “I’ll take it!” and writing a check for the down payment. A lot goes into closing the deal, including negotiations on price, inspections, dealing with the bank, and more. Most importantly though, just like a seller must make their home appealing to buyer, a buyer must make their offer appealing to the seller or it may not even be considered. Sellers are looking for specific terms and conditions that benefit them the most, along with a great offer. By following these 10 tricks, you can be on your way to putting your offer on top of the pile.
The offer price is a huge factor in any home buying process. Deciding whether to submit an offer above, below, or at list price can be challenging to figure out, and one wrong move can send the seller running to the next offer. It takes a lot of real estate research on the area in which the house is located along with the housing market in general to ballpark an offer that has a high chance of being accepted. Luckily with a Class-Harlan Real Estate ally in your corner specializing in Bucks and Montgomery Counties, submitting a great offer becomes a lot easier. Using their know how and years of experience, submitting an offer that is fair and well-researched makes this process quick and easy.
No Seller Assist
Coming up with a 10%-20% down payment on a home can be financially straining for any buyer. That’s why many buyers try to exercise a seller assist option on their offer where the seller gives the buyer a credit (eg., 3%) to go towards buyer closing costs. While this can greatly help a buyer, it can throw up a few red flags for the seller, forcing them to pass on the offer. Usually when a buyer exercises this option, they offer to put down a minimal down payment. This can lead the seller to think the buyer’s financial situation is marginal. A buyer that does not exercise seller assist on the other hand may prove to be more financially stable with a lesser chance of the deal falling through.
Strong Down Payment
There’s multiple reasons to put a large down payment on a home including the reduction of overall interest payments, lower interest rates from lenders, smaller mortgage payments, and no need for PMI. For sellers looking for the perfect offer, a large down payment in a situation with competing offers can be a deal maker. Just like where a low-down payment with seller assist can hint at a marginal financial situation, a strong down payment can hint at a stellar financial situation where banks will be more likely to approve a mortgage. This is a big safety net for sellers by going with a buyer who’s deal will most likely not fall through rather than spending time on a buyer who’s deal may fall through.
Preferred Settlement Date
Timing can make a big difference in terms of which offer a seller accepts. If a seller wants to get out of their home as soon as possible so they can quickly move into their new home, it may be beneficial to try and set an early settlement date. On the other hand, if the seller wants 30 or 60 days before settlement, the buyer may need to be patient and set a settlement date further down the road than they would like. At the end of the day though, it all depends on if an agreeable date can be set for both parties. By working with your Class-Harlan Real Estate Agent, you can gain a better understanding of a preferred settlement date to set on that makes both parties happy.
Send a Letter with your Offer
There’s a reason a buyer is submitting an offer on a home. It could be the curb appeal, the school district, stellar upgrades, or any other number reasons that compelled them to submit an offer on one house in particular out of the countless homes on the market. That’s why instead of just telling their friends and family about why this is their dream home, they should tell the seller. An emotional appeal may not be as convincing as a stronger down payment or a high offer. However, an emotional appeal as to why a buyer is submitting their offer can sway the seller’s mind.
Inclusions and Exclusions
Inclusions and exclusions detail what will be included and excluded with the sale of the home. Simply put, this list will give insight as to what will and won’t come with the home such as a washing machine, chandeliers, or a refrigerator. Usually this list is hammered out during negotiations, but a buyer can save themselves and the seller a lot of time by being up front with what they want included with the sale. This is a great way for the buyer to convey their wishes to the seller up front in order to hammer out any issues immediately rather than during negotiations where the deal can fall apart due to a failure to compromise.
Buyers have a great deal of protections when buying a home, and one of those protections is the inspection contingency. During this period, a buyer can have the home inspected to get a detailed report of anything that may need repairs. Based on this information a buyer can request that the seller make any repairs before agreeing to buy the home, and can even back out of a deal altogether. So why would anyone waive their right to an inspection?
First off, a buyer can back out of a deal for several reasons based on the inspection report without losing their earnest money deposit. A crack in the sidewalk can make a passive buyer back out of the deal, forcing the seller to relist their home. Secondly, it can be off-putting for a buyer to require the seller to repair everything on the list. From painting to repairing a wobbly doorknob, a seller can dissolve the deal if too many unreasonable requests are made.
Shorten Inspection Contingencies
If a buyer decides to go through with an inspection, they will have a certain time frame to get it done as well as any additional inspections that may be recommended by an inspector. If a lot of inspections need to be done, it’s good to have a long inspection contingency. However, in the current competitive real estate market, a long inspection contingency can push a buyer’s offer to the back of the line. Shortening the contingency period and scheduling inspections quickly during this period is key. It moves the process along faster, and decreases the chance of a third-party offer being accepted.
Putting a down payment in the area of 20% is huge in terms of submitting a stellar offer. What’s even better is putting that 20% down in cash! By doing so, a buyer will reduce his mortgage payments than if they put down a smaller down payment, lower his interest rate, and avoid needing PMI. Not only that, but it instills confidence in the seller that the buyer has the credit and finances to buy the home without issue from the bank.
However, cash down payments need to “season” in a bank account for anywhere between 30 to 60 days so a lender can ensure the validity of the money. For instance, if $20,000 showed up in a buyer’s bank account overnight, it may mean they took out a personal loan to cover the down payment. If this is the case, a lender will be less likely to give out a home loan because the potential buyer is already on the hook for a large loan, making the issuance of a larger second loan a very risky move.
Conventional Loan over VA or FHA Loans
Finally, the type of mortgage a buyer gets can dissolve a deal instantly. Conventional loans give a good amount of protections to the sellers in the form of minimum down payments to attract buyers who may be more financially ready to make an offer, while also using the borrower’s credit and debt-to-income ratios to determine eligibility for a loan. Of course, by having these protections in place, the seller’s mind is more at ease accepting an offer with a conventional loan.
On the other hand, FHA loans benefit the buyer by insuring loans to those with lower credit scores and who are only able to put down a minimal down payment of 3.5%. Similarly, VA loans offer the same benefits to those with lower credit scores and cash-on-hand, but require no down payment on the home at closing at all. Though FHA and VA loans can help certain individuals buy a home who may not have been able to with a conventional loan, it can be risky for a seller to accept an offer with an FHA or VA loan. Because most of the protections go to the buyer with these loans, the chances of a seller rejecting an offer for another with a conventional loan are higher.
These ten tips can help any buyer make an offer, and their dream home, become reality. Your Class-Harlan Real Estate agent can help get you on the right path by walking you through the home buying process. Call your Class-Harlan agent today, and get started on putting together a winning offer.