Hey everybody it’s Austin Solomon. Welcome to this week’s episode of the Real – Wausau Real Estate Show.
Today we’re talking about six tips for beating out other offers. With the spring market in full swing and the market is going crazy and there’s a shortage of houses, it’s very common for homes to have multiple offers on them and I want to give you the best shot. I have six tips to give you the best shot at getting the house.
In a multiple offer situation, there are multiple people interested, what are six things you can do to put yourself in the best position.
First thing is make the offer clean, this means you want to limit your conditions to only what’s most critical. Remember the more conditions or contingencies you put in the offer, the less appealing that is to the seller and the less appealing it is.
It makes sense, there are more things and more hassles and headaches with things to do in the offer, and the seller is not going to like that. On one side of the spectrum, the cleanest offer is a cash offer with no contingencies and the more conditions you add from there would be less appealing.
Part of a clean offer is reasonable timelines as well. So you want to move quickly when it comes to conducting inspections, dropping off the earnest money and securing the loan. So have tight timeframes which tell the seller you’re serious and things are going to be moving along quickly.
A third part of making the offer clean is dropping your request for home warranties, seller-paid closing costs, or anything that would take away from the net offer to the seller.
Step #2 is to have a solid pre-approval letter. It’s really more important now than ever to have a really solid letter from a lender and really going deep early on in securing a loan. If you’re working with a lender, you’re going to have to go through the entire process anyway, so if you can get most of it knocked-out as part of that pre-approval process, with credit, verifying income, making sure everything looks really good. Then the lender is going to be able to express confidence in that letter, and also maybe they’d be willing to give a phone call to the other agent, the listing agent, to express the confidence they have in you getting the loan.
With that as well, one thing to talk about when you’re talking about the pre-approval is having the conversation with your lender about would be: what type of loans work for you? Again, when you’re in a multiple offer situation, you want to put your best foot forward, which may mean that a government loan for example may keep your payments the lowest, but maybe going a conventional route would be better because it could help you secure the house vs doing a government loan, which could get you the best interest rate. But if you don’t get the house because you’re doing a government loan and there is more involved in getting that loan, then obviously that is a negative factor.
You have to consider, even though monthly-payment wise a government loan might be the best option for me, because it’s a multiple-offer situation, maybe I’m going to go conventional, so I have the best chance of locking the house down.
Tip #3 put a large amount of earnest money down. The more money you put down, the more serious you convey your interest. So, if you put down $500 of earnest money. In a normal circumstance anywhere from $500 – $1,500 would be normal, but in a multiple offer situation, if you put $5,000 down, that ’s going to show the seller that you’re really interested. To take that a level further, it’s not super common around our area but if you did a large amount of earnest money and made that non-refundable after the home inspection period. That would be another way for you to show the seller you’re very serious about closing.
#4 is to put your best foot forward from the gate. When you’re making an offer and there are multiple offers in, go with your best price, your highest and best right from the gate. You want to put your highest and best foot forward because a lot of times buyers will leave a little bit out there thinking the seller would come back to them. But you don’t want to wait for the seller to ask for your highest and best, you want to assume they aren’t going to counter your offer. So really just going with your best foot forward if they don’t accept it, hey at least you know that you put your best foot forward.
#5 is the escalation clause. This is a strategy where you actually offer a range of values on a home. So, for example if the home is listed for sale at $150,000, you could offer $150,000 or an amount over the best offer up to, for example, $160,000. So, in this case you’d say, I’d offer you $150,00, your list price, but I’ll offer $2,000 over the next best offer up to $160,000. So, this can be really effective because hey you’re not going for that $160,000 right out of the gate, so you’re not overpaying for the house but you’re just nudging the other offers by the amount you said, like in the example would be $2,000.
Now this works, but you have to have #1, #2, #3, #4 and even #6 here. Those have to be in place for you to use this. If your offer is not very clean or you don’t have a pre-approval letter, a lot of times it doesn’t matter if your offer is $2,000 more than the next best offer because you missed those points.
And finally #6 is to customize your offer to the seller. This is all about putting yourself in the sellers perspective, what’s most important to them, what’s on their mind? So here you can ask, so what’s the seller’s timeframe, what are they looking to do, when are they looking to move out, do they want to close right away, do they want to close further out and customizing it for them. If the seller wants to, for example, take some personal items like appliances, again, if you’re in a multiple offer situation just let them have those things. You have to work with them and let them do what they want to do so it’s appealing to them. Again, in customizing the offer to the seller you could write a personal letter or make a personal connection, which can be effective as well. This is another piece too that again #1 – #4 have to be in order, in order for you to be effective. A letter isn’t going to do much if you come in $5,000 less than the other offer.
Great! So that covers the 6 tips for beating out other offers. If you guys have questions about these, would love to go deeper and answer any questions. Otherwise I hope this works out for you and we’ll catch you guys on the next show!
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Austin Solomon | The Solomon Group – Coldwell Banker Action – (715) 212-4693