Ways to Strengthen a Home Purchase Offer
Depending on the area in today’s market, it seems like there are way more buyers than sellers. People are often discouraged in purchasing a home by the interest rates and how tough it is to get an accepted offer. There are ways to strengthen a purchase offer, though some may be too risky for buyers.
Find Out What the Seller Would Prefer
Asking the realtor to reach out to see if there is anything the seller would prefer when it comes to closing can strengthen an offer. Some sellers may prefer:
- A fast closing.
- A pushed back closing date.
- Dual closing – selling a house and buying at the same time.
- Renting back to the seller after closing to give them time to relocate.
Offer Cash
If someone has enough cash to purchase a home, they could close on the transaction with cash and refinance later with the delayed financing exception. Getting creative by reaching out to family members or friends who have the capital to purchase the home and work out an arrangement to buy it back from them with financing could be an option.
For example, a buyer owns a property and has a lot of equity in it but does not have the time to sell and purchase another house that went on the market. The parents could give them a bridge loan with their current home as collateral to purchase the new home. People often even vest the property with other individuals and refinance later.
Write a Letter
Making an offer with a “house offer letter” could help by catching their attention though it depends on how sympathetic the sellers are.
Escalation Clause
An escalation clause is a great way to beat out other offers. This is done by including a clause where the offer is increased by a set increment to beat another competing offer. It may be smart to increase the increments at a higher dollar amount because some sellers may say, “Well I like the fact that the other person just gave me an offer versus another that said they would beat it by $100.”
Improve Credit Score and Increase Down Payment
A pre-approval letter shows the down payment, a borrower can also include a credit score on it though this is confidential and would need consent. A higher credit score could show more credit worthiness and ease the sense that the deal will not go through because of credit.
Get Properly Pre-approved
Pre-approval letters matter. A pre-qualification letter is often a quick unverified estimate in what a buyer can afford.
Being properly pre-approved for a mortgage is important in order to avoid any financing delays or denials.
Try to Find Off Market Deals
Realtors use the Multiple Listing Service (MLS) as a tool to look up real estate that is being listed or post a listing. These listings are accessible to real estate agents and help get the word out for houses for sale.
Some sellers may exclude their listing from the MLS for the following reasons:
- Privacy.
- Seeing what the market has to offer before officially listing.
- Trying to sell quickly.
- Or even avoid days on market.
Advantages for buyers who know about excluded listings:
- There may be less competition.
- Potentially better terms for when negotiating.
- Hear about the home prior to hitting the market.
Earnest Money Deposit
An earnest money deposit is a sum of money that is paid at the beginning of the transaction to show the buyer is serious about purchasing the property. Earnest money is a deposit of money towards the purchase transaction that will be credited at closing towards closing costs and the down payment.
Making a larger earnest money deposit may show that the buyer is more serious than other. Earnest money will be refunded as long as a buyer does not waive contingencies and meets deadlines.
Limiting Contingencies
Though this can be risky and strengthen buyer’s offers, people will:
- Waive the inspection contingency.
- Waive the financing contingency
- Waive the appraisal contingency.
Why is Waiving Contingencies are Risky
Though in most cases, waving contingencies will increase the odds that a seller will choose you over another offer, it can be very risky.
Not only does the borrower need to qualify for the property, but the house also does. Say for example there are deficiencies that are not up to conventional loan appraisal requirements – the buyer may be responsible for fixing whatever deficiency is listed on the appraisal to qualify if the seller was not willing to pay.
This could have been found out earlier in the loan process with an inspection contingency – backing out may mean forfeiting the earnest money and fees spent already on the loan.
Also, if the property does not appraise, the buyer could be stuck with paying the difference. A lender will go off the of the lesser of the appraised value or purchase price – so any dollar amount short, means more out of pocket cost