1. Closing Costs
In a fast-paced sellers’ market it is extremely hard to be competitive. Being creative in this type of market usually means as a buyer you need your offer to be strong. Paying your own closing costs makes your offer more appealing to a seller. When you ask a seller to pay your closing costs you are reducing the net offer to the seller. This is just the first way we can make your offer stronger. It is recommended that you pay your own closing costs.
2. Earnest Money
When there are multiple offers on a house, what is there that you can do to set your offer apart from another offer? Earnest Money is one way. Earnest money is a good faith that you intend to execute the contract. It is also known as a good faith deposit. Earnest money protects the seller if the buyer backs out of the contract. It’s typically is around 1% of the sale price and is held in an escrow account until the deal is complete where it’s applied towards your loan. You can always increase this as it can be a determining factor when a seller considers an offer.
Being flexible in your closing date can be a great way to make your offer more attractive to a seller. Who is your seller? Is it a bank, they usually want to close quicker? Is it a traditional seller who needs time to move or find a new house? Being flexible and allowing the seller to find their next home can be a powerful tool.
What is an inspection contingency? You see this on the contract but what does it mean to you as a buyer or seller? Home inspections are used to provide an opportunity for a buyer to identify any major issues with a home prior to closing. I will always encourage you to have an inspection done. But, sometimes in a competitive sellers’ market not having an inspection contingency will strengthen your offer dramatically. Even if you choose to have an inspection there are contingencies you can put in place that allow the sellers to feel more comfortable with your offer over another offer.
5. Seller’s Net
How much do you offer? When you look at your offer from the seller’s perspective it’s the net amount that you concentrate on. For example, you offer $150,000 with the seller paying $5,000 in closing costs. That is a net offer to the seller for $145,000. The net is what you concentrate on as a seller so consider the net amount of your offer that includes seller paid closing costs.
6. Escalation Clause
What is an escalation clause? We would include an addendum to the Purchase Agreement stating, “Buyer will pay $1,000 over any other offer, not to exceed_____.” It can be any amount you’re comfortable with.
7. Personal Letter
Including a personal letter and a photo of yourself has great effect. You can include how much you love the home, a little bit about yourself, your family and how you will take care of the home and the neighborhood.
8. Mortgage Financing Contingency
On the Purchase Agreement you have the choice to check the box for the Earnest money to be refunded to the buyer or the seller. You can always elect to have the Earnest money refunded to seller. This would make the seller understand how confident you are in your financing. Also, the appraisal is also done as part of the mortgage financing, so if there was a short appraisal and the buyer nor seller could come to terms. The Earnest money could be lost due to appraisal/mortgage financing as well. Please ask questions if you have any.
9. Loan Types
Can you change your financing from FHA/DVA to Conventional? Contact your lender to find out for sure if you can use other loan program. Why would you do this? Government loans like FHA/DVA/USDA appraisers will consider the property condition, and value. Conventional loan is Value only. Why would this help you? Sellers minimizing their risk with a conventional loan vs government loan.
We can include timing on the offer. We would include on the Purchase Agreement some verbiage like “Seller to accept, reject or counter this purchase agreement by 5 PM on May 25, 2020.” This creates a little urgency in the offer and allows you to not wait on an offer for days. This is a little forceful, but sometimes effective.
11. HOA/Condo Rescission Period
In the situation where there is a condominium or townhouse with a HOA we use a Common Interest Community Modification/Waiver of Buyer’s Right of Rescission document with the offer. We can reduce the days from a 10-day to a 3-day time. Of course, this means you have 3 days instead of 10 to review the HOA documents but sometimes it can show the sellers you are serious about your offer.
12. Reputable Local Lender
We work with two different lenders and have a great relationship with them. Edge Home Financing and Fairway Independent Mortgage Corporation. We can request they reach out to the listing agent after an offer is submitted and let them know you have full financial approval versus a quick approval. Working with a reputable lender is often an extraordinarily strong factor in determining which offer is chosen.
13. Low Appraisal
Fear of a low appraisal. As a seller you hope for the highest offer to be made but if a low appraisal comes in the seller wants assurance you will be able to financially uphold your end of the agreement. We can add language into the Purchase Agreement that in the event of a low appraisal, the buyer agrees to pay up to $_____ above the appraised value. In the event of a difference greater than $_____, buyer and seller shall have the ability to renegotiate. If no agreement can be reached, buyer and seller shall sign a cancellation with earnest money refunded to the buyer. (This could also be altered to Seller)
14. Immediate Possession vs Flexible
Instead of checking the Immediate Possession box on the Purchase Agreement you can give the seller an extra day or two to move out. Sometimes this makes all the difference, and your agent can query the selling agent for if this is applicable.
15. Seller Home Warranty
Offer the sellers a “sellers home warranty”. This is a home warranty that costs $75 from the various home warranty companies. It covers the home for the sellers while the home is on the market (even after an offer is accepted, up until the closing date.) It gives a sense of security for the seller to know that during hot months the AC is covered, or during the winter the furnace is covered, etc. As a buyer you can purchase the warranty for the sellers, and they are given the security that they are “home free” with not having to worry about any mishaps during the transaction period.
16. Sellers Closing Costs
You can offer to pay some or all of the sellers closing costs. For a $350,000 home, a seller has approximately $2000 in state deed tax, settlement fee, recording fee, etc. Not to mention the commission amounts owed. This language can be added to the “other” blank lines of the PA. For example: Buyer to pay for $8000 of the seller’s closing costs at closing.
17. Include an “As Is Addendum”
This as is addendum can give the seller confidence that once the closing is complete, the sale will be final. Please know however, there is a risk of course for you to do this. You are limiting your ability to sue the seller post-closing for any disclosure issues at all. You should read the As is Addendum closely and consult with an attorney as needed. We are hearing this tip has helped some buyers win in multiple offers.
18. Down Payment for Loan
Sometimes putting a larger down payment down on a home can show the seller that you have liquid assets. This is important factor so they know you have capital to get the loan done.
19. Provide a Written Statement
Instead of doing a mortgage financing contingency, you could provide a written statement to the seller from your lender. This could give the seller assurance that your lender intends to have the clear to close earlier in the transaction. Discuss this option with your agent. Ask your agent for more information.