Offers that Win: How to Bid on Your New Home
One of the most apprehensive parts of the process of buying a home has to be putting in that bid. So many questions go through your mind after the offer is made. Did we price things correctly? Have we just lost our shot at this home? Will the seller be insulted? Are we competitive with the other families who have put an offer in?
Quieting these voices is never easy, but you can be certain your offer is solid if you have followed these tips for making a competitive offer on a home. Believe it or not, the magic of a winning offer is not always just about the money.
Now is not the time to establish your presence as the “Alpha Home Buyer” who makes cut-throat deals. Do you want to get the best deal possible? Of course! But if your attitude is off-putting to the seller, you might find your offer rejected even if it was a good one. And that is because homes are a very personal thing to most people.
Someone is selling the place in which they may have raised children, grown-up, made good memories, etc. The seller not only has their own emotional connection to the property but no doubt their own list of “must-haves” in a negotiation. Ask good questions of your seller without prying into their privacy.
Why are they selling this home? Can you get a sense of how quickly they want to move? If your offer reflects the fact that you are accommodating as much of what the seller wants as possible, that will be noticed and appreciated.
Keep it Simple
Homebuyers often worry about the “what-ifs” in negotiation and want to throw a lot of contingencies into the deal. Home contingencies do have a place in real estate, and that is typically to reduce risk.
The problem is, too many contingencies can make the seller think you are trying to litigate your way into their home. Sometimes putting in contingencies that favor the seller can improve the chances that they will accept your offer.
Again, this comes back to relationship building. If you have found out, for example, that the seller has not yet found a place to move but is actively seeking a new place, having a flexible closing date is friendlier to the seller.
Let your real estate agent offer good guidance on what, if any, contingencies make good sense. Otherwise, don’t clutter up your own deal. If you must make contingencies, keep the timeframe short and sweet.
Establish That You are a Secure Deal
Too often, a deal falls through because the home buyer has done none of the upfront work needed to actually secure a loan in the first place. The home buyer could also discover the unpleasant reality that they do qualify for a loan – just not as much as they will need for this particular deal.
When the deal falls apart, not only are you disappointed but the seller’s time has been wasted and they may have missed out on a better deal as well. If you can prove upfront that you are financially in a position to make the deal, the seller will be more predisposed to work it out with you.
Take the time to get your financing in order first. Get pre-approval from a lender and know your budget. You shouldn’t be finding out about your FICO score after you’ve toured the home.
What Can You do to Sweeten the Deal?
If you cannot meet the price the seller is asking, look for other ways you can enhance your offer. Many sellers will respond favorably to an offer to handle fees or other closing costs. If a seller is paying 6% in closing costs and agent commissions, that’s a lot of money on the table.
If you are able to roll your own closing costs into the loan itself, which many lenders will allow you to do, then assuming some of these fees and costs becomes much easier to manage. Earnest money is another way you can stand out in the deal.
Earnest money is a form of the deposit that lets the owner know you are serious about the purchase and not just trying to hold up the line to keep your home buying options open. If you can put more earnest money down, the seller will understand that you mean business.
When it comes right down to it, even if you have a great offer on the table, you’ll still need to have a little bit of luck to close the deal. Sometimes there are factors outside of your influence that cause a seller to reject the offer. Sometimes the timing just isn’t right.
When a deal is rejected, particularly for a home you really love and can see yourself moving into, the emotional shock can be heartbreaking. However, if you are prepared, you can walk away knowing you did your best and put the right offer on the table.
Ultimately, if you have done your homework and made your offer following these guidelines - if the offer is rejected, you can have peace of mind that the deal was not right for you.