When offering a contract on a home, a buyer wants to make their offer as attractive to the seller as possible. While offering to pay a higher price seems the obvious way to please the seller, it is not the only way. Here are five strategies you can apply to make your purchase offer stronger, and none of them involve a higher asking price.
- Put forth a significant amount of money for the earnest money deposit. It is a show of strong intent to go forward with the seller. Customary amount is 2-3% of the purchase price, yet many buyers think 1% is plenty. They call it earnest money for a reason. The buyer should not fear putting down earnest money. The contract makes it easy, or at least reasonable for a buyer to get their money back if the property does not appraise, the buyer is unable to get a loan, the property does not pass the buyers inspection, or if the seller pulls out of the deal to name a few. You are not throwing the money away, it goes into the monies used to buy the house.
- Work with the seller on a closing date that is most beneficial to the seller. If you have flexibility, use that to your advantage by co-operating with the seller on a date to close that helps them.
- Try to reduce any contingencies brought to the table. Paying for the home in cash removes any loan contingencies for the buyer, and that is why cash is king for a seller. If you have a home to sell before you can buy your new home (not unusual), the closer you are to completing your home selling process the better your contingency offer will be to the seller. It is best to have a contract in hand for the sale of your home, and know the closing date. Now you are bargaining from a position of strength instead of telling the new seller that you are going to put your home on the market within three weeks of your return home, once you complete your exhaustive search to find the right Realtor. Asking the seller to wait it out with you is not what the seller had in mind.
- Get pre-approved, not just pre-qualified for your loan. What is the difference? Pre-qualified means that a lender has reviewed your creditworthiness and believes you would be eligible for a loan based on the information you have provided to the lender. It is a snapshot of where you are and is a great place to start to build the relationship with your lender. Pre-approved is a deeper inspection into your credit report with a full review of your financial information. To be pre-approved you need to have started the application process and have paid the application fee. Now you will have a letter that tells the seller that you are approved for an exact amount of money, and to buy the home you will only need to have the property appraise. Most buyers do this shortly after they have a contract, but how much stronger is it to have this already done! Here is a good article from Realtor.com about the differences.
- Offer to buy the property “as-is”. This means you are telling the seller that you will not ask them to fix anything found in the inspection. Whoa! This one can be a little scary. This would be a tactic if you were in a multiple offer situation, with a property you believe you have to have, or felt confident about the history of the property. By no means does this mean you give up your right to an inspection, and you should go forward with your due diligence during your inspection period. Always reserve the right to cancel if the property is not what you thought it was, and the amount of money to make the repairs would exceed the amount of money you think you are saving by making this offer. Make sure that is made clear in the offer.