What can a Buyer do in a heated real estate market where multiple offers are common? How can you make your offer standout? Price is always paramount. If you make an offer above what the comparable sales support, you are entering into the realm of an emotional purchase. What if you can’t or won’t make a crazy high offer? There are several ways to increase the competitiveness of your offer. If possible, include all of these elements:
Increased Deposits – Put down $2,500 or $5,000 with the Offer rather than the standard $1,000. This helps to signify you are serious. If you back out for a reason not covered by a contingency, you are exposed to an amount greater than the standard $1,000. Or be really bold; put down 1% with the Offer. At the Purchase & Sale (P&S), consider putting down 10% versus the standard 5%.
Tight Dates – Apply for the mortgage the day the offer is accepted. Standard practice is to wait until the day of the P&S or within three days of signing the P&S. Don’t wait. Again, this will signify you are serious. Downside is that if you decide to back out you might incur some lending fees.
Expedited Mortgage Commitment Date – I never suggest Buyers waive the mortgage contingency. There is another option. Some lenders can pre-underwrite ahead of time and then close in about 14 days. This can be helpful with a vacant house. More importantly, you can get your mortgage commitment much earlier. If you can get the mortgage commitment 7 to 10 days after the P&S, almost a month before other competing offers, you have something other offers won’t. Agents often consider a house as good as sold at the mortgage commitment. Check with your lender before you include any dates in an offer. Do remember, the longer the period of time between the mortgage commitment and the closing has more risk on the Buyer.
Inspection – I never suggest buyers waive the inspection. But, the current market is often forcing Buyers to make this choice to get their offer accepted. If you decide to waive the inspection your offer will stand out, but that decision does come with the risk of not knowing what you are buying. If you can’t take that leap, what can you do? If you can get an idea on the age/condition of the furnace, hot water heater, air conditioning unit, roof, windows, etc. you may want to waive the 1st $10,000 or $20,000 (or a number you are comfortable with) of inspection items. Spend ample time at the Open House or Showing. See if there are manufacture dates on the furnace, hot water heater, windows, etc. Bring a flashlight and poke around in the basement and attic. Look for cracks in the foundation, signs of current or past water penetration. Outside, is there any rotted wood? Visit the Town Hall and review the file for the home at the Building Department. This all helps to make a more educated guess as to the condition of the property. If you are in a multiple offer situation, the Seller is unlikely to fix anything or offer a concession unless it is a major structural / mechanical / safety issue. Thus, waiving the 1st $10,000 or $20,000 really does not matter, but it sends an important message to the Seller that you will not use the Inspection to get the price back down. And, it allows you to back out if the issues with the home are insurmountable. A good book to read is the Confident House Hunter by Dylan Chalk.
Appraisal Clause – There can be concern – rightfully so – that when bidding wars occur, homes will not appraise for the purchase price. If you have the cash, include a clause that if the house appraises for less than the offer amount, but more than the list price, the buyer will make up the difference to keep the loan to value ratio intact.
While price matters most of the time, sometimes having an offer with other elements that are enticing can make the difference.
Doug McNeilly is a REALTOR® with Coldwell Banker Residential Brokerage in Wayland, Massachusetts. He specializes in Wayland, Sudbury and the Greater Boston Metrowest Area.