3. Offer An All-Cash Deal
Can you buy the home with cash? If you don’t need to apply for a mortgage, your offer will usually jump to the top of the pile. The seller doesn’t need to worry about you running into problems with financing. But don’t worry. You may be able to use delayed financing after you close on the sale to help you regain access to the cash you have in the home.
A cash sale saves time for everyone and can close much sooner because there’s no underwriting process to wait on. If the seller wants to sell their home as soon as possible, a cash offer can be very powerful.
4. Drop The Contingencies
Sellers don’t want their homes to sit on the housing market forever. They also don’t want to have to relist their home because a contingency resulted in the sale falling through. You can make your offer stronger by dropping your contingencies. Contingencies are specific conditions that must be met before the sale can be completed.
Example: Dropping The Appraisal Contingency
Let’s say you have a contingency in your offer letter that says the home must meet or exceed your offered price during the appraisal. This is because mortgage companies won’t lend out more money than the home is worth. You’ll still need the appraisal because your lender requires it.
By dropping the appraisal contingency, however, you’re telling the seller you’re willing and able to pay an additional amount in cash at closing if the home appraises for less than the agreed-upon purchase price. As an example, you may be willing to pay up to $5,000 extra at closing to make up for the low appraisal. This allows you to fill the gap between the appraised value and the purchase price.
Remember Your Budget
When debating whether to drop contingencies from your offer, it’s important to be careful. Even if you’re paying cash for the difference between the appraised value and loan amount, you’ll probably still need to pay at least part of the closing costs, depending on whether seller concessions are still on the table. You’ll definitely need to have enough cash to cover your down payment.
Otherwise, you’ll end up either having to walk away without your earnest money deposit or putting less down on the house. This might force you into buying private mortgage insurance (PMI).
5. Skip The Inspection
Most offer letters include a contingency that says you can cancel the sale if a home inspection reveals major problems with the property. Although you can make your offer stronger by agreeing to skip the inspection contingency, you’ll be taking an enormous risk.
Unless you know for a fact that the property has been properly maintained – which might be the case if you’re buying from a family member or close friend – you might be purchasing a house whose great looks hide some urgent and expensive repairs.
Items To Check Before Skipping An Inspection
If you feel able to shoulder the potential risk and want to make as clean of an offer as possible, do a thorough walkthrough of the home. Here are some things to mark off your walk-through checklist before submitting your offer:
- All lights and outlets in each room work.
- Toilets, showers and faucets aren’t leaking or emitting foul odors.
- All home appliances are functioning as they should.
- Gutters are clean, secure and are directing water away from the home.
- The garage door closes and opens correctly.
- The home security system arms and disarms as it should.
- There are no cracks or other issues with the foundation.
You can also ask the homeowner for repair and home improvement records, as well as any home warranties for work completed. These documents will give you a closer look at the condition of the home and how well the owners have been taking care of it.
6. Be Available
Another key to remaining competitive on a home sale is to keep yourself available. Leave your information with the seller and invite them to contact you or your agent with any questions about your offer.
Respond to any inquiries quickly and have your real estate agent or REALTOR® regularly check in with the listing agent to monitor the seller’s progress. Be as flexible as possible and stay on the seller’s radar. When they decide, you’ll want to be the first to know.
Again, to make sure you’re available from the very beginning of the process, make sure you get initial approval so you’re able to put in an offer as soon as your dream home hits the real estate market.
7. Make A Backup Offer
What if your dream home’s seller accepts a contingent offer from another buyer? Likely, it means it’s time to move on, but if your heart is set on a property, here are two strategies you can use to try to beat another offer. Who knows? You may get lucky.
If There’s A Kick-Out Clause
First, have your real estate agent find out if the seller is still accepting offers while the sale is pending and if they included a kick-out clause in the sales contract. A kick-out clause allows a seller to continue accepting offers while the potential buyer awaits the home inspection, appraisal or financing needed to close.
If the seller gets a better offer, and depending on how the offer is structured, the kick-out clause allows them to notify the first potential buyer and encourage them to do one of the following:
- Match the competing offer or exceed it (the escalation clause).
- Agree to waive all contingencies in the contract.
- Agree to waive some contingencies.
If There’s No Kick-Out Clause
If no kick-out clause is included in the sales contract, all you can do is have your real estate agent keep an eye on the contingent or pending sales process. It’s possible that buyers will back out before the closing date after reading the home inspection report or they won’t be able to get the financing they need.
If your need for a new home isn’t urgent, and you love that house, you could wait it out. Just know that most sales contracts successfully close. Should the sale fall through, be ready to act and make an offer that matches or exceeds the last offer. Otherwise, the seller may decide to simply put the home back on the market.
Know What To Include In Your Backup Offer
If you’re serious about proposing a backup offer, make it worth the sellers’ time and effort to invoke the kick-out clause. Make the offer price tantalizing, the earnest deposit large and the contract as contingent-free as possible.
Keep in mind that while you are awaiting a resolution between the sellers and the first potential buyers, you won’t be able to make an offer on another home. If you’re in the middle of house hunting in a competitive market, this may cause you to miss another great opportunity.
