How to write a Strong Offer in a Competitive Market
I've been working with a couple for about 8 months now. Let's call them Lorraine and Ted (not their real names). Lorraine, Ted and I met last August and talked about their goals for home ownership. They were renting in Rhode Island, and they had some flexibility with their lease if they found the perfect place- their lease was up in April, so they had plenty of time to shop around, get familiar with the market, and decide where the best place to settle down would be.
Fast forward 8 months, several open houses, private showings, and a variety of towns considered later, we've written 3 offers and all have been denied. Not to mention, they have agreed with their landlord to go month to month with the hopes of finding something soon!
No longer are the days where writing an offer for close to the list price will get you a signature on the dotted line. We got creative, coming up with minimal contingencies, and making sure that we were coming in over list price for all offers.
After a meeting of the minds, and really talking about what can make them stronger buyers, here's what Lorraine and Ted learned.
*A pre-approval will always trump a pre-qual, and not all loan programs are created equal (more on that shortly).
*Sometimes you have to really give your highest and best the first time. I'm seeing a lot of offers being written with escalation clauses (the buyer agrees to pay X over the highest offer up to a given dollar amount). I hate escalation clauses. It's not your highest and best- it's someone else's highest with your amount just added on.
*Waiving a home inspection is one route... usually not the best route, but it is a tactic being used by buyers to get an offer accepted. Alternatively, you could write in that the home inspection is for informational purposes only.
*Not having a home to sell usually puts you above those that do have a home to sell (that's a completely separate blog).
*Sometimes those personalized letters help- I've been seeing a lot of buyers include photos of themselves along with the offer as well. I can't wait for the offer with a selfie taken in front of the listing. If you're reading this, and you are shopping one of my listings, please, please, PLEASE include this in your offer. You will make my day!
*Make sure you read the offer, understand the dates, dollars and language.
So here's where Lorraine and Ted are at today... we are about to sign the P&S. They stopped by an open house, and they fell in love- along with at least 8 other interested parties- we were one of 9 offers presented to the seller. Upon writing up the offer and sending it over, the listing agent called me.
They had a higher offer- was this my client's BEST offer?
Yes, we wrote the offer up for $15k over the list price, with nothing to sell, and they have a pre-approval for a Mass Housing loan (a great conventional product), Bank of Canton has ensured that they have reviewed their documents and pulled their credit. My buyers can be flexible with the closing date since they are still renting and the sellers need to find housing.
I followed up with my buyers to let them know that we were not the highest, but that I wouldn't have any more info until the following day. Disappointed, they went back to the MLS and asked to see a few other homes in the interim.
The next day, the listing agent called me again. "The seller's really appreciated the letter presented and the offer. To help offset the request for the closing costs, could the buyers come up just a little bit and meet in the middle?"
Shocked and surprised, I asked what happened to the higher offer. "Those buyers were going FHA." The home is being sold "As Is" and any inspection is for informational purposes only. The seller was nervous that the FHA appraiser would require work to be done to sell the home (adding banisters to the basement stairway, making sure that there is no chipping paint, and adding handrails to the entrance way). Literally, what saved us was the type of loan my buyers had qualified for.
Despite the fact that the home inspection was for informational purposes only, the buyers had their home inspection last week. A few things did come up- but most of it was normal home owner weekend projects and things that the buyers were comfortable with.
So today, while the attorneys are going back and forth finalizing their verbiage for the P&S, we wait to sign, and remain grateful that we finally have an accepted offer, and have gotten through the toughest part! Being supportive, and helping to encourage my buyers after offers were denied, was not always easy, but something that I take great pride in doing. Understanding the market, the process and trusting my instincts helps me to guide my clients (both buyers and sellers) to the best possible outcome for them.
If you're thinking of buying a home, let's talk more about how to make sure that you're in the best position as a buyer. If you're thinking of selling, let's talk more about what a strong offer looks like and how to make sure your home is being marketed to your ideal buyer!