Show Your Offer Muscles

In a fast and competitive market, buyers need to craft competitive offers to stand out from the crowd.  Below, I'll list some of the terms that already give you a leg up over other buyers and detail additional options available to you.

1. Use a local lender

Local lenders tend to have a better record of on time closings and regular communication, so sellers and listing agents often favor a buyer using a local lender over a buyer using a big bank or a national lender. 

2. Consider a conventional loan

In reality, a conventional, FHA, and VA appraisal on the same property should result in the same appraised value.  However, sellers and listing agents are sometimes skittish about accepting VA or FHA loans over conventional loans, so conventional loans can top VA or FHA loans in multiple offer situations. 

3. Offer a higher than average Earnest Money Deposit

Even in this tough market, many buyers still offer $1,000-2,000 for their earnest money deposit.  An earnest money deposit of 1-2% of the purchase price is much more enticing to sellers.  It shows the seller that a buyer is serious about the purchase and financially stable enough to put that money down within 48 hours of signing a contract. 

4. Make a hearty downpayment & pony up the proof

A solid downpayment shows a seller that you're financially stable and have cash on hand.  It's a way to make them feel good about your ability to qualify for a loan and follow through with buying the house.  Any amount down is better than a zero, but buyers putting 10-20% (or more) down will have a decent advantage over competition. Be prepared to pony up the proof by providing a recent statement showing that you do, in fact, have the money, but please, please redact your account and routing numbers!

5. Be prepared to pay over the list price

Sellers and listing agents can't keep up with the lack of supply and high demand, so listing prices are often below what a home eventually sells for.  How much can you expect to pay over list price?  Well, that depends on the property and its unique features, the neighborhood and it's historical appreciation, and the most recent comparable sales.  I do extensive additional research on any property before writing an offer to help the buyer make smart and informed decisions on each term. 

6. Offer to pay a small portion over the appraised value

Appraisals are on the mind. Offering to pay any amount (even $2,000 to $5,000) in cash over the appraised value can ease a seller's mind and offer them some cushion if the appraisal comes in below the contract price.  However, think carefully about this option.  Paying a few thousand over the appraised value can be ok if you plan on owning the home for quite a while or if it's your forever home, but, if you plan on selling the home in 3-5 years, paying over the appraised value may not be a sound financial decision. 

7. Shorten your inspection deadline

The standard deadline for completing a home inspection and requesting maintenance is 10 days. That's almost unheard of in this market.  Successful buyers are shortening their deadline to 3, 4, or 5 days and shortening their response times.  A shortened inspection deadline moves the transaction past the inspection contingency quickly and is favored by sellers.

8. Offer a pass or fail home inspection

The pass or fail home inspection means that the buyer will have an inspection and it will either 1) PASS...meaning the buyer will continue with the sale without requesting any repairs or 2) FAIL...meaning buyer will terminate the transaction due to inspection and walk away.  This can work for some properties and some situations. 

9. Waive the home inspection

Ugh, as a general rule, I hate this option. It means the buyer will not have a home inspection at all, and it's risky.  There's so much that isn't visible for regular showings and tours, and the home inspection is your opportunity to learn about the house and get an idea of the repairs and maintenance that it needs.