If you’re serious about buying a home, you probably know how difficult it can be. When the market is hot a buyer might make multiple offers before getting a signed contract. So how can you make your offer more attractive to home sellers in order to get your dream home the first time?
Home prices are soaring, inventory is low, and mortgage rates are rising. It’s been like the Wild West in the real estate world. Despite all that, making the right offer can still end in a new home.
It can be scary to write an offer to buy a house – but there’s no need to worry. While buying a home can be exciting, it’s essential that you also feel comfortable with this decision.
Making a good offer on a house can help you feel better about your finances. Plus it can help you get the home of your dreams!
Here are six tips that are sure to make your offer an attractive one.
1. Make Things Simple for the Seller
In addition to price, sellers often consider how easy your offer will be to close. For example, a cash offer without inspection or financing contingencies is very appealing to many sellers. Also, one that allows the seller to stay or “rent-back” for a period of time can help.
When you make an offer on a house, your purchase will likely be contingent on a number of things. For example, your offer might be contingent on getting financing or selling your current house.
The problem is, sellers don’t like contingencies because they add uncertainty and risk. Sellers prefer offers with as few contingencies as possible, so they can feel more certain the deal will go through.
In a more buyer-friendly market, buyers are able to put in a lot of contingencies and ask the seller for repairs or other changes to the home. You can make your offer competitive by making things easier for the seller.
Sellers may take a lower offer if it means less work or more certainty that the offer will go through no matter what.
By keeping your offer simple and free of unnecessary items, it will be easier for both you and the seller to understand and sign off on the transaction.
Another way to make things easy for the seller is to be flexible on closing dates and possession.
Some sellers, especially those with young children, need time to find a new home themselves. Others may want a quick closing date to get rid of their mortgage payments. Be flexible with these issues, and you’ll have an advantage over buyers who aren’t willing to budge.
2. Consider a Larger-Than-Average Earnest Money Deposit
Earnest money is a “good faith” deposit that shows you’re serious about buying the home.
Once you make an offer on a house, your real estate agent will submit a contract to the listing agent. This will include your earnest money deposit check. When your offer is accepted, your check will be deposited into an escrow account. If there is no contract or if your offer is rejected, then the check is returned to you.
To stand out from other buyers, make a larger-than-average deposit, this could boost your odds. Earnest money is often 1 or 2% of the total costs, though some buyers choose to go as high as 5 or 10%!
Other things being equal, sellers might prefer someone who makes a statement with their deposit over someone who doesn’t. Sellers might be inclined to choose a buyer who isn’t afraid to commit serious funds upfront.
Your real estate agent can help you determine how much earnest money is appropriate in your situation.
3. Show You Have the Funds to Buy
Getting pre-approved for a mortgage before you put in an offer can greatly increase your chances of being selected. That’s because sellers want assurance that a buyer will be able to follow through and close the deal.
Pre-approval means that a lender has stated, in writing, that you qualify for a mortgage loan. This loan is based on your current income and credit history. A pre-approval usually specifies a term, interest rate, and mortgage amount. (You can learn more about how to get pre-approved here!)
If you’re shopping for a home, consider getting pre-approval from a lender before making an offer on a house. Sellers will take your offer more seriously if you have proof that you can pay.
4. Find a Good Agent that Knows the Market
An important step in making a successful offer is to find a real estate agent who’s familiar with the area.
A good real estate agent can make or break your buying experience. You need someone who understands what homes are in your price range and can help you navigate the whole process.
The best agents know how to get you as much information as possible about the homes that interest you. They’ll also help you understand what price is reasonable, so your bid won’t be too high or too low.
An agent will also be able to help you find a home that meets your criteria and will know how much that home should cost. This can help when it comes time to make an offer on a home. Your agent will be able to advise you of the best price based on comparable sales in the area.
An expert agent may also recommend lawyers and other professionals who can help you through the closing process.
5. Make a Competitive Offer
This may be an obvious tip on how to make your home offer more attractive, but we have to say it. When it comes down to it, money talks. There are a lot of ways to make your offer stand out from the competition. But ultimately, sometimes the best solution is just to make a larger offer.
According to Fidelity.com, one of the most common mistakes that homebuyers make is to lowball their first offer.
Generally, a good offer is at least 95% of the asking price. In a hot seller’s market that can increase to 105-110% — seriously! According to Redfin.com, 2022 has had the most homes sold in recent history for over $100k over asking.
If you make a low offer, you’ll probably be overlooked by the seller. After all, sellers are looking for the best return on their investments as soon as possible.
If you’re serious about a house, consider making a competitive initial offer. You don’t want to offend a seller and risk losing any chance at a deal.
The problem with underbidding is that you may start negotiations in a hole. And if you go too far below the asking price, the seller may reject your bid outright. Or they may lose trust in you as a buyer.
In some markets, lowball offers can actually cause sellers to be offended and refuse to do business with you! Unless you have a significant advantage over other buyers (such as cash or an all-cash offer), lowballing might not even get you into the game.
6. Include an Escalation Clause
What is an escalation clause, you may ask? Something you’ve likely never heard of before entering a hot real estate market.
An escalation clause is something that can be written into an offer that states the prospective buyer is willing to raise their offer up to a stated limit in order to beat out a higher offer from another party.
For example, a buyer may put in an offer for $250,000 but say they are willing to go up to $300,000 if escalated. They also include the increments they want to increase by. So if the highest offer is $265,000 and they are increasing by increments of $5k, their new offer would be $270,000.
This can be a good option for a buyer hoping to purchase a house that is under their top budget. It allows them to put in what they feel is a good offer with some reassurance that they can still beat out other offers that come in, within reason.
No matter what, making an offer on a home is a big moment. It marks the point at which you go from being a potential buyer to being a strong contender.
A good offer can get your foot in the door and help you get the home of your dreams, especially if you follow our tips on how to make a home offer more attractive. But you may have competition on your hands if it’s a property with a lot of interest from other buyers. With these tips on how to make an offer more attractive, you’ll have the advantage when it comes to drawing the seller’s attention.
Ultimately, making an offer to buy a house can be stressful and competitive, but there are things you can do to make your offer more appealing. Just follow these guidelines on how to make an offer on a home. You’ll be moving into your dream home in no time!
Want to know more about how to make an offer on a house? Here are some of our most frequently asked questions!