Making an offer on a house is your chance to show a seller you’re a serious buyer. You shouldn’t simply throw out a number and hope it’s accepted. Instead, take the time to write a clear purchase offer demonstrating how well you understand what the seller needs to reach a deal.
Here are five tips to help you submit your bid:
1. Prepare a Written Offer
According to NerdWallet, written offers are taken more seriously than verbal ones. In a carefully constructed written offer, you can highlight items that make you a strong buyer. For example, if you’re a first-time buyer without another house to sell, the seller may feel reassured about your level of commitment.
Financial ability is another key point of emphasis. If you’re preapproved for a mortgage, convey this information to the seller. You can even include a personal letter to the seller, presenting compelling reasons why they should consider your offer over others they may receive.
2. Be Competitive on Price
The first thing a seller will look at is usually your offer price. An offer that is too low may make it difficult for the seller to reasonably bridge the price gap in a counteroffer. In a competitive market, it may immediately eliminate you from the consideration pool. Constructing a competitive offer, supported by comparables and rationale, that you, as the buyer, feel good about, may be a good place to start. To find your competitive offer, consider examining recent comparable sales (sales within the past 6 months is a good place to start) in that neighborhood to determine price movement for the area. This doesn’t mean your offer needs to be at or above asking price, it simply means it should be competitive based on your analysis of that house in that particular market.
Understand that if the house hasn’t been on the market long, the seller may want to wait for additional offers closer to asking price. Alternatively, if the house has been on the market longer than average, there may be more opportunity for price negotiation. Understanding these market and property details can help in crafting an offer that you feel confident about.
3. Present a High Down Payment
To better position your offer, you’ll want to signal to sellers you’re ready and able to commit to seeing the home purchase through to the end. One way that you may accomplish this is to offer a higher down payment than the standard (or than other offers on the table). Down payments typically range from 3-20%, depending on the market. In competitve markets, offers which include higher down payments are often seen as stronger due to less risk of the deal falling through due to financing. Check out these creative ways to save for a down payment as you prepare for your home purchase.
4. Consider Limiting Contingencies
If you’re close on price but need an extra incentive to sway the seller, closely study the contingencies of your offer. If possible, find new ways to sweeten the deal. For example, some people may choose to eliminate the financing contingency to make a stronger offer. While this comes with greater risk to you as the buyer, since you risk losing your deposit should your financing fall through, it may be what sets your offer apart from others in a competitive market.
As Bankrate suggests, carefully examine your financial situation and risk tolerance before removing a contingency. However, you should understand that offers with fewer contingencies are looked upon more favorably.
5. Communicate With the Seller
Don’t be afraid to ask questions and communicate with the seller. They may not expect to receive their list price, but they may have a specific number in mind or a preferred settlement date, which you might be able to fit into your own schedule. As a buyer, you may have concerns about the house, preventing you from submitting a higher offer. Discussing your concerns with the seller may provide enough comfort for you to offer a more competitive price – or not.
To add to a strong offer, consider writing a carefully thought-out offer detailing the reasons why you should be the new owner of a home.
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