Real estate, in general, has cooled off in recent years after several years of rebounding from the financial crisis, but there are still some very hot real estate markets in the United States. Plus, inventory remains at a historic low in many places, which has led to an abundance of bidding wars among would-be homebuyers.
If you're worried about losing your dream home in a multiple-offer situation, here are seven tips that can help make your offer stand out above the competition.
1. Show proof that you can afford the home
If you want to look like a serious buyer, the first thing you need to do is show the seller that you can actually close on the home. This means obtaining a mortgage preapproval (not just a pre-qualification) letter if you plan to apply for a mortgage. If you're a cash buyer, it's a good idea to submit proof of funds along with your offer.
2. Put your money where your mouth is
If you haven't gone through the homebuying process before, an earnest deposit is money that you submit to the seller along with your offer to show that you're serious about buying the home. If you don't fulfill your obligations under the contract, the money goes to the seller.
Typical earnest payments are in the $500 to $1,000 range in lower-cost markets but can be as much as $5,000 to $10,000 in higher-cost areas. And to be clear, this is money that eventually gets applied toward your down payment and closing costs. If you want to make your offer stronger, consider offering more of an earnest deposit than is expected in your local market -- your real estate agent can help you with this.
As a personal example, when my wife and I bought our first home, the property was being sold as part of an estate sale and was an excellent deal, meaning that there were multiple offers. Some of them were all-cash offers, which we didn't have the means to compete with. So, we decided that putting a large amount of money on the table right away would help our offer stand out.
While an earnest deposit of $2,000 or so would have been in line with expectations, we wrote a check for $10,000 to accompany our preapproval letter and full-listing offer, just to show how serious we were. And we got the house.
3. Offer to close quickly
If you're planning to obtain a mortgage, getting preapproved can certainly speed up the process, but your lender may still require a certain amount of time -- say, 30 days -- to close.
However, it's still a good idea to include the shortest realistic closing time frame you can. If a seller gets three offers, two with 45-day closes and yours with a 30-day close, it puts you at a nice advantage.
4. Don't take forever to inspect
Standard due diligence (inspection) periods vary -- in my local market, a 10-day period is standard -- but you can make your offer stronger by speeding up the process. For example, maybe you have a home inspector who could come out right away after your contract is accepted.
Here's the point: Sellers don't want to wait for weeks to find out whether you're going to accept the property in its current state or ask for repairs or concessions. If your offer contains an inspection period that's half as long as a competing offer's, that could be a very attractive feature to sellers.
5. Think about your contingencies
It's typically not a great idea to waive the financing contingency unless you'd be willing to pay cash (or lose your earnest deposit) if something goes wrong in the mortgage approval process.
However, you might be able to boost your offer's strength by getting rid of the appraisal contingency. Basically, if you do this, you're agreeing to come out of pocket for the difference if the home doesn't appraise for your offer price. However, if you really want the home and have some financial flexibility, it could be a smart way to make your offer stand out.
6. Make your first offer your strongest
If you find the perfect home for you, or you live in a hot real estate market where most inventory sells within just a few days of being listed, it's not the time to try to score a bargain or lowball the sellers.
In other words, if a home is listed for $300,000, don't offer $250,000 "just to see what happens." If homes are selling for the full asking price or close to it in your area, you'll need to make a strong offer to show the sellers that you're serious. In many cases, if sellers have received (or expect to receive) multiple offers, lowball offers aren't even countered -- just flat-out rejected.
7. Show the sellers why you are the best buyer for their home
As a final thought, if you've done all the other things on the list but are worried about losing the deal simply because your real estate market is on fire, it could help to make your offer personal.
Here's one thing to keep in mind: Sellers, especially if they've lived in a place for a while, typically have a sentimental attachment to their home. While they certainly want to get top dollar for the property, they often also want to know that their home is being transferred to good hands. Including a personal note with your offer about how the home would be a perfect place for your children to grow up, how much you love some of the design elements they incorporated into the kitchen, or something else detailing why this would be the perfect home for you could go a long way.
The right offer can make all the difference
Inventory remains low throughout much of the United States, and with mortgage rates falling to near-record lows in recent weeks, competition for homes could heat up even more. A smartly constructed offer can make you stand out as a buyer and give you the best chance at getting your dream home under contract.