In the current rising interest market, with a low inventory of houses, it’s common for houses to get multiple offers. As a potential buyer, how do you make your offer stand out? The answer isn’t always to make sure you have the highest offer. Read on to learn tips from an experienced Realtor and a mortgage loan originator.
Make A Clean Offer
In any real estate market, making a clean offer is one of the best ways to catch a seller’s attention. A clean offer is an offer with few contingencies, which can include inspection, appraisal, financing, and the sale of another property.
With few contingencies, a seller can rest easy knowing that the sale will likely go through as expected. The more contingencies tied to an offer, the greater the risk for the seller as they wait for the buyer to satisfy each condition.
It’s important to note that not all contingencies can or should be left out of an offer. For example, an inspection contingency is valuable to ensure the safety and integrity of the property. Some sellers may have a pre-list inspection done on the property, which could make a buyer more comfortable leaving an inspection contingency out of the offer.
If you’re planning to finance the property, an appraisal contingency will likely be required by the lender. An appraisal can also protect a buyer from overpaying for a home that may not be worth the asking price.
If you have another property to sell, you could consider a bridge loan so that you can remove this from your contingencies. Bridge loans are a type of short-term financing often used in the real estate industry to bridge the gap between the purchase of a new property and the sale of an existing one.
Unlike mortgages or other long-term loans, bridge loans typically have shorter repayment terms and usually have higher fees and interest rates. When considering a bridge loan, be sure to discuss your financial situation, including your ability to make monthly payments on the loan and other debts, with an experienced lender.
Offer Non-Refundable Earnest Money
Non-refundable earnest money, a sum of money put forward by the buyer to demonstrate how serious they are about purchasing the property, is another area that can help make a buyer stand out in a multiple-offer situation. While earnest money is often required in an offer, a buyer can stand out by offering more than the typical 1% to 5% of the purchase price of the property.
It’s important for a buyer to carefully consider how much they are willing to offer in earnest money. If a buyer backs out of the deal for reasons beyond the agreed-upon contingencies, they may lose the earnest money deposit.
Write An Escalation Clause Into Your Offer
When working with your lender to get pre-approved, make sure to discuss how much you can comfortably afford to offer. If you have some wiggle room between your planned offer price and the maximum amount you can comfortably afford, you could consider adding an escalation clause to your offer. Escalation clauses in real estate offers allow potential buyers to increase their offer up to a certain amount if another buyer submits a higher bid.
When using an escalation clause, buyers specify both the initial offer price and the amount by which they are willing to increase their offer in the event of a competing bid. The clause typically includes a cap, which is the maximum price the buyer is willing to pay. If another buyer submits a higher offer, the escalation clause will automatically increase the price of the initial offer by the specified amount up to the stated cap.
There are a few things for buyers to keep in mind when using an escalation clause. First, it is important to ensure that the clause is legal in their state and does not violate any rules or regulations. Buyers should also be careful not to set their cap too high, as they may end up paying more than the property is worth. Finally, buyers need to work with a real estate agent who is experienced in using escalation clauses to ensure that their offer is competitive and has the best chance of being accepted.
Working with your Realtor and lender, you can strengthen your offer and make it more attractive in a multiple-offer situation. Commitment and flexibility are key, along with understanding what you can afford before making an offer. Be sure to talk to a mortgage loan originator about what tools you can use to make your offer attractive to a seller and still comfortable with your financial situation.
For informational purposes only. Heritage Bank NA is an Equal Housing Lender. All loans are subject to credit approval.
