The highest price may get the attention of a seller, but there are many other things to consider when writing an offer. I specialize in helping my clients understand all of the components that go into an offer package— not just the price. Here are four tips we can discuss when it comes time to write an offer on your dream home.
1. Cash is King, but solid financing is Queen
Of course, sellers love all-cash offers because there’s no chance of financing issues popping up during the escrow process. But for those of us who need a mortgage, we must demonstrate solid financing. The first step is to get pre-approved for a home loan, and then to become fully underwritten. This is the strongest position you can be in when making an offer because you have already been vetted by the lender and the likelihood of a surprise about your financial fitness is far less.
Consider the local reputation of your lender. Sellers often do not care about the lender’s reputation, but the listing agent will surely know. Some lenders are easy to get ahold of should questions arise, and others never pick up the phone. Local lenders are preferred because not only do they know the local market, but they will hire local appraisers, which is mission critical in a competitive market like ours.
2. Earnest Money Shows Intent
Earnest money is a deposit generally held in escrow by a title company. If the purchase goes through, it is applied to the down payment and closing costs—if the sale falls through, the buyer may lose some or all of that deposit. Buyers can show sellers that they’re serious about their offer and have “skin in the game” by putting down a large earnest money deposit. Earnest money deposit is typically 3% of the sale price, but offering more than that can help demonstrate to the buyer that you are serious about the property. Doing so does not come without risk, of course, so work with an agent who can advise on each specific scenario.
3. Drop or Reduce Contingencies
Contingencies are clauses that allow one or both parties to back out of the agreement if certain conditions are not met. These contingencies appear in the purchase agreement and must be accepted by both the buyer and seller to be legally binding.
Because contingencies increase the likelihood that a sale will fall through, they can make an offer less desirable in the eyes of a seller. The more contingencies that are included, the weaker the offer. In our East Bay real estate market it is common for buyers to waive as many contingencies as possible.
Common contingencies include:
- Financing: A financing contingency gives the buyer a window of time in which to secure a mortgage.
- Appraisal: Most lenders will only offer a mortgage on a home up to a certain percentage of the appraised value.
- Inspection: An inspection contingency gives the buyer the opportunity to have the home professionally inspected for issues with the structure, wiring, plumbing, etc.
- Home sale: Some buyers cannot afford to purchase a new home until they sell their previous one.
Once again, doing so is not without risk. I can help you to assess how competitive and necessary it may be to waive contingencies in your offer, and which ones will be most relevant.
4. Offer a Flexible Closing Date or Lease Back
People sell their homes for a wide variety of reasons, and flexible terms that work with their personal situations can sometimes make all the difference. For example, if a seller is in the process of planning a significant move, they may prefer a longer closing timeline that gives them time to find housing in their new location. Work with your agent to determine what the seller’s motivations for selling may be, and ask if they would be motivated by a flexible close or move-in date.
Flexible closing dates can provide a powerful advantage for first-time homebuyers. If you have a month-to-month or easily transferable lease, for example, you may be able to offer a more flexible timeline than a buyer who is simultaneously selling their existing home.
Ready to work with a skilled buyer’s agent to write your next offer?
As a top producing agent with 20+ years of experience in the East Bay, I have helped hundreds of clients showcase and maximize the sale of their homes in the Greater San Francisco Bay Area and the counties of Alameda and Contra Costa, and my experience as a former appraiser allows me to help my clients understand the market. If you have any questions, I am here to be a resource for you.