Getting Your Offer Accepted

As Bob Dylan, said, “The times, they are changin’.” Not too long ago, advice on this topic wouldn’t have been necessary. Since the beginning of this year, however, one of the biggest challenges buyers have faced is wrapping their heads around the fact that they don’t call the shots anymore. Inventory is way down across the board, and for the first time in a long time there are more buyers than sellers. So landing a great deal takes a bit more effort than it has in recent years.

As a buyer, there are certain things you seek in a home. Your needs are unique, but the general characteristics that make a home appealing within a particular area or price range are almost universal amongst buyers. That means you’ve got competition. More and more, well-priced listings are attracting multiple offers within days after hitting the market, and they’re selling for sometimes far in excess of the seller’s asking price. Even without multiple offers on the table, sellers of well-priced listings know if any given offer isn’t all that attractive, they can simply wait for the next one which should be arriving shortly. The seller has their pick of buyers, and it’s up to you to convince them you’re the one!

What sellers are looking for is NOT just the highest possible price, though – they’re looking for the best possible price with the highest likelihood of closing. So what can you do to make your offer more attractive than others?

 Price. Although price isn’t the only concern, it’s still the primary one. Offer high enough, and the other considerations fade out as dollar signs enter the sellers’ eyes.

Financing. Plain and simple, cash is king. Sellers frequently accept lower cash offers because their likelihood of closing is much higher than that of a financed offer. If you don’t have enough cash available, consider such creative methods as 401(k) loans, private mortgages (i.e. to a family member), or for investors, hard money. If you must finance, then use the strongest financing you can qualify for. In order, that would be:

a.       Conventional with 20% or more down

b.      Conventional with less than 20% down

c.       FHA with 10% or more down

d.      FHA with less than 10% down

e.       Rehab loan, such as FHA 203(k)

           Time. Typically, sellers list their homes when they’re ready to sell them. (Duh, right?) So the faster you can close, the faster they can move on with their lives. If you’re buying cash, you can probably close within two weeks. With conventional financing you can shoot for 30 days, and with FHA you’re looking at 30-45. Rehab loans take a minimum of 60 days and can easily drag on for much longer.

      Contingencies. The fewer contingencies, the better. Attorney review and inspection contingencies are built into the contract, but that doesn’t mean they can’t be waived/eliminated. If you must finance the purchase, then you must include a financing contingency – there’s no way around that. A sale of home contingency (you have to sell your house in order to buy the next one) significantly weakens your offer by extending the time frame and introducing a large amount of uncertainty. If you’re competing with other offers and you are contingent-on-sale, you’re very unlikely to win.

       Incentives. Additional personal property, closing cost credits, seller-paid points, home warranties, high tax prorations, pre-closing possession… These are just some of the “perks” buyers can, and frequently have, requested when making offers over the last few years. On top of nickel-and-diming the sellers with these items, they complicate the presentation of the offer. Author Les Brown said, “Shoot for moon. Even if you miss, you’ll land among the stars.” Sorry Les, but in this market if you shoot for the moon as a buyer you’ll likely just end up by yourself in outer space. Keep the perks to a minimum if you want the best price, or to get the house at all.

      Heart strings. Most sellers are human beings, and most human beings have emotions. In some instances, it can work in your favor to submit a “personal letter” to the seller to demonstrate why you love their home and how you’ll take great care of it for many years. When to include a personal letter is a topic for another day!

Here’s the rule of negotiations, of which I’m sure Yogi Berra would approve: Everything other than price costs money. Handing a briefcase full of cash to the seller on the spot is the surest, fastest way to complete the sale, and if you could do that, you would get the house for the absolute lowest price possible (although it’s probably not a great idea for other reasons). Anything beyond that – each extra step, each contingency, each week that must pass before closing, each nugget of uncertainty – must be accompanied by a higher price to compensate the seller for the additional risk. On the opposite end of the spectrum from the briefcase-full-of-cash buyer is the buyer who makes an offer contingent-on-sale, financed with a 203(k) rehab loan, a 90-day closing, and throw in the 1976 Eldorado that’s in the garage. This buyer would have to pay dearly in order for their offer to even be considered.

Keep these considerations in mind when you’re thinking about how to structure an offer. Better yet, hire an agent who can advise you as to how much you can ask for on any given listing while still getting a house you’ll love for the best possible price.