Buying a home isn’t always easy. It’s a decision that should be taken seriously. You’re likely going to live in that home for a significant number of years, so it isn’t something you want to do on a whim.
Things can be even more complicated in a seller’s market. Sellers have more freedom when it comes to accepting offers. Sometimes they may receive multiple offers on their property at the same time. They have to take a little time to review those offers before selecting one of them to accept.
If you’re one of several interested parties making an offer on a home, here are a few things that you can do to stand out from the crowd:
- 1. Get pre-approved for a mortgage loan as soon as possible.
- 2. Make a substantial earnest money deposit.
- 3. Agree to either waive or reduce certain contract contingencies.
- 4. Pay the difference between the home’s appraised value and its sale price in cash, if possible.
- 5. Allow the home sellers extra time to relocate if necessary.
- 6. Be reasonable.
- Have Questions? Ask Pete Elder!
1. Get pre-approved for a mortgage loan as soon as possible.
One of the first things that you should do when you’ve decided to buy a home is to get pre-approved for a home loan. Sit down with a lender and discuss your intentions. The lender will review your employment and credit history.
They will then issue a pre-approval letter if you’re accepted. The letter will state the terms and conditions and the maximum dollar amount that they would be willing to lend to you.
Having that pre-approval letter in hand tells sellers that you’re serious when making an offer. It also gives you an advantage over other potential buyers who haven’t started to secure their financing yet. Being pre-approved usually makes you a stronger candidate and less of a risk in sellers’ eyes.
2. Make a substantial earnest money deposit.
You may want to make a larger earnest money deposit to affirm your interest in buying a particular home. This may be an especially intriguing option if the seller is concerned about possibly entering into an agreement, only to have the buyer either back out or is unable to pay for the transaction.
Just keep in mind the fact that earnest money is part of your down payment. If increasing the earnest money is more than you can actually afford, then don’t consider this option. It may make you look more favorable, but it can impact the sale and eventually your credit history if you can’t fulfill the obligation.
3. Agree to either waive or reduce certain contract contingencies.
When you make your initial offer, take time to listen to the seller carefully. There may be specific provisions or contingencies that can be negotiated.
For example, you may offer to reduce the time period for a home inspection. You could also propose to pay for certain recommended repairs or renovations yourself, instead of letting the home seller shoulder that burden.
Your willingness to accommodate these and other concerns that the seller may have might make them more willing to work with you. They may also be flexible with other contract contingencies.
Communicate with them regularly before the purchase contract is signed so that both sides clearly understand their responsibilities.
4. Pay the difference between the home’s appraised value and its sale price in cash, if possible.
Home appraisal values and home sale prices are very rarely going to be the same. In some cases, the house may be appraised for more than what it’s selling for and vice versa. It really depends on the condition of the home, the current economy and other factors.
If the home that you want to buy has a lower sale price than the appraisal value, you may propose to pay the difference yourself. Once again, this is only something that you should think about if you can reasonably afford to do so. It may improve your chances of successfully closing the sale.
5. Allow the home sellers extra time to relocate if necessary.
Most home sellers are in the process of looking for a new place to live while they attempt to sell their current home. This can sometimes take longer than expected, especially if they are moving to a new city or state. They may also have to find a new job or change schools for their children.
You can make things easier for the seller by letting them stay in the home for a few extra days. Make it clear that you understand their situation and that you don’t expect any special consideration for this favor. This will make buyer possession seem much less important.
6. Be reasonable.
There’s typically a fair amount of give and take during offer negotiations. It’s okay to ask for a few concessions from the seller. Just don’t ask them to give much more than you receive.
Research home purchase agreements so that you know what costs you’re expected to pay as a home buyer and what costs are normally paid by the home seller. If you want to persuade the seller to work with you, you may volunteer to pay their transfer fees, escrow fees or other charges that may be sticking points with them.
Your offer should be strong. It may even be above the seller’s asking price. The offer should be realistic, but it shouldn’t be something that would break your budget either.
Take time to research homes for sale in areas that you’d consider living in. This will give you a better understanding of what to expect when you’re ready to make an offer. You can also ask your realtor for a comparative market analysis so you can determine whether or not a seller’s asking price is legitimate. There may be instances in which home sellers price their properties below market value in order to generate more interest and offers.
Multiple offers can be a regular occurrence depending on the market. If you find yourself in this situation, be patient.
Talk to your real estate agent and the seller on a regular basis. Let the seller know how interested you are in their home. It can be a very frustrating and exhausting ordeal, but persistence can definitely pay off. If the seller accepts your offer, you’re one step closer toward owning the kind of home that you’ve always wanted.
Have Questions? Ask Pete Elder!
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