Back to Buying Homepage

25 Strategic Tips on How to Get Your Offer Accepted in a Competitive Market

 

For a seller, an ideal dream offer that is tough to beat is:

• Cash - with proof of funds provided
• A meaningful Earnest Money Deposit
• No Inspection Contingency
• No Financing Contingency
• No Appraisal Contingency
• Closing - within a desirable time frame
• Price - Acceptable, but might not be the highest offer

Fortunately for buyers, these type of offers are few and far between

• Please read the below detailed information on how you can come close to competing with this type of offer

Navigating the home buying process for a highly desirable home, especially in a seller's market, can pose added complexities. Securing a winning bid may require extra effort on your part.

Many of these strategies should be used all the time – sometimes it only takes one other offer to beat your offer.

Succeeding in a multiple offer scenario hinges on understanding how to present your strongest offer.

• Various tactics exist to render an offer appealing; it's not solely about the price, as sellers often value factors like timing and convenience.

A skilled agent diligently identifies the seller's concerns and tailors an offer with their clients to alleviate those concerns.

Naturally, the strategies you employ will heavily rely on factors such as the type and condition of the property, your degree of motivation, your personal situation, and the level of competition from other interested parties.

• In the event you find yourself in second place, ensure your agent maintains communication with the seller's broker. Sales can sometimes fall through, leaving an opportunity for you to step in.
• Stay prepared to act swiftly if such a situation arises. You should consider submitting a backup offer to secure the top position if the initial sale collapses.

Below is an overview of strategies some buyers have used in the past to make their offer stand out from the competition. Some are very basic and probably obvious; others are more aggressive and there can be some risk involved with several of them.

You should discuss the different options and variations for your situation, and comfort level, with your agent and/or legal advisor.

1. Know Exactly What You Are Looking For

In a competitive market, quick decision-making is essential. There might not be sufficient time to differentiate between wants and needs once you've viewed a property.

To facilitate your decision-making process, it's advisable to thoroughly consider and prioritize your wants and needs for your next home before you commence your search. This preparation enables you to promptly assess whether a home meets your criteria or not.

• After discovering a home that captures your affection, you and your real estate agent will evaluate various factors to establish an appropriate offer.
• Your agent will assess several elements, including a comparative market analysis they'll conduct to ascertain the optimal offer value.

Additionally, it's important to contemplate factors such as availability of other similar properties, how long the house has been listed for sale, the prevailing local market conditions, and the pace at which properties are being sold in the vicinity.

2. Hire an Experienced Buyer’s Agent

Buyers should prioritize working with an experienced real estate agent to guide them through the complexities of the process.

Having an advocate during such transactions significantly reduces stress, as some agents are well-versed in all facets of the purchase, including contingencies.

• Work with an experienced buyer’s agent who goes the extra mile to communicate your interests. Your agent should call the listing agent, not just text or email, to discuss your offer.
• This can help make a difference in getting your offer accepted - listing agents often times have considerable input on which offer is accepted.
  

Check out Dave Schott - Buyer's Agent Reviews

3. Pay CASH

In a fiercely competitive seller's market, opting to purchase a home with cash can prove to be a smart decision. Such an approach can significantly enhance the appeal of your offer to sellers eager to swiftly conclude the transaction.

A cash offer shows the buyer's strong financial standing and ability to expedite the closing process, placing them in control without being beholden to a lender's timeline.

Cash is unparalleled in its effectiveness. When faced with multiple offers, a cash offer holds considerable sway.

While making an all-cash offer necessitates showing the funds readily available, for many buyers, this isn't feasible, prompting the need for alternative approaches.

Although waiving the financing contingency can be advantageous, it doesn't equate to the security of having cash on hand. Opting for a mortgage still carries a degree of risk for the seller.

4. How to Compete With A CASH Buyer

Frequently, some buyers arrive at the negotiation table without a mortgage contingency, opting instead to offer cash for the home.

This can be disheartening for credit buyers, as they may feel unable to compete with cash offers, especially when it involves their dream home.

Indeed, cash offers hold undeniable advantages for sellers and can present formidable competition. When a seller receives a cash offer, they sidestep concerns about banks or loans, leading to a smoother and quicker transaction process.

• However, competing with cash offers is not impossible. The key lies in making the credit offer more enticing to the seller.
• Those comfortable with transparency towards the seller should contemplate providing financial details, such as employment history or redacted asset documentation, to reinforce the assurance that securing a loan for the individual is highly probable.

For instance, if you possess substantial funds in your bank/brokerage/retirement account but opt for a mortgage due to financial considerations, disclosing this information assures the seller of your financial stability.

Some buyers choose to obtain home loans for convenience rather than necessity.

• Consider sending redacted proof of funds statements demonstrating your capability to cover the costs adequately, regardless of whether you pursue a mortgage or not.

Use the below tips wisely to present an offer with a competitive edge over the cash proposal.

5. Use a Local Reputable Lender

One of the initial tasks for listing agents is confirming the mortgage lender and pre-approval letter.

Certain lenders may have unfavorable reputations for jeopardizing deals. If you opt for one of these lenders, the listing agent will likely relay this information to the sellers.

Present your mortgage pre-approval obtained from a trusted, community-based lender. A pre-approval from a distant or large-scale lender may raise doubts in the seller's mind.

Sellers often disregard offers from buyers with pre-approvals from online lenders. Opting for a local bank , credit union, or larger mortgage banker strengthens the credibility of your pre-approval and provides the seller with greater assurance.

Seek guidance from your buyer's agent regarding recommended lenders to enhance your chances of securing acceptance for your offer. Read more about the advantages of using a Local Lender - HERE.

6. Submit a Pre-Underwritten vs Pre-Approval Letter

Sellers prioritize certainty in purchase arrangements, so offering the highest assurance of funding, short of an all-cash offer, can make your bid more appealing and distinguish you from other buyers.

• Securing pre-approval for a home loan is essential prior to making an offer and in most sales, sellers will only consider buyers who have a pre-approval letter.

Buyers may potentially conceal adverse financial details discovered during underwriting, causing concern for listing agents and sellers.

• To address this, consider engaging a reputable local lender capable of pre-underwriting your loan.

This approach demonstrates to the listing agent and seller that you've undergone a thorough review, significantly enhancing the likelihood of closing on schedule. Read more about the advantages of submitting a Pre-Underwritten Letter.

7. Provide a Pre-Approval Letter for Your Maximum Possible Loan Amount

Another important item: Ask your lender to pre-approve you for your maximum allowable loan amount, even if you are buying below this amount.

• Example - If you can qualify for $500,000 and are only going to spend $350,000, a letter showing you are buying below your max gives the seller some additional assurance.

8. Closing Terms

Some sellers have inflexible circumstances and require a buyer who can accommodate their closing date.

To distinguish yourself, strive to be as flexible as possible on a closing date. Among the terms in a real estate offer, the closing date might hold significant weight for sellers.

It is important for your buyer's agent to ascertain the seller's requirements before drafting the offer, as this demonstrates professionalism and fosters good business practices.

9. Close Extra Fast on Vacant Homes

When making an offer on a vacant property, the seller typically prefers a swift closing to avoid leaving the home unoccupied for an extended period.

Aim to expedite the closing process on vacant properties. As mortgage lenders determine the required timeline for completion, it's crucial to coordinate your schedule with theirs. Opting for a mortgage pre-underwriting can speed up the closing process.

Consider engaging a lender known for their ability to expedite closings, as this can provide you with leverage when dealing with vacant properties.

10. Keep Time Frames Short

One of the most appealing advantages of cash buyers is their ability to expedite the closing process. Dealing with financial institutions often leads to lengthy closings.

• To maximize appeal, aim to minimize the duration of each contingency deadline, such as financing and inspection.
• Consult with your buyer agent to determine appropriate timelines for each contingency.

If you're hesitant about waiving the home inspection, consider shortening the contingency period. Each contingency in a real estate contract represents a potential obstacle for the seller.

By reducing the inspection window and mortgage contingency, if feasible, you can expedite the process and appeal to sellers.

Coordinate with your lender to establish the earliest possible mortgage contingency deadline, as this demonstrates a commitment to swift resolution, which sellers find attractive.

11. Keep Your Offer Clean and Simple

Contingent offers are common in real estate transactions, serving to protect buyers from unforeseen repairs, financing issues, and valuation discrepancies.

• While contingencies are typically accepted without hesitation in buyer's markets, in competitive markets, many buyers are opting to waive contingencies to make their offers more appealing to sellers.
• However, this strategy carries risks, and it's advisable to consult with your advisors before proceeding.

Ensure your contracts are clear and straightforward for the seller's comprehension. This demonstrates your and your agent's ability to work efficiently. Only include additional terms if they are essential and enhance the strength of your contract.

A clean offer should exclude seller concessions, such as requests for assistance with closing costs (unless necessary), which are additional requests beyond the offer price, and personal property.

In situations where sellers are fielding multiple bids, a clean offer can increase your chances of outbidding offers with contingencies.

12. Be the First to View and Submit an Offer

Certain sellers prefer to streamline the process and avoid dealing with multiple contracts. If you're the initial buyer to submit an offer, you could persuade the seller to accept your offer.

• To secure this advantageous position, you'll require a proactive agent who can swiftly arrange showings, often within minutes.

Both you and your agent should utilize a "saved search" feature to promptly notify you of new listings.

Upon discovering a promising property, it's imperative to act promptly and schedule a viewing without delay.

13. Offer Not Contingent on Sale of Current Home

If you find yourself needing to sell your current home before purchasing another property, you may need to employ some creative solutions.

Sellers receiving multiple offers typically prefer contracts without contingencies, particularly those contingent on the sale of another property. They aim to minimize delays and uncertainties in the transaction process.

Avoid making your offer contingent on the sale of your current home.

• Instead, work with your lender to obtain pre-approval for financing that doesn't necessitate selling before buying.

You can still coordinate with your agent to sell your current home and purchase a new one simultaneously.

14. Make the Highest Offer

When discussing strategies to win bidding wars, offering the most money should be obvious. I mention this to provide a complete list of your options.

Offering a higher price is indisputably one of the most effective tactics in any offer situation.

In real estate, as in any competitive scenario, outbidding the competition is often the surest path to victory. By offering a slightly higher amount than other buyers, you significantly increase your chances of being the seller's top choice.

Price is not the sellers only consideration when reviewing offers.

A higher offer price typically carries considerable weight. Merely offering the list price is often insufficient. In frenzied seller's markets, many buyers discover firsthand that some competitors are willing to go above and beyond for homes they love.

• Cash buyers understand that their offers hold appeal to sellers and they sometimes expect a discount on the price.
• Credit buyers can counteract the allure of cash bids by presenting competitive offers.

Acknowledging that credit buyers may need to offer slightly more than cash buyers, it's prudent to consider homes lower in your personal price range.

This approach affords buyers the flexibility to make higher offers to secure the desired property without exceeding their budget.

15. Offer Over Asking Price

Sellers often set low list prices to spark bidding wars, particularly in multiple-offer situations where homes are likely to sell above the asking price.

The challenge for buyers lies in determining how much over the asking price to offer.

As a buyer, it's essential to offer as much over the asking price as you can comfortably afford – based on the home’s value, and for your situation.

It’s not advisable to overextend yourself to secure an accepted offer.

• Consider this: an additional $10,000 might seem significant, but it's roughly equivalent to the cost of a cup of coffee per day.
• For instance, imagine you make a $20,000 over-asking offer on a $400,000 house. While the offer may initially appear high, if the property value historically increases by 3-5% annually on average, you stand to possibly recoup the investment within just a few years.
• Real estate is a long-term investment strategy that often pays dividends over time.

16. Increase Your Earnest Money Deposit

Earnest money is provided alongside a sales contract to reassure the seller as they remove their house from the market. It serves as evidence that the buyer is genuinely committed to purchasing the property beyond the contract itself.

• While the specific terms for earnest money deposits vary, they typically range from 1% to 2% of the sales price.

Typically, earnest money is held in escrow by a title company and is applied towards the purchase price at closing.

Increasing the earnest money amount in a seller's market can help you stand out but proceed with caution.

Contract contingencies allow buyers to recover their earnest money if the deal falls through due to various reasons, such as issues uncovered during a home inspection or difficulties with financing.

• Disputes over earnest money occassionally happen in real estate transactions, and both parties need to sign a Mutual Release before the Earnest Money can be returned to the buyer, per terms in the contract.
• Consider adding additional earnest money after completing the Inspection Period, but only if you are fully committed to purchasing the home.

Failing to proceed with the purchase could put your earnest money deposit at risk, depending on the terms outlined in the purchase agreement.

17. Make Part of Your Earnest Money Non-Refundable

Another tactic in a competitive market is to designate a portion of your earnest money deposit as non-refundable.

However, you'll need to assess how much risk you're willing to take on.

If you're completely confident that nothing will prevent you from closing, then the risk should be minimal. Sellers will appreciate the added assurance.

18. Make a Larger Down Payment

When sellers evaluate contracts from potential buyers, they view the down payment as an indicator of financial stability.

Buyers who offer a larger down payment typically have greater financial reserves available, reducing the likelihood of deal disruptions caused by issues such as a low appraisal or costly repairs.

If your financial situation permits, consider specifying a down payment of at least 20%-25% in your financing contingency. This positions you ahead of other buyers who are putting down less money.

Sellers are inclined to favor buyers with greater accessible funds, as this increases the likelihood of meeting the closing date and overall transaction success.

19. Remove the Financing Contingency

The financing contingency stipulates that you will only proceed with the purchase if your home loan is approved.

Unfortunately, there are instances where pre-approved loans fail to materialize, leaving buyers in a difficult position.

However, by waiving this contingency, you convey confidence to the seller that you will secure the loan regardless. Be aware that in the event of loan denial, you risk forfeiting your earnest money deposit.

• While waiving the financing contingency may seem daunting, it can be executed with minimal risk by securing a lender willing to pre-underwrite your loan. This assurance provides confidence that the lender will see the transaction through to completion.

While taking the risk of removing the mortgage contingency can increase the appeal of your offer, it's crucial to carefully assess your confidence in securing financing before proceeding.

Although such risks may pay off in certain market conditions, it's essential to exercise caution and avoid hasty decisions.

• Enhance the strength of your offer by presenting it as a cash offer, even if you plan to finance the purchase with a mortgage.
• Utilize accounts demonstrating sufficient funds to close as proof of funds. Once accepted, you retain the option to proceed with mortgage financing.

Contact us for further guidance on navigating this type of offer, which is increasingly common in highly competitive markets.

20. Remove the Appraisal Contingency

An appraisal contingency is a provision in the contract that stipulates the offer is contingent upon the home appraising for at least the offer amount, if not more.

Without this contingency, the buyer may be required to cover the shortfall if the appraisal returns a lower value.

If you're offering tens of thousands over the asking price, there's a considerable chance the home may not appraise at the desired value.

In such cases, the appraisal results would be your responsibility, not the seller's. Including a clause addressing this scenario in the contract could increase your chances of winning the bid.

Evaluate whether including an appraisal contingency is necessary for your offer.

• Presently, many successful offers omit this contingency. Consult your buyer agent to weigh the pros and cons of including an appraisal contingency in your purchase offer.

Expressing your willingness to bridge the appraisal gap by bringing additional funds to the table can significantly distinguish your offer. However, it's crucial to ensure you're in a solid financial position to assume this risk.

21. Offer to Cover any Appraisal Gap

Cash buyers enjoy a significant advantage in not having to fret over a low appraisal, a common concern in situations where sale price is bid up considerably.

It's entirely feasible for the appraised value to fall short of the sales price, as appraisers independently determine property values.

In seller's markets, appraisal contingencies can thwart many home sales.

When using an Appraisal Contingency, buyers often mitigate this risk by offering to cover any appraisal gap between the agreed-upon sale price and the appraised amount by making a larger down payment, thereby ensuring the seller receives the desired price.

• You will determine a cap on the amount of appraisal shortage you will cover.

Offering to cover an appraisal gap is a compelling way to strengthen your offer and capture the seller's attention. This gesture instills confidence in the seller, reassuring them of their choice amidst competing bids.

In such competitive scenarios, offering appraisal gap coverage closely mirrors the advantages of a cash offer, as many deals have faltered due to appraisal issues.

• Covering an appraisal gap is a common strategy employed by homebuyers seeking to secure acceptance in bidding wars.
• However, it's vital to grasp the implications of this approach. Not only does it entail paying above market value, but it also carries the risk of being stuck with an overpriced property if the real estate market declines shortly thereafter.

Whether you choose to include a modified appraisal contingency or waive it altogether, providing proof of funds demonstrating your ability to cover the appraisal gap can strengthen your offer's credibility.

This reassures sellers that you possess the necessary financial resources to navigate any appraisal-related challenges that may arise.

Example – home is listed at $400,000, offer accepted for $425,000, appraisal comes in at $400,000. Lender’s loan is based on the appraised value, so you would need to add $25,000 to your down payment.

22. Remove the Inspection Contingency

Waiving the inspections can be a plus, particularly if the home appears well-maintained visually. However, it's crucial to weigh the risks involved, especially with older homes or those lacking updates.

Some buyers opt to remove the inspection clause if they're confident there won't be any major issues, which is more common with newer, well-constructed homes.

Foregoing a home inspection can present a significant advantage for buyers, particularly in competitive bidding situations.

Typically, buyers have the right to withdraw from a contract if they uncover unacceptable issues during the inspection process.

However, once sellers accept an offer, they prefer not to deal with potential repair requests or negotiations.

• Alternatively, buyers can opt for an inspection but include an offer to cover a portion of the estimated repair costs up to a maximum amount, providing reassurance to sellers about their commitment to the purchase.
• This allows a buyer to cancel the contract if inspection issues surpass the predetermined threshold.

Ultimately, each approach carries its own set of risks and benefits, so it's essential to carefully consider your options and consult with a knowledgeable agent to determine the best strategy for your situation.

23. Use an Escalation Clause

Essentially, an escalation clause enhances your chance that your offer remains competitive, automatically  escalating above other bids up to your maximum price.

It demonstrates your willingness to pay up to a certain amount for the home, with the flexibility to adjust if necessary to secure the deal.

• However, it's important to note that even with an escalation clause, the seller may choose to counteroffer or raise the listing price instead of accepting it outright.
• Employing an escalation clause has become a common tactic in competitive real estate markets but use it judiciously.
• While it can immediately elevate your bid to the top, improper use or manipulation by listing agents can lead to paying more than your initial offer price.
• Many sellers will not accept Escalation Clauses and request your highest and best offer when submitting.

When considering an escalation clause, ensure your agent thoroughly understands its nuances to navigate potential issues.

• Here's how it works: Let's say you offer $455,000 on a $450,000 home with an escalation clause stipulating that you'll pay $5,000 more than any other offer, up to a maximum of $475,000.
• If another buyer offers $465,000, the escalation clause adjusts your offer to $470,000 automatically.
• This adjustment is triggered by providing documented proof of competing offers, confirming the need for your offer to rise within the escalation clause's range.

When using an escalation clause, it's crucial to set a meaningful escalation amount, such as $3,000 to $5,000+ to have a meaningful impact in competitive situations.

24. Make Sure You Submit a Complete Offer

• It's imperative to pay close attention to the details of your offer, yet mistakes can easily occur during this process.
• These errors might involve overlooking required disclosures, supporting documentation, or omitting essential information from the purchase agreement.

In a fiercely competitive market, such mistakes could lead to your offer being disregarded altogether.

25. How Will Seller/Agent Handle Offers

It's important to determine how the seller's agent will manage incoming offers.

• Will they give notice to all agents to submit their best and final offers, or will buyers have only one opportunity to make an offer?

In some cases, there might not be a chance to counteroffer. Frequently, you'll need to present your strongest offer from the outset. It's crucial for your agent to clarify this in advance.

Summary

Engaging in a bidding war as a buyer can be a rollercoaster of emotions. Doubts and questions may flood your mind, like "Did I offer enough?" or "Could I have done more to secure the deal?" These feelings are entirely normal.

The key to navigating bidding wars successfully is to put forth your best offer and move forward with confidence.

• Do cash offers always prevail? Not necessarily!

Implementing the strategies mentioned above can significantly enhance your chances of triumphing over a cash offer - OR any other offer. With perseverance, you will secure the home of your dreams!

• Remember, success in negotiations often depends on various factors beyond just the price offered.
• The overall quality of your offer, the tone of negotiation, and the seller's trust in you as a buyer and your agent, all play crucial roles.

That's why having a skilled agent by your side to craft a compelling offer and navigate negotiations is invaluable.

Please note that these strategies are tailored for hot seller's markets with multiple competing offers, and tactics may vary based on market conditions. Each offer is unique, and it's essential to seek personalized advice from your attorney or buyer agent.

Hopefully, you now have a better grasp of how to emerge victorious in a bidding war. Best of luck in your endeavors!

Feel free to contact us for a complimentary strategy session to discuss your goals and how we can assist you in achieving them.

• Please contact Dave Schott with any questions or to start the home buying process. Call/Text  (636) 489-1820 or submit Contact US form.