3 Tips for Making a Stronger Property Offer
When your local real estate industry is stuck in a seller’s market, it can be very difficult to purchase a preferred property. Many times, there will be multiple offers on any one house. That’s when its important to modify a few key parts of the REPC contract to attract the seller’s attention. Below are 3 things you can do to improve your chances of closing the deal.
1. Escalation Clauses
Purchasing a property when there are multiple interested parties can be really tricky. You would never want to offer a significant amount more than the other potential purchasers, and break the bank. You also don’t want to come in too low when presented with a great deal. This is where an escalation clause can come in handy.
Say the seller lists his property at 500K. You know the home is worth more than that, and is going to appreciate in the future. Let’s say there are 3 other hungry parties chomping at the bit to buy the property. This is where you can add an escalation clause to your offer. This gives you the ability to say you will pay a certain amount more than the highest offer.
The one thing you need to be very careful with when dealing with escalation clauses is to set a cap on the top offer. In the scenario mentioned above, you might add to the contract the highest you’re willing to pay is 525K. If the highest offer is lower than that, then you will add an extra 1.5K to buy the house.
These clauses are a safe way to add a little something extra if the seller excepts your offer. It’s a great way to make sure you stay competitive without paying way over the market price.
2. Shorter Home Inspection Period & Financing Deadlines
We would never recommend a buyer waves the home inspection all together. You might get lucky and not run into any problems. However, if there is a serious issue, it could be an absolute nightmare. We’ve seen plenty of examples where the seller claims everything is up to code, and there are no problems only to find out there is mold hidden in the basement. Getting this kind of hazard cleaned is extremely costly.
Rather than waiving the inspection all together, you can present an offer with shorter deadlines. This means the house is going to close faster, and the seller is going to get paid. If they are in a pinch for cash, this will definitely be appealing.
The other piece that has to be completed before settlement and closing is financing approval. This always comes after the inspection deadline, and is the easiest way for a buyer to get out of the REPC contract. If a buyer cites problems with obtaining financing or simply doesn’t like anything about the numbers, he/she can cancel and get a return of all earnest money.
Seeing how the financing piece is the easiest way for a buyer to get out of the contract, it’s often advantageous for the seller to have the shortest deadline possible. If you lower the number of days to complete this part of the deal, your offer will definitely be appealing.
3. Larger Earnest Money Deposit
The earnest money deposit you make on offer doesn’t effect the purchasing price one bit. On a successful real estate deal, this money is simply rolled into the down payment for the home. Earnest money is essentially a portion of funds that will act as settlement if you default on the contract. The larger the amount of funds, the more skin a buyer has in the game to follow through with the agreement.
If you are 100% interested in a home, adding some additional earnest money to your offer will catch the eye of the seller. That’s a sure fire way to let them know you’re confident in making the purchase. It’s also a way to show you have the resources to secure the loan.
Buying a property that has the potential to appreciate or is listed below market value can be competitive. You can bet your bottom dollar there are plenty of other buyers or investors looking for diamonds in the rough. If you come into a situation where there are multiple parties jockeying to make the purchase, using the tactics mentioned above will increase your chances of winning the property.