Sweetening the Deal without Raising the Price
Most people think that the person who offers the most amount of money will get the house. While price is certainly high on the list of what makes a good offer, there are many other components that make an offer stand out.
Consider an offer that was heads and shoulders above all others in price, however the buyer has a long financing contingency -- in fact, they haven't even been pre-approved for a loan. This means that they can't guarantee that they can actually pay the price they're offering. Now how strong is that sky high price? What good is a big number if the sale doesn't close?
As a seller, you want to be sure you're accepting an offer that will close. Yes, get the best price possible, but listen to your Realtor when they tell you why one offer may be more likely to close than another.
Generally speaking, the fewer contingencies in an offer, the better -- there will be less ways the deal can fall apart if there are less contingencies. That being said, as a buyer you do want to make sure you're protected. How do you protect yourself and still write a strong offer?
First, you need to understand what contingencies are, what they do for you as a buyer, and what you risk by not having them. Read this post to get the basics, then come back and finish up here.
Alright, now that you have an understanding of the big three contingencies in any offer and when you can omit them, let's delve a little deeper into the inspection contingency. This one is generally pretty important, and one that sellers would love to not have to worry about. After all, this one creates room for negotiation in the event of learning new information about the condition of the property. Still, it is your right as a buyer to investigate the property to your satisfaction. If you know there are going to be 10, 20, or even 30 offers, going in with an inspection contingency could easily kill your shot in such a highly competitive situation. If the sellers allow, you may want to consider a pre-inspection.
A pre-inspection is when you have the property inspected before writing an offer so you know what you're getting and can then write an offer based on the real information from your inspection report. The risk of this is spending money on an inspection (typically in the $600-700 range, give or take, based on the size of the property) and not getting the house. However, it's advisable if you want to submit an offer as "clean" (contingency free) as possible.
If you are in a position where you cannot make a non-contingent offer, there is one more way to demonstrate to the seller that you are serious and not looking for a way out. Remember that bit about liquidated damages in that other post you just read? Well, if you offer more than 3% of the purchase price as your deposit and you opt to not sign the liquidate damages section of the purchase contract you are telling the seller that if you back out for a non contractual reason (and damage the seller in the process), the seller can keep more than the 3% limit set in that clause in the contract.
Outside of contingencies, or lack thereof, you can strengthen an offer based on the seller's needs. This is another good reason to work with a Realtor -- we talk to each other and know the questions to ask to get the information that can help strengthen your offer. Say the sellers are buying another house and they're eager to get the proceeds from this sale to fund the downpayment on what they're buying. That tells us that they'd probably appreciate a quick close. Escrows tend to last 21-30 days, the bulk of which is spent getting the loan finalized. However, if you can close in 14 days (I've even closed escrows in 7 days!), you can bump your offer higher in the ranking.
Let's add to this scenario and say that while the sellers need to close quickly, their new house won't be ready for them to live in for another couple of weeks. This gives you as a potential buyer the opportunity to sweeten your offer with a free rent back. Because you closed escrow in 14 days, you will begin paying the mortgage on your new house at that time, so you will be looking at paying for two weeks without taking possession, however that two weeks of free living for the sellers could provide them with the breathing room they need to transition to their new home when it's ready for them.
There are many considerations when reviewing multiple offers, or when constructing an offer. I've given you a bunch of things to think about, but these aren't all my secrets. If you want to learn more tips and tricks, contact me and I'd be happy to sit down with you to review your situation and develop a winning strategy to reach your goals.