Seven Reasons The Highest Offer Doesn't Get You The Home
Part Three of Our Three-Part Series On Making an Offer When Buying A Home
The real estate market in many locations has simply been on fire! Today, here in New England and many other areas, homes that typically attract little interest are garnering multiple offers, and bidding wars are common.
Conventional wisdom says that when it comes to real estate, the highest offer gets the house. But the truth is, this is not always the case. Sure, a solid offer is the first thing that every seller wants to see, but an astute real estate agent or REALTOR® will advise a seller that each offer is more than just a number it is actually the sum of all its parts.
Here are seven reasons why your artfully crafted lower real estate offer might just help you beat the higher bidder after all!
1. When it Comes to Real Estate,Cash is King!
If you can afford to pay cash, you just might beat a higher bidder. It might sound impossible to pay cash for your home, but many people do it. According to the National Association of Realtors, 12% of all houses sold in 2019 were all-cash deals.
An all-cash offer is attractive to a seller of real estate for several reasons. First, there are no mortgages or lenders involved, no appraisal to worry about, and escrow can close faster.
2. Don't Have 100% Cash? A Preapproval Letter is the Next Best Thing
Pre-approval is much different than pre-qualification. A pre-approval letter is a confirmation from a lender that confirms you are ready to buy in a set price range and you have been pre-approved for the loan.
In essence, the real estate pre-approval lender turns you into a virtual cash buyer. Other buyers could offer more, but if they are not pre-approved, the deal could fall through. As a result, a pre-approval letter gives you a leg up, even with a lower offer.
3. Your Timeline is Flexible
Typically, the closing period can last anywhere from 30 to 90 days. Offering to customize closing to meet the seller's needs can sometimes seal the deal over a higher bidder. Sellers almost always want a fast close. If you have all your paperwork together you might be able to get it done! Be flexible! Sometimes the seller might need more time, for example, if the house they are moving into will not be ready for 60 days. Find out what works for the seller and accommodate their needs. Sometimes the lower offer does win.
4. The "We
Love Your House, Please Let Us Buy It" Letter
It might seem cheesy, but much of the home buying process is emotionally based. Sometimes sending the seller a heartfelt letter letting them know you love their house and hope to raise your family in the home can sometimes make the difference!
5. Keep the Contingencies and Concessions to a Minimum
Contingencies are typically negotiating tools that allow you to walk away from a deal without consequences. The three most common are inspection, financing, and appraisal contingencies. Every contingency you add can make your offer appear weaker because each can make the deal more difficult to close. Make sure you really need each contingency before building them into your offer.
6. Be Careful About Asking for "Extras"
Be careful what you ask for! If you ask for the custom drapes, the appliances, and the chandelier that was a wedding gift from the inlaws, (and was excluded in the listing) you risk offending the seller and having them walk away. Even if yours is the highest bid!
7. Include an Escalation Clause
An escalation clause is an excellent way to make your offer stand out. An escalation clause states that you will pay a pre-determined amount over the highest bona fide offer that does not contain a home sale contingency. While not all agents use this tactic, it's a great way to stand out in a competitive situation.
For example, once all of the offers are reviewed, the seller's agent will contact the buyer's agent and forward them the highest offer. The buyer then has a fixed amount of time, for example, 30 minutes, to accept or reject the highest bid and include their escalation amount. So if the offer is $525,000 and the escalation amount is $5000, the buyer must agree to $530,000.
Putting Together Your Real Estate Strategy in a Competitive Market
Sometimes the biggest wallet does not close the real estate deal. These tactics can help you develop a strategy to help make a lower bid more attractive to a seller. The best solution is to work with an experienced real estate agent or REALTOR®. They understand the local market and can help you develop a strategy to compete in a tight marketplace that goes beyond simply making the higher offer.
Remember, every term in a deal is negotiable. In today's market, the seller is in the driver's seat. However, if you understand their needs you can craft a strategy that offers benefits beyond the highest offer. A good seller's agent will compare and leverage all offers to achieve the homeowner's desired pricing and terms. A good buyer's agent will help you craft an offer that benefits you and meets all of the seller's needs.
https://www.trulia.com/blog/5-reasons-the-highest-offer-wont-always-get-you-the-house/
https://www.realtor.com/advice/buy/reasons-why-your-higher-offer-wont-win-the-house/
If you missed part one of this three part series on Making an Offer when Buying a Home, here is the link to part one & two:
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