How Can I Make My Offer More Competitive - The Buying Power Checklist

How can I Make My Offer More Competitive? This is something that we hear often from home buyers who are looking to get a competitive edge when it comes to buying a home.

The Buyer Power Checklist empowers home buyers who are looking for an advantage when it comes to getting their offer accepted to buy a home. It is especially helpful to first time home buyers who have never gone through the process before.

The Buyer Power Checklist breaks down an offers buying power into three different categories. A buyer's offer will either be in the 'Low', 'Average' or 'High' Buying Power category.

Offering Seller Free Occupancy (A Seller Rent Back)

How can I Make My Offer More Competitive? Offering the seller free occupancy through a rent back is a great option for home buyers who have a little flexibility as to when they need to be in the house. A home buyer who is renting a home before has a distinct advantage on offering this competitive advantage.

A buyer should always ask a seller what their preferred closing date is. An idea is to offer them to close a couple days before they intend to close on their next house and rent them the house back at $1 for a short period of time.

How does it help? Well it makes the process a little less stressful for a seller. By closing a couple days before it guarantees that everything will stick to their timeline and that their closing will be seamless.

If you are financing, the agreement with the bank does say that you will be living in the property within 60 days after closing. So this does even allow you as a buyer to give the buyers an even more extended period of time for their move.

There may be an end to your generosity when you eventually will have to make your first mortgage payment. You will want to talk to your mortgage banker or real estate agent as to when that first payment will be.

Writing an Offer Without A Home Sale Contingency

How can I Make My Offer More Competitive? A Home Sale Contingency can be a big negative when trying to get an offer accepted in a competitive situation. Removing a home sale contingency is extremely risky if you haven’t done your due diligence and are not feeling 100% confident in being able to go through with the sale.

If you are a first-time home buyer then you can check this box off! You have a built-in competitive advantage.

If you have a house to sell, then you do have some options. The first option is to talk with your mortgage banker and see if it is possible to buy your next home without selling your current home. If that is the case, then removing the home sale contingency is far less risky. Other options are speaking to your mortgage banker and finding a friend or relative who may be able to co-sign on the next house which would allow you to carry both properties.

The second option is very risky. That is removing the home sale contingency with your house being under agreement or not even on the market. Very risky. Even if the house is under agreement and you have rock star buyers, there is still risk. What if the buyers on your house lose their job and can’t qualify for a mortgage?

This is an option to talk in a lot of depth with your mortgage banker as well as your real estate agent. It’s important to know all of your risks and understand that you can lose your entire deposit if you are not able to perform. Each situation is different, but it is hard to recommend this option when you can’t perform if the house doesn’t sell.

After weighing the risks, if writing an offer with no Home Contingency is right for you, then this and using some other items on the Chubb Homes Team Buying Power Checklist will help make your offer more competitive.

The Buyer Power Checklist breaks down an offers buying power into three different categories. A buyer's offer will either be in the 'Low', 'Average' or 'High' Buying Power category.

Getting a Pre-Commitment, not a Pre-Approval

A Pre-Commitment can make an offer to a homeowner more attractive and thereby increase the chances of getting your dream home!

In this video, Jeff & Jason talk about the power of the Pre-Commitment and what it could mean for you and the seller. While it is often very hard to compete with a Cash offer, an offer with a Pre-Commitment will give you a fighting chance.

No Seller Concessions

How can I Make My Offer More Competitive? Writing an offer with a Seller Concession will drastically reduce how competitive an offer is. In a competitive situation, if you are wanting a seller concession like closing cost assistance, asking for it in the initial offer phase is most likely not the place to do it.

The most common seller concession is asking for assistance with closing costs. Closing cost assistance is amazing. Essentially it allows you to finance some of the closing costs. And with interest rates so low, it is a great deal for a buyer.

While they are amazing for a buyer, they do signal it as a weakness to a seller. This is why you do not want to ask for them in the initial offer phase. That is if you are looking to win the offer!

The best time to ask for closing cost assistance is after the home inspection. The way to do this is ask to inflate the price and for the seller to give you the difference back. The difference to the seller is very little on a net perspective. So, make sure to offer to make up that difference to the seller!

The risk to the seller is that the property may not appraise for that higher amount. Most likely the sellers will require language that would reduce the price if the property does not appraise for the new inflated price.

There are many tips on how to finesse a seller concession into an agreement in a competitive market. It’s important to know the risks of both strategies which is why you will want to talk to your Real Estate Agent in more detail as each situation is different.

Shorten Contract Timelines

How can I Make My Offer More Competitive? By shortening the contingency time periods, it mitigates some of the risk of the sellers. This thereby make your offer more attractive. In an offer there are a couple areas where a buyer can shorten their timeline. The inspection and mortgage contingencies are the two biggest areas that a buyer can adjust. Other parts of the contract that can be shortened is the Purchase & Sale Agreement timeframe as well as closing.

For the home inspection contingency, a buyer is generally given about a week to perform. The faster this is done, the more attractive it is to a seller as they will have a definitive answer quicker on whether the transaction is going to move forward. If you reduce this timeline, a great idea is to actually schedule the inspection before your offer has even been accepted and let the seller know about the inspection date! Worst case scenario if they choose another offer is that you cancel the inspection.

The Mortgage Contingency is THE most important contingency in the contract. This is the one that protects the buyer’s deposit and the one that generally extends the longest throughout the transaction. Talk with your mortgage banker to see if this is a timeline that you can shorten. A great way to do this is getting a pre-commitment vs. a pre-approval.

While shortening the closing date can be attractive to some sellers, it won’t be to others. The best thing to do here is ask what is the sellers preferred closing date. Then, whatever the seller says… Make it happen!

Cash Buyer - Cash is KING!

How can I Make My Offer More Competitive? It’s true, when it comes to buying a home… Cash is king! Being able to write an offer that is cash is a very big competitive advantage.

To a seller, a cash offer takes a lot of the risk out of the transaction. It in most cases removes the appraisal risk as well as the possibility as to whether the buyer will be able to perform and close on time.

In many situations a seller might even be willing to take an offer price a little less that is all cash then a competing offer with a mortgage contingency. Nothing is 100% guaranteed, but this is as close as someone is able to get in the real estate world.

The Buyer Power Checklist breaks down an offer buying power into three different categories. A buyer's offer will either be in the 'Low', 'Average' or 'High' Buying Power category.

Buyer to Assume City Smoke Inspection

How can I Make My Offer More Competitive? Being a buyer and assuming the duties of the city smoke inspection is a very creative way in making your offer more competitive in this crazy competitive market!

It’s a creative way (creative means not many other people do it!) to make your offer stands out… And it is something that a buyer can do for relatively short money.

In order to sell a house in the state of Massachusetts, the city fire company must come out and inspect the smoke detectors in the property to ensure they are of code. The inspection itself depends on the municipality and costs somewhere in the range of $30 to $50.

The inspection itself is not the tough part. It can just be annoying! We work with a company that will do the inspection and guarantee that the inspection will pass. While not difficult, the inspection process is one of the most annoying steps in the transaction… Especially for the real estate agent!

Large Earnest Money Deposit

How can I Make My Offer More Competitive? A buyer increasing their deposit can help make their offer standout and make it more competitive.

The larger the deposit, the bigger the signal to the seller that the buyer is committed in getting to the closing table. This helps ensure that the buyer will perform as they have a larger amount of money holding their feet to the fire.

It has become standard practice in Massachusetts for a deposit to be 5% of the purchase price. This is however 100% negotiable. If you are a buyer putting 3% down, then obviously you will not be putting down 5% or more in deposits!

More Money Down then Loan Typically Requires

How can I Make My Offer More Competitive? Putting More Money Down then loan requires.This competitive advantage is a little more complicated than others, but can be a big competitive advantage when trying to get an offer accepted in a competitive situation.

First, it is important to know that the amount that you put down on the offer for your mortgage contingency is not the amount that you are required to put down. What this amount means is if you can get the loan at that amount down, then you must proceed.

Let’s say that I can put 10% down on a house, but I want to put 5% down. Maybe me putting 10% down would require a gift from my parents or having to pull money out of my 401k.

So, can I put 10% down on my offer if I really want to put 5% down? Yes, this would mean if I was not able to get the loan putting the 5% down, but could putting 10% then I would have to move forward with the loan otherwise I could lose my deposit.

I can’t stress enough that if you do this, you need to be prepared to have to come up with the additional funds. As down payments go, 5% looks better than 3% and 7% looks better than 5. The more the better, but don’t put an amount that you could not fulfill.

Proof of Deposit and Down Payment

How can I Make My Offer More Competitive? Showing a proof of deposit and proof of a down payment.

This one is one of the simpler ways to help give your offer a bigger competitive advantage. A buyer most likely already has the funds for the deposit and down payment in an account. Simply showing a statement with these funds will help give the seller some piece of mind about the strength of the buyer.

When providing bank statements, be sure to cross out any personal information like the account numbers.

Buyer Knows Seller

How can I Make My Offer More Competitive? A Social Connection to the Seller.

This one is left up to a little bit of luck, but can be a HUGE competitive advantage to getting your offer accepted. How can you figure out if you have a connection or not?

Today with all the social media, it has made it easier and easier to find out if there is a connection. Ask your agent to pull up who the owner is. You will want to take that owner(s) name and put them in your Linkedin/Facebook profiles. When you find their profile, many times it will have a mutual acquaintances section.

Reach out to your friend to see how friendly they are with the seller. If they are, this could be HUGE. The Buyer Power Checklist breaks down an offer buying power into three different categories. A buyer's offer will either be in the 'Low', 'Average' or 'High' Buying Power category.

Using Conventional Financing

How can I Make My Offer More Competitive? Going Conventional is one of the ways when using the Chubb Homes Team Buying Power Checklist to make your offer more competitive.

Utilizing a Conventional loan or Conventional Financing can be a difference maker in getting your offer accepted. There are many different types of loans that are available to home buyers. Jeffrey and Jason talk about how using a different product other than FHA can increase your chances in getting your offer accepted.

Another topic to discuss with Jason is a loan with a 'Piggy Back 2nd'.

Offer Extended Occupancy (45 to 60 days)

Offering Extended Occupancy to a seller is where a buyer purchases a property then allows a seller to stay in the house post closing. The extended portion is generally for 30 to 45 days. As a buyer, you do not want to offer extended occupancy past 60 days as this will create a financing issue. 

How much do you charge the seller for this extended occupancy? It depends on how competitve you want your offer to be. Many buyers charge the standard market rate, however we have seen homebuyers offer this extended occupancy for $1. 

This can be a huge benefit for both buyer and seller as it can allow a buyer to lock in the rate while allowing the seller additional needed time. 

Waiving the Appraisal

How can I Make My Offer More Competitive? Waiving the Appraisal is one of the best (and most risky) ways when using the Chubb Homes Team Buying Power Checklist to make your offer more competitive.

For a seller, waiting for the appraisal is one of the more stressful parts of the transaction. Will the appraiser see the value in the property and agree with the agreed upon price? Because if the property doesn't appraise, then it can ruin the deal in late hours of the transaction. Many times the seller has packed and there are severe hardship to put the house on the market.

This is why waiving an appraisal can be such a powerful tool in a negotiation and ultimately be the reason why a seller picks your offer in a competitive situation. The power of waiving the appraisal is the reason why it is worth two checks towards the buying power of the buyer.

In this episode, Jeffrey and Jason talk about the option of waiving the appraisal and the major risk in doing so. This is an option that should not be taken lightly.

The Buyer Power Checklist breaks down an offers buying power into three different categories. A buyer's offer will either be in the 'Low', 'Average' or 'High' Buying Power category.

Non Refundable Earnest Money Deposit

A Non-Refundable deposit is a way to make an offer more competitive.

A non-refundable deposit is when a deposit on a house would be agreed to be released to seller should the buyer not be able to perform by the contract.

This can be very attractive to a seller when choosing an offer.

As an example, let’s say you agreed to a non-refundable deposit without a mortgage contingency. You do an inspection for informational purposes only and find issues and decide to walk away from the agreement. The initial deposit would automatically revert back to the seller.

Or as an example let’s say you were denied the loan after the Purchase & Sale Agreement was signed, then the entire deposit would revert automatically back to a seller.

You can see how this can be risky.

But a buyer can also negotiate a certain portion or maybe only the first deposit. You can get creative with what you are offering a seller.

There is a lot of risk here. So proceed with caution.

Order Appraisal Immediately

Ordering the Appraisal immediately is a way that can help differentiate your offer and make it more competitive in hot seller's market.

What you want to do is order the appraisal right when the property goes under agreement. This will do two things for the seller. 1) It will show that you are committed to buying this house and are willing to invest in the home purchase right away (An appraisal costs money!) and 2) It will help speed along the mortgage process thereby eliminating some risk that a mortgage commitment extends late in the transaction.

A mortgage commitment is ultimately one of a seller's biggest risks. A seller can't truly feel secure in their house being sold until the buyer has been approved for financing (This is if the buyer is getting a mortgage of course).

Personal Letter from Buyer to Seller

A Personal Letter from a Buyer to a Seller can be a big competitive advantage in getting an offer accepted on a house.

It is important to know that not all sellers are willing to look at a personal letter. But if they do, it can allow for the seller to personally connect with the buyer.

An offer is rigid. It doesn’t allow for a buyer to connect with a seller in any particular way. A letter to the seller allows for a connection.

In your letter you want to relay to a seller who you are (say the good things!) and why you love the house. Talk about what you envision for the home (without talking about improvements like a rehab or an addition… Because that is saying you don’t love the home as it is). Maybe you envision having a game of catch in the backyard with your kids!

As you are walking through the house, be sure to look at obvious connections. Don’t get creepy looking, but maybe you notice a college degree or a picture with a fish prized fish. This might be an area that you could get a personal connection if you graduated from the same college or love fishing too.

Take the time to write a good letter. It can make a huge difference.

Waive the Home Inspection

Waiving the home inspection is something that a home buyer can do that will ultimately make their offer a lot more competitive... It does however come with risks.

Know what you are doing when you waive the home inspection. Many times we will see people waive inspections for new or newer construction or even houses that have been recently renovated.

Another idea is to have an inspector view the property with you BEFORE you submit an offer on a property. It wouldn't be a full inspection, but they could walk through and look for major issues (foundation issues!). If they are not writing a report, many inspectors will do this for a discounted price.

You can still do a home inspection after an offer has gotten accepted. If you do a home inspection for informational purposes only and found something major and decided to walk away, then damages would be limited at the total amount of deposits that you have put down at that point in the transaction.

The risk can a lot of times be worth the reward on this one as this will make an offer a LOT more competitive!

A High Home Inspection Contingency Threshold

A High Home Inspection Contingency Threshold is a way to make your offer more competitive and at the same time protect a buyer from major issues.

Waiving a home inspection can be very risky. Having a High Home Inspection Threshold allows a buyer (and seller) to have the best of both worlds.

Most standard offers in Massachusetts are written so that you can walk away for any issue that you find. Even the small ones. Believe it or not, a cracked light switch plate would be enough to allow a buyer to walk away.

Putting a threshold in there says to a seller that you are a serious buyer and not looking to nit pick the sellers on any and all little issues.

If you are trying to make your offer more competitive in a competitive market and are not willing to waive the home inspection, then put a high threshold amount on the offer.

How it works is if you agree to a threshold of $5,000 then you as a buyer are not able to negotiate with the seller or walk away without putting your deposit in jeopardy for any issues that cumulatively reach $5,000.

The threshold can be for any amount. A buyer starts to see some competitive advantage with $2,500 to $5,000 thresholds. We have seen threshold amounts of $10,000 which will make an offer a lot more competitive.

Offer Above Asking

This is the biggest competitive advantage a buyer can do in a competitive offer situation on a home.

Offering more than asking will immediately get your offer to stand out. It will put your offer to the top of the pile. Other terms and conditions will still matter, but money talks... And the more money you offer, the louder your offer speaks and the more issues it can help erase.

For example, an offer with a home sale contingency can be a tough sell in a competitive market. BUT if that buyer offers a substantial amount over the next highest competing offer, then it might be just enough to get it done.

How much over asking is always the question. Which is why we have created a helpful bullseye chart to help our buyers visualize where the sale price may be inflated to.

Offer 10% or More Above Asking

Offering 10% or more above asking price can be a huge competitive advantage when bidding on a house.

I know this can seem extreme, but it really depends on the situation and how many offers the seller has received. If there is only one offer on a house, then you most likely do not need to go 10% or more over the asking price.

When we see sales prices go 10% or more above asking price is generally when there are 7 to 12 offers on a property. It is a simple supply and demand equation. The supply is one house. The more demand on the house, then the more it will go over asking price.

How much over asking will a house go for? It’s a million-dollar question that no agent really knows. All we can do is our best and hope the chips come our way. We can use these ranges to help position our offers better to increase our chances of winning the bid.

Close on Seller's Preferred Closing Date

This can be one of the better ways to make an offer more competitive and many times can be relatively easy to accommodate!

Many sellers have a date that they need to close by. This can be for a magnitude of reasons from the closing on a new house for them to a relocation to another area. It doesn't matter the reason!

This should be one of the first questions your buyer agent asks the listing agent. Heck, in this competitive market we are seeing many agents specifically say what that date is. If a seller is saying it, then there is a reason for it. And it is important to them.


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