In a hot real estate market where you keep losing out to other buyers, you might fantasize about taking a hint from The Godfather and making the next seller an offer they can’t refuse. But since you live on the right side of the law (and don’t want your next residence to be the slammer), you need to play fair. The good news is that you can submit an offer on that Nashville home that seals the deal … without breaking anyone’s legs. Learn how to make an offer on a house that gets the job done with these eight tips.
Always Be Pre-Approved Before House Hunting
Being preapproved shows the seller that you have your financial ducks in a row. Even better is to have your lender pre-underwrite your file, a more thorough process in which you provide all pertinent documents to your lender. Doing this puts you in the same league as all-cash buyers.
Never Lowball a Seller
If you haggle for produce at the farmers market, offering asking price (or above) right out of the gate might not be in your DNA. But attempting to negotiate on a house probably won’t help you get to the closing table in a hot market. Go in at listing price or higher if the comps support a higher offer price. Look to your agent as a guide!
Reduce Your Contingencies
Although you should go in with a strong offer, money isn’t everything, and it doesn’t always buy a seller’s happiness. If money’s been your only focus until now, change your game plan by waiving some contingencies. If you’re pre-approved for a mortgage and have — or can get a hold of — some extra cash, you can waive the financing contingency, an agreement that lets you out of the deal if you can’t get financing. This is a strategy for those who have extra cash or are using banks that do not require repairs. But keep in mind, if the appraisal comes in low, you must come up with the difference in cash.
Consider an Escalation Clause
If you think a seller will get more than one offer, you can help ensure yours will be the one picked by having your offer automatically increase by a predetermined amount. Note that if the escalation clause is triggered, sellers generally have to disclose the competing offer to keep things honest. Let’s say you offer $400,000 for a home with an escalation clause of $5,000 capping at $430,000. If someone else offers $410,000, your offer will automatically escalate to $415,000, beating that other offer. But if another offer comes in higher, such as $450,000, and your cap is $430,000, you would be out.