Today, Paul Valentino, President of Coldwell Banker Residential Brokerage in the Greater Washington, D.C. Metro and 30-year real estate veteran, shares five tips to increase a buyer’s chances to submit a winning offer.
As you know the DC metro market is HOT! That old supply and demand thing from Economics 101 is really in play; too many buyers and not enough sellers. This leads, in many situations, to multiple offers on properties. If you find yourself ready to make an offer, here are five powerful things you can do to improve your chances of getting the home of your choice.
1. The Fast Kill The Slow. A buyer will be in the best negotiating position in a competitive situation if they are be the first buyer to submit a reasonable offer the seller can work with. It should compel a response from the seller before the seller receives any other offers. Acting fast and strong in a competitive situation gives a buyer the best chance to beat out other buyers. This strategy is greatly enhanced when used in conjunction with the next strategy, “The Quick Closing.”
2. The Quick Closing. In some situations, especially when the seller is making mortgage payments on a vacant property, a buyer can distinguish their offer by being able to close on the purchase quickly (eight, 14, or 21 days). This strategy can offer the buyer a huge advantage over other competing buyers. They are the only purchaser who can close the purchase before the seller has to make their next mortgage payment.
One key element of this quick closing is the compressed timeline to meet the seller’s desired closing date. A buyer is forcing the seller to make a quick decision and takes away any advantage the seller might have in a protracted negotiation, especially the advantage of giving other buyers time to submit their offers. The key to this strategy is a top notch lender with in-house processing, underwriting and closing departments which have a proven track record of smooth, quick closings. Most lenders will require 30 days, or even as long as 45-60 days, to complete the loan and other buyers using these lenders won’t be able to compete with your quick closing.
3. A New One! If you have the cash as a buyer, offer to pay for some, or all, of the seller’s closing costs. This is the reverse of asking the seller to pay for some of the buyer’s closing costs. This can reduce issues of increasing the price to net the seller more and possibly avoids appraisal issues by NOT raising the sale price.
4. Don’t require a Home Inspection. This is a much discussed item. But I must caution; before choosing NOT to perform a home inspection, know and understand the risks. If you’ve written a strong offer in all other regards, you don’t have to give up this option. There are ways to obtain your Home Inspection and NOT risk losing the offer contest.
5. Strengthen Other Elements of The Offer. While a seller’s decision often comes down to the net sales price (what the seller will walk away with), there are other elements of an offer which buyers and agents sometimes forget - elements which can sway a seller off of accepting the offer which nets the most. These include:
- Size of the down payment: The larger the better.
- Size of the earnest money deposit: The larger the better.
- The seller subsidy: Sometimes referred to as Buyer Closing Cost Credit. Eliminate this if at all possible.
- Settlement date: Either as quickly as possible as noted above, or a date of the seller’s choosing in the event the seller needs, or wants, to stay in the property longer, or even past the settlement date. Flexibility on the part of the buyer can prove to be a real incentive for a seller to accept this offer over others. A good agent will always communicate with the seller’s agent to gather this info on seller preferences.
- A strong lender letter. This is a letter written by the buyer’s lender of choice indicating the buyer’s ability to obtain the financing indicated in the contract. The stronger this letter is written, the stronger the buyer’s offer looks to the seller.
- A CASH offer. Any offer indicating the buyer will be purchasing ALL CASH, with no financing, will require a statement proving proof of the funds necessary to close the transaction. Without this proof, the cash offer is worthless. With this proof, the offer is “golden!” CASH is king!
There are, of course, many elements of a contract to purchase. Buyers should think about their offer package as a whole, taking into consideration the psychological impact on the seller of each element individually and in combination with each other. It’s often possible for a buyer to make their offer stand out from other competing offers by using smart tactics with every element of their offer, without necessarily having to spend more money in the sales price.
Paul Valentino is the President of Coldwell Banker Residential Brokerage in the Greater Washington, D.C. Metro, and is a 30-year real estate veteran. A certified residential broker, Valentino holds the National Association of Realtors® e-PRO professional real estate designation, and is a member of the National Association of Realtors®, the Virginia Association of Realtors®, and the Northern Virginia Association of Realtors®.