I often have home buyers reaching out to me asking, what they can do in the housing market to make their offers more competitive, essentially win the bid. What I am not going to recommend is you completely giving up the farm, waiving all contingencies and offering the highest price and basically putting yourself at risk to get the offer accepted. Somebody that has seen in last few years the craziness, my goal is to never put my clients at risk. I want them to get the property that they love but also make sure they're doing their due diligence on the inspection side and going through the proper channels where they are not essentially going to have regrets. It's a competitive housing market and people are doing things that I've never seen people do with regards to buying housing and some of my buyers are willing to do that but my advice as a professional is to you know make a competitive offer but do so with keeping your risk at a minimum. So what can you do to help your offer stand out? Keep in mind there's no magic trick so anything that I say isn't a sure way to get your offer accepted but when you combine all these different practices into your offer, your offer is going be you know one of the top offers. It's not necessarily going to be the top offer in some cases because you don't know what other people are willing to do but you know to win you have to be competitive and it's all about being competitive in today's market.
I'm going to assume that you've already been pre-approved not pre-qualified, you've been pre-approved with a lender and they have verified your taxes, they verified your checking account statements, they've looked at your pay stubs, they've looked at your credit report and they know exactly where you stand & told you this is the amount that you can qualify for, because that's going to be critical in this process. Being pre-approved is definitely the first step but it's also going to tie into another thing and that is your lender making a competitive offer and keeping your lender informed of what you're doing and bouncing ideas off your lender to make your offer more competitive because we're going to talk about potentially shortening contingencies on your loan contingency, maybe shortening your appraisal contingency and things like that but when you're making your offer one thing you're going to do is you're going to have your lender call the real estate agent on the other side, the listing agent to have a conversation with them, that conversation is going to go something like "hi my name is John and I'm from xyz mortgage and i'm calling because you know my client is making offer on your property, the buyer's agent is so and so and I just want to talk to you about the offer, my clients are super well qualified they have credit scores at x, their debt to income ratio is here, I verified all of their information you know they're more than qualified and in a position to purchase your home, do you have any questions for me? Is there anything I can send you to verify and help your client understand how well qualified my client are? we're in a position right now where we can close in X number of days" and addressing any potential concerns that seller agent might have, because it's important to know that you've got a strong team on the other side.
When I'm a listing agent I want to know that that buyer lender knows what they're doing and the communications is there, that buyer lender is going out of their way to make it known to me that they have a qualified client, that's important to me as a listing agent and I think it's important when you're on the buying side that your lender does that.
Now the second thing I mention is potentially shortening contingencies so when you write a contract there are standard contingency dates in that contract and typically, they are longer time frames than what you really need in order to meet those time frames in a contract for example you know you have 45 days in the state of IL to have a loan approved. I often reach out to my lender prior to writing that offer for my client and saying "hey look can we get this loan approved in 20 days? can we get it approved in 30 days and they might say yeah, we've already sent it to underwrite, or it's already approved. Why would you shorten your contingency periods? because ultimately the seller wants to get past that contingency period as quickly as possible because you know in my experience once the buyer is past that contingency period, the risk percentage of buyer falling out of escrow is very low, so typically once contingencies are released the buyer ends up closing on that transaction in most cases, now there are some cases where things happen people lose jobs, whatever it is and things don't close or people get cold feet and back out and end up losing their deposit but most of the time once contingencies are released the buyer moves forward with the transaction and that means the seller can move forward with their plans and so the seller wants to get past those contingency periods as quickly as possible. So as a buyer's agent when I'm writing an offers, I'm trying to shorten those contingency periods for my buyer in a competitive and multiple offer situations, not to get them locked into the deal but to help their offer be more competitive if that's the property my client wants and I have this conversation with my clients you know to make sure this is the right property for them. We're not releasing/waiving any contingencies unless clients wants too but we can shorten the appraisal contingency, shorten the loan contingency, and shorten home inspection contingency. I'm calling my home inspector and saying "hey listen can we get a home inspection done in five days or sooner? are you available in the next 3 days for us to get this home inspection completed if we go into escrow" and I'm trying to shorten all these contingencies as short as possible in order to help my offer stand out for my clients.
Now keep in mind I didn't say anything about completely waiving any of these contingencies. Now if you're in a market where people are waiving home inspections and they're waiving appraisals and they're waiving all these things then you must decide if that's right for you, i tell my clients don't waive all these contingencies, leave something in place to give yourself something to be able to back out if something goes wrong. I often work with buyers that want a home inspection but they're okay purchasing the property AS-IS, they've seen it, they walk through it you know they're okay with the risk of something coming up in the inspection. In most cases being a licensed IL home inspector i can provide my recommendation and saying the buyers going to purchase the property as-is, so that means "hey listen we're not going to ask for any small repairs but we're still going to do a home inspection and in those cases I'm still able to negotiate repairs, so just because a seller and a buyer agree to an as-is purchase doesn't necessarily mean you can't come back and ask for things, so keep that in mind when you're writing offers. Out there you know your goal as a buyer is to get into escrow, once you're in escrow you have a little bit more leverage as the buyer to request some of these things because the seller doesn't want to start the process over in most cases and not to say that the seller is going to agree with you and do all of these small repairs you've requested but they may, if there are items that really need to be taken care of, maybe they were unaware of them, maybe it's something they would have to disclose to the next buyer anyway they may be willing to just give you a credit or do those items so that they don't have to start the process over but you can't necessarily go into the transaction thinking hey i'm just going to say as-is and then I'm going to ask for all these small repairs, that usually doesn't work but you know it may help you get your offer accepted if you're willing to do those things.
Now as far as waiving the appraisal I've had many clients this year actually waive the appraisal contingency but I'm as their agent looking at the comparable before we're making an offer on that property and oftentimes I can find comparable that will support an offer above the list price of that property and so I tell my clients "hey listen you know I know the property is listed at X, we're offering X+Y and there are actually comps to support that". So, there's a really good chance it could appraise for X+Y. So, understand if you waive the appraisal contingency you know you might have to make up that gap and you can't use that to back out of the contract, but I think it will appraise and fortunately I have been very lucky this year with appraisals. I have had some appraisals come in short but we've been able to renegotiate them and my clients haven't been in that position so just keep in mind if you are waiving anything just know what your risks are if you're waiving the appraisal, if you're waiving the home inspection you're not going to be able to use those to back out otherwise you would be putting your deposit at risk. So keep in mind waiving those things could present a problem if there are real issues there so just make sure you're minimizing your risk when you're talking with your agent about risk about waiving things.
The next thing we're talking about is removing any miscellaneous fees in the offer. I am talking about home warranties, maybe you don't ask for, the refrigerator, the washer and dryer whatever it is up front maybe you make that you know a negotiation after you get into escrow, again you're trying to set your offer apart from all the other offers and so if all the other offers are asking for these things and you're not that means less fees out of the seller's pocket which could help your offer stand out. Now you need to make sure, or your agent needs to make sure that the agent on the other side is aware that you're not asking for these things up front because oftentimes things are overlooked when somebody receives 20 offers and they're going through contracts and small things like that can be overlooked. So, you want to make sure you're pointing out that your buyer isn't requesting these items which is going to save the seller money. I've also seen buyers willing to pay certain fees that the seller would typically pay to help their offer stand out so that could also put you in a position to help your offer stand out.
Now you know the highest price in the down payment and typically two of the first things that a seller looks at and so you know anybody can win if they're offering the most amount of money and waving everything. we've talked about that but what we're talking about here is being competitive without giving away the entire farm. When making an offer on a price what you can do is use an escalation clause if seller is accepting it. We've talked about this before but escalation clause allows you to make an offer but your offer will escalate as other offers come in above your offer, up to a certain price and so say you're buying a house for $500 000 but you're willing to pay $525k but you don't just want to throw the $525k out there to start because you're thinking well what if somebody only offers $505k and I came in at $525k. I'm paying way more for this property than I had to, well then you can make your offer at $500 000 with an escalation clause that says you're willing to go up thousand dollars higher than the highest offer up to that $525k. So if somebody made an offer for $505K, your offer would escalate to $506K but what I think is important here is to remember as a buyer's agent you have to explain this to the listing side to make sure they understand how an escalation clause works, unfortunately a lot of agents don't understand escalation clauses and how they work and so in order for you to actually be effective with that escalation clause your agent needs to make sure the other side understands it so it's important that your agent have a phone conversation. There are other nuances to escalation clause which I won't go into.
Last thing in making these offers and being competitive and potentially winning the bid is having a professional on your side, that is willing to have conversations with the other side, you want an agent that ideally knows the agent on the other side that helps out but if your agent doesn't know the agent on the other side you need to have an agent that is willing to try to get that relationship, try to find out what's important to the to the seller of that property but also important to the agent of that property you want to make the agent on the other side feel like they're part of the team and the process because relationships in this business mean everything and I can tell you that from doing this long time I get offers accepted often where you know the only reason is because I knew the agent on the other side and they want to work with a professional. When I'm a listing agent I want to work with a professional on the other side I trust and so having your agent have those conversations with the agent on the other side, asking the right questions asking what's important asking what they can do to help their offer stand out that's important. It shows that you're doing what it takes but also follow-up once you submit your offer. Your agent should be following up saying "hey just want to make sure you received our offer, did you have any questions this is what we offered also you should be expecting a call from my lender, he's going to have a conversation with you to show you how well qualified my client is".
All these things matter because you're in a competitive market, you've got to do what the other people aren't willing to do to get what you want to get and again you're trying to do that without putting yourself at risk and all these things that i talked about matter. Now i'm not here telling you need to buy a house now but what I am saying is if you're considering buying a home and you will find youself in a hot sellers market which you will find yourself in again as soon as rates drop, people are submitting multiple offers often going above the asking price, these are things that you can do in order to help your offer stand out.
So, hopefully that gives you a little bit of guidance on what you need to do to be competitive in this market if you're somebody out there that's buying or thinking of buying down the line. what are the things that you're writing in the contract will help decided if your offer will get accepted. I'll continue to update on the housing market as more information comes out, but I appreciate you taking the time to read, I appreciate the support and feel free reach out even if it's for a casual chat on the housing market and econom
