Making your purchase offer stand out from those of other South Bay homebuyers in 2020 will give you a huge advantage when it comes to buying the home of your dreams. Although we are in the midst of a real estate market that is skewing more favorable to buyers, there is still plenty of competition for appropriately priced homes in coveted neighborhoods. Local home buyers will still need to be prepared, thoughtful, and strategic when submitting offers on homes that meet their wants and needs. Losing out on a home that you have already pictured yourself and your family living in because you didn’t submit your best offer or because your offer didn’t stand out is not a good feeling.
There are steps that you can take to prepare yourself well before you even start looking for homes that will help your offer be more attractive. There are also strategies for writing the offer itself and thoughtful ways to ensure that your offer stands out to the home seller when it is presented. Here are some of our top tips for making your purchase offer the best it can be in 2020.
Preparation: Be the Best Buyer You Can Be
The choices you make before you even start your home search will be instrumental. A home seller and their real estate agent (if they have one) will take a long look at your financing and how good you look financially on paper. Get your financial situation in order and you will be in good shape.
The More Cash You Have, the Better
Submitting a full cash purchase offer is almost always going to look the most attractive to a home seller. If you are in the financial position to come up with an all-cash offer, that’s great, but most buyers are not afforded that luxury. If you are financing your home purchase, you will be best served by getting your credit report looking great and saving as much down payment as possible. This will allow you to get into a great mortgage loan with favorable terms. It could have been a long-held dream of yours to own a house or property. You are likely to face many obstacles on your way to achieving that goal. In addition, money stands out as an important criterion here. Having to deal with the bank for the loan can be frustrating and confusing at times. As a result, you could look for alternative options, such as approaching a mortgage company, like this Canadian K5 Mortgage Company. The stronger your financing looks, the better. In addition to saving for a hefty down payment, you will want to prepare to pay closing costs as well. Often, buyers will make offers that ask the home seller to credit back a portion of what they are offering to go toward paying the buyer’s closing costs. Although this is not uncommon, offers like this are not as attractive to sellers as offers that don’t ask for such credits to be paid.
Strong Credit = Strong Loan
If you are thinking of buying a home, but your credit is average at best, you will most likely not qualify for some of the strongest mortgage loans. You also take a chance of not getting approved for a loan altogether. Most sellers will be advised by their Realtor to be leery of accepting offers from buyers that don’t have strong credit. Real estate agents know all too well that escrows can fail at the last minute because of a buyer’s inability to get final loan approval due to credit issues.
Redondo Mortgage Center can help you get ready to buy a home.
Don’t Underestimate the Power of the Pre-Approval Letter
Get fully pre-approved by your lender! If you submit your offer with a fully underwritten pre-approval letter, that tells the seller and their agent that there won’t be an issue with you getting approved for your loan. A pre-approval letter is different from a pre-qualification letter. The pre-qualification is merely the first step in getting pre-approved and then ultimately, approved for a home loan. The pre-qual is based on information provided by you (the consumer) and does not take into consideration all aspects of your financial situation. Factors such as liens, tax issues, excessive debt, or unreported delinquent accounts can sink a buyer’s ability to get approved for a home loan even after being pre-qualified by their lender. These items will usually be detected during the pre-approval underwriting. This is why having a pre-approval letter will give you an advantage over other buyers that are only pre-qualified.
Start the process of getting pre-approved here!
Strategy: Make the Right Offer
You may have heard someone say, “the highest offer isn’t always the best offer”. More often than not, the highest offer is indeed the offer deemed “best” by sellers. The seller’s main motivations are what decide what an acceptable offer looks like. Since money is usually the main motivator for sellers, the purchase price and the bottom line are very important. In some cases, the seller is motivated by other factors such as timelines, family situations, emotions, and even fear. The buyer that is mindful of all motivations will fare well
Start with Your Best
Since ‘the bottom line’ is usually the main motivator for sellers, the best approach as a buyer is to come straight out of the gate with your highest and best offer. If you are submitting an offer to purchase a home that you feel is ‘the one’, then don’t take the chance of losing it over a few thousand dollars just because you want to negotiate. In a ‘multiple-offer’ situation, you won’t know how much a competing buyer offered, so it will be best for you to make the highest offer of what you are willing to pay. In the end, getting your offer accepted and buying a great home to raise your family is going to be worth every penny that you may have overpaid.
Find out What Motivates the Seller
There may be a myriad of things that motivate a seller. If you have the opportunity to speak directly to the seller or their agent before making an offer, try to find out what other terms may help your offer look better. You may find that the seller is concerned about the home inspection process and the proposition of needing to remedy a long list of expensive repairs requested by a buyer. If you are aware of this, you could choose to remove your inspection contingencies or agree to buy the home ‘as is’. This will make your offer very attractive to the seller over offers that do not address this motivation.
Offer More Earnest Money
One of the first acts of intent performed by a buyer is the deposit of their earnest money. The earnest money is the amount of money the buyer offers the seller as an initial deposit which is held in escrow until the transaction is completed. If the buyer backs out of the transaction for reasons not covered by contingencies of the contract, the seller would keep the earnest money. If the buyer performs pursuant to the terms of the purchase contract, the earnest money is applied as a credit back to the buyer when the escrow closes. A larger earnest money offer may be seen by the seller as a higher level of intent or confidence from the buyer.
Fast Close…or Maybe Slow it Down a Bit
As I mentioned before, timelines may be very important to the seller. Perhaps they are accepting a job promotion that is taking them to a new area and they need to be moved into their new city by a specific date. There could be a desire to stay in the home for a longer time frame due to the seller’s personal situation. Knowing the seller’s specific needs in regard to timelines could help you offer terms that provide them with the timelines they need. Being flexible with your own timing for closing escrow or taking possession of the home will be positive.
Remove the Extras from the Offer
Sellers and their agents love ‘clean offers’. This is a straightforward offer from a buyer that offers the seller almost exactly what they want and doesn’t ask for home warranties, buyer’s preferred escrow, closing cost credits, extended contingency periods, etc.
The Thoughtful Approach: Don’t Forget the Human Element
It is important to remember that the seller of the home you are attempting to purchase was in your shoes when they were the buyers of this home. It won’t hurt to help them remember how it felt. After all, the sellers are human and emotions could definitely tip the scales in your favor if you hit a nerve.
Seize any Opportunity to Speak directly to them
If you have the opportunity to speak with the sellers to ask them questions about their home, hopefully, you will make a great impression on them. When your offer comes in, they will be able to associate a face and personality with the offer. If the seller identifies with you and your situation, their emotional connection with you could help them make the decision to accept your offer rather than counter it over a few minor items. This could also help when negotiating repairs later on.
Submit a Letter with Your Purchase Offer
A personal letter submitted with your offer will show the seller that this is much more than an investment or ‘another transaction’ to you. It is your opportunity to show them how much you love their home and what it will mean to you and your family to make it your home. You could kick it up a notch and include a family photo as well.
Your Agent can Help
Most experienced, hard-working Realtors have a few tricks up their sleeves when it comes to helping their client’s offer get noticed. Of course, a good agent will direct you on all of the above points and do their part in helping you present a great offer. Your agent should also be doing their best to develop a good rapport with the listing agent during the process of setting up showings and fact-finding. Another huge thing your agent can do is to present the offer package to the listing agent in person instead of just shooting it out via email. Some agents even add a small gift as a token of appreciation. This also helps them build a relationship with that agent for the future as well.
Now You are Ready to Make a Strong Offer!
It is important to remember that it is not one single thing that makes your purchase offer attractive. A great offer really is the sum of its parts. It all starts with financial preparation and choosing an experienced, hard-working Realtor to guide you through it.
If you would like to work with an experienced, real estate expert to buy a home in the South Bay, contact Merit Real Estate today at 310-379-4444. We have been selling homes in Redondo Beach and the surrounding South Bay cities for over 30 years. Our agents are experts on how to get their client’s purchase offers accepted in ‘multiple-offer’ situations.