Crafting a competitive offer in a seller’s market

    Sellers Market
    Sellers Market

    Housing inventory in San Antonio is in short supply so far in the first quarter of 2015 which means that buyers are often having to compete to purchase those properties that are available.  I know no buyer likes to hear that they are in a “multiple offer situation,” but it is almost unavoidable right now and is certainly unavoidable on well-priced, well maintained homes.  Here are some suggestions, born from experience, on how to craft your offer and some things to consider as you are crafting it.

    Type of financing.  Cash is king when it comes to multiple offers.  You may not be able to get a discount off the list price anymore for paying cash, but you certainly have an edge in this situation.  If you aren’t paying cash, consider the type of financing you have chosen to use and what that says to the seller.  A conventional loan where you are putting 20% down tells the seller that you have the ability to absorb some of the costs of the transaction, where an FHA loan with 3.5% down may signal that you’re on a tight budget.  A USDA loan that requires a second underwriting by our friends at the Federal Government may require a longer closing period than other types of financing.  A VA loan that requires the seller to pay some of the closing costs may lose the deal for you when other types of financing don’t have that requirement.  TIP: Some VA lenders will absorb those closing costs on their side helping your offer to be more competitive. 

    Closing costs.  If you are able to pay your own closing costs you will have an advantage over buyers who have to ask the seller to contribute to their closing costs.  All buyers would love to have the seller pay some of their closing costs but if you don’t have to have them, don’t ask for them.  An offer of $200,000 with the seller paying $6,000 in closing costs is equivalent to an offer of $194,000 to the seller.

    Contingencies.  The less contingencies you have in your offer, the better.  The most common contingency is that the buyer has a home to sell and their financing to purchase their new home is contingent on the sale of their old home. If the other offers do not have this contingency the seller is more likely to choose them because that is one less hurdle to clear during the closing process.

    Extras (Home warranty, Survey, etc).  Very similar to the closing costs discussion above, if you have the ability to absorb these various little extra costs then do it and don’t ask the seller to pay for them.  In the grand scheme of things, a $475 home warranty and a $450 survey are not worth losing the house to another buyer.

    Flexible Closing or Seller Leaseback.  If you don’t need to move into the house right after closing, or you have a place that you can stay in the interim, let the seller know.  You never know what their situation and timeframe are and often a buyer who can close earlier, or later, or lease back for a month will have an advantage over a higher offer because the timeframe is more important to the seller.  TIP: Most loans will allow the buyer to lease back to the seller for up to 60 days before moving in.

    Send Buyer’s Letter.  Many savvy buyers today are submitting a letter to the seller with their offer and sharing who they are, why they love the house and why they want to purchase it.  This helps the seller to personalize the offer, to see the people behind the contract, and it may help to sway their decision.  A seller who raised their family in the home may be moved by your letter about how you want to raise your family there as well.

    Offering over Asking Price.  What is expensive today may be inexpensive next year.  In a rising real estate market it may be hard to pay a higher price than a similar house sold for six months ago.  The truth here is that you may not like it, but you probably don’t have a choice.  In almost every multiple offer situation I see offers over the listing price.  TIP: The silver lining for buyers here is that the property will still have to appraise for the purchase price for your lender to make a loan for the full amount.  If you agree to pay more than the listing price, and the property does not appraise for that much, you have a chance to re-negotiate with the seller.

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