Winning Offers in a Seller's Market

With real estate inventory low, most sellers are examining multiple offers above the asking price, taking steps such as removing contingencies and other obstacles could place you ahead of competition.

1. Enlist licensed, experienced industry professionals.

These professionals help achieve your goals, and therefore should be honest and driven regarding any obstacles and challenges.

2. Obtain a pre-approval and mortgage commitment letter.

In less competitive times, prospective buyers could arrive at an open house with a mortgage pre-approval. Obtaining a mortgage commitment letter grants a foothold over other prospective buyers.

3. Include an escalation clause in your contract.

For example, if the highest offer received is $10,000 above the original asking price, and you agree to pay up to $5,000 more than the highest bid, you’ll take control as the highest bidder.

4. Offer earnest money in escrow.

Between 1% and 3% of the purchase price, you can also offer more, for additional leverage. Should the seller accept your offer and the deal closes, you’ll already have this additional money in place toward down payment.

5. Have all of your finances and qualifying documents in place.

Prior to any home search, it’s recommended to calculate budget and debt-to-income (DTI) ratios to determine down payments and mortgage financing. This information should be readily available when initially meeting with your mortgage lender.

6. Be prepared to waive contingencies.

Also known as a “clean” offer, this entails waiving the right to any contingencies, such as inspections, appraisals, sale of another property, or other financial obligations. This should also be free of any special requests or concessions, including the seller paying closing costs and repairs.

7. Agree to an “as is” contract.

These are common with fixer-upper or estate sale properties, when the seller is usually anxious to move quickly. Prospective buyers who don’t mind a rehab property can waive a home inspection and other repairs by accepting the house in its current condition.

8. Consider adding an appraisal gap coverage clause.

While you don’t want to be forced to pay above market value, in this current competitive seller’s market, this clause is almost a necessity. Buyer and seller agree to how much you’re willing to pay above the appraised value, or you split the difference. It’s important to have as much in writing as possible prior to signing the contract.

9. Be flexible and willing to meet halfway.

Even the best-laid plans are fraught with challenges. Even if you can’t reach a specific agreement, a little flexibility goes a long way, and you’re more likely to meet somewhere in the middle.

10. Pay with cash if you can.

If you have the ability to offer to buy a home with cash, it can be desirable for the seller. They will not have to be concerned with your financing falling through.