Sellers have the upper hand in today’s housing market. But that doesn’t mean buyers are helpless to improve their odds.
With demand far exceeding the number of homes for sale, buyers have become all too familiar with the disappointment of getting an offer rejected. “I’ve recently gotten over 22 offers on a house after just two and a half days of being on the market. So it’s highly competitive,” says Scott Sanchez, a licensed Realtor with Keller Williams Clients Choice Realty in Colorado Springs, Colorado.
But even in a heated market, there are some creative ways to catch the interest of sellers and get your offer to the top of their pile — without necessarily increasing your bid or paying more, according to a range of real estate experts.
The highest offer isn’t always the one that’s accepted, these experts say. But you’ve got to at least match the listing price. “If you’re going to get multiple offers, anything below [the listing price] doesn’t even get looked at,” says Shaheedah Hill, licensed Realtor with Maximum One Realty in the Atlanta area.
Beyond that, sellers value certainty over anything else, and this is where you can make your mark. “If a seller’s going to accept your offer, they want to make sure that it’s going to go through,” Hill says.
Linda Landon, 68, sold her L.A. home last year and accepted a lower offer over other bids because it was all-cash versus financing.
Getting into the mind of a seller in today’s market can help buyers craft an offer that will stand out — such as creating a personal connection. For example, one thing Landon appreciated about the offer she accepted was the heartfelt letter the buyers included. “They really got the essence of my home. They really appreciated what I know to be true about the home,” Landon says.
When multiple buyers are close on the price and payment structure, sellers need to narrow down their choices. If you’re up against other comparable offers — as is often the case these days — and a seller needs a tie-breaker, experts say there are ways you can stand out and pitfalls to avoid.
5 Ways to Make Your Offer Stand Out
We asked three real estate experts for their advice on how buyers can make their offers stand out in a challenging market. Here’s what they said:
1. Avoid talking negatively about the property
A home is a big financial investment. It’s also where we make memories and mark many of life’s big milestones. So it’s easy for homeowners to develop a personal connection with the property that doesn’t break just because the house goes on the market.
Being considerate about how you speak about the house goes beyond sparing the seller’s feelings. Some buyers make negative comments about a property thinking that it will result in a better price for them somehow, says Tamar Asken, CFP and licensed Realtor with Avenue 8, a real estate brokerage in the Los Angeles area. “And that’s extremely unhelpful. You need to do the opposite. Tell people that you love their house. They’re more likely to want to sell it to you if they think that you appreciate it.”
And with the proliferation of smart home devices, such as Google Home products, Amazon Alexa, nanny cams, security cameras, and baby monitors, pay attention to what you say even when the homeowners aren’t around. “[Don’t] discuss the offer in the house, and also, don’t say anything negative about the person’s home while you’re there, because they probably are listening,” Hill says. Many homes also have security devices and smart doorbells at their door, so Hill says this is important to keep in mind even as you approach a house. A flippant comment about some imperfection with a property can be received poorly by a seller — who in turn could hold it against you in considering offers.
2. Include appraisal gap coverage
In this seller’s market, buyers might need to offer higher bids on higher-priced homes, if their budget allows. On the flip side, sellers may be concerned their home will appraise for less than the accepted offer — which can mean a renegotiation on the selling price.
Lenders use a loan-to-value ratio (LTV) to calculate how much someone can borrow. If an offer is made on a home that is higher than the appraised value, the deal would likely need to be renegotiated since the standard LTV for borrowing is typically 80% of the home value.
For example, consider a buyer who bids $300,000 on a home. But after the appraisal, it’s valued at a lower amount, in this example, for $275,000. The borrowing power for the buyer has now decreased from $240,000 to $220,000. This difference can easily derail an offer that otherwise worked for a seller and a buyer.
|80% LTV (Amount Able to Borrow)|
|Buyer’s Bid: $300,000||$240,000|
|Appraised Value: $275,000||$220,000|
One way to improve the offer is to include an appraisal gap clause. With this clause, you’re committing to cover some or all of an appraisal shortfall. And in some situations, this is an essential part of crafting a winning bid. “The biggest divider I’m seeing is the appraisal gap,” Sanchez says. “I’ve had some sellers recently who took a little bit of a smaller offer because it was a guaranteed [full] appraisal gap.”
For the buyer, it’s very important to only commit to covering 100% of the appraisal gap if you have the cash to pay for it, which can be challenging to estimate. If the appraisal comes in $20,000 or $30,000 below what you offered, then you’d need to pay that out of pocket. An agent can help you anticipate costs depending on the appraisal scenario.
You can also include a partial appraisal gap. Hill has recommended that buyers offer an appraisal gap of 1% of the offer price. So for a $250,000 home, you’d commit to paying $2,500 if the appraisal comes in low. This may feel like a small amount, but even that can make your offer more appealing. “Some people are offering [above asking], but they have no appraisal gap,” Hill says. “The seller knows that if it doesn’t appraise, we’re probably going to have to renegotiate this back down.” Promising to cover 1% of the appraisal gap is better than someone who isn’t promising anything.
3. Vet your real estate agent and lender
Help yourself by researching and vetting your real estate agent. Here are some things to consider:
Find a local agent and lender: While the process of buying a home is similar across the country, the etiquette and details of a transaction can vary from one area to another. You’ll want to work with a real estate agent who isn’t just familiar with the area but also with the type of property you’re interested in.
An agent who knows the market you’re shopping in can help your offer stand out. “Having a super pro agent that knows how to submit a clean offer in the way that it is expected to be received in your market inspires a lot of confidence in the listing agent,” Asken says.
Using a local lender may also appeal to some listing agents. “Sometimes we’re looking for local lenders,” says Hill. “Online and out of state [lenders], I put a star by those because … you want to have somebody that you’re familiar with or that you know you can reach readily.” A great loan officer can inspire confidence in the seller and listing agent that there won’t be any problems when it comes to getting the mortgage approved.
Experience in crafting solid bids: Expert coaching can help you craft the best bid. You can do this with an experienced agent who can help you provide proof that you’ll be able to close the deal at the price you offered. Sanchez likes to send account statements with a buyer’s cash balances circled in red along with an offer. “My goal is to email all of that over, along with the lender [preapproval] letter, and I say ‘hey, these buyers are solid, they’re not only solid, but I’m proving to you that they’re solid.’”
Lender communication and relationships: A good seller’s agent will verify the financing with the mortgage lender when they’re reviewing the offers, so you’ll want to work with a responsive loan officer. “The loan is the lifeblood of the deal, and I can’t tell you how many deals I’ve had where the lender does not communicate with everybody,” Asken says. If your agent has an existing relationship with the lender, that could help move things along quickly and not hold anything up.
Hill tries to work with lenders that will take the borrower through the underwriting process ahead of time. During the underwriting process, a lender verifies your income, assets, debt, and credit history. This way, there won’t be any surprises when it comes time to close on a home. “But sometimes you’re not always working with lenders that are willing to do that,” she says.
4. Carefully consider waiving or adjusting contingencies, if you can assume the risk
Contingencies are clauses in the purchase agreement that allow the deal to be canceled if certain conditions aren’t met, and they typically protect the buyer but can frustrate a seller. For example, a financing contingency allows the buyer to walk away from the deal if they can’t get a mortgage.
Sellers prefer offers with fewer contingencies because that means there are fewer opportunities for a deal to fall through — costing the seller time and effort in starting over with new buyers.
But every contingency you waive is a risk you’re taking on, and some contingencies you just can’t waive. If you’re selling your house and need that money to put toward your new home purchase, then your offer will need to be contingent on selling your current house.
You can improve your offer without completely waiving your buyer protections. Hill suggests shortening the timeframe for certain protections. “I deal with a lot of first-time homebuyers, so I don’t recommend for any of them to waive the due diligence period,” she says. The due diligence period is when buyers can have the home inspected, appraised, and decide whether or not to walk away from the deal. But having a due diligence period of three days versus 10 days may be more appealing to a seller.
But you’ll need to be sure you’re working with an inspector that is available on short notice. Also, depending on the type of mortgage and local or state laws, there are certain contingencies that you may not be able to waive. It’s important to have a conversation with your agent ahead of time to determine what plan makes sense for you and to be prepared to move quickly.
5. Build a personal connection with the seller
Taking a little extra effort to build a personal connection with the seller can pay dividends. “A lot of people are still looking at stories,” says Asken. Some sellers may not want their most precious asset to go to a developer that plans to strip and flip the house.
Leveraging an emotional connection could work in the buyers’ favor — by writing a letter to the seller. Similar to Landon’s story, Hill had a buyer who was a veterinarian technician, and the house had a chicken coop. In the letter, the buyer talked about how much they loved the chicken coop and wanted chickens. The offer was accepted, and the seller had eggs set aside for Hill’s buyer when they showed up for the first inspection.
It’s also important to be careful with what you disclose in the letter. You want to avoid putting the seller or agents at risk of violating fair housing laws. Avoid mentioning your ethnicity, religion, or family status. Instead, focus on the house itself and what you like about it.