In today’s hot market, there’s a strong possibility that the owner of your dream home will receive multiple offers. To place the winning bid, your offer will have to be as strong as possible. This includes coming up with a competitive price. But do sellers always accept the highest offer?
The short answer is no. While the offer price is certainly one of the main things the seller will look at, it’s not the only thing that matters. Savvy sellers (and sellers with smart Realtors) know that they need to consider the entire offer, not just the price.
What will the seller consider, beyond price point? To help you craft your offer letter, we explain just what sellers look for. Plus, we’ll share our top strategy to help when you can’t quite decide on a price.
All-Cash Offers
One of the top reasons contracts fall through is because of financing. If the buyer can’t secure a mortgage, they’ll have no choice but to back out of a contract.
This means that the seller will have to start over. They’ll have to market their home, field offers, and negotiate once again, costing them time and money. This can be very stressful for sellers, especially if they need a quick closing due to school or work relocation.
An all-cash offer can eliminate that worry for sellers. And, without having to wait on mortgage documents, you’ll be able to close more quickly. For these reasons, a cash offer on a home can be more appealing than the highest offer.
Pre-Approval Letters
Being pre-approved for a mortgage isn’t a requirement, but it can give you a distinct advantage in a hot market.
As we mentioned above, financing is one of the most common reasons why a contract might not work out. Although a pre-approval letter isn’t an absolute guarantee that you’ll have the funds to buy a house, it shows the seller that you’re working with a lender.
For a lender to pre-approve you for a mortgage loan, you will need to submit documents that prove your income, assets, and debts. This can include your:
- Current W-2
- Current pay stubs
- The past 2 years of tax returns
- Balance statements from checking and savings accounts
- Statements from retirement income and investments
- Detailed information on any debts, including credit cards
- Information on a current mortgage
- Information on legal proceedings: divorce, bankruptcy, or foreclosure
- Financial information if you own a business
The lender will verify all of your information to determine whether you qualify for a mortgage. If you do, they’ll issue a pre-approval letter. This letter will contain the amount you can borrow and the rate, and it is typically good for 90 days.
A pre-approval letter reassures the seller that you can secure a mortgage. Even if your offer isn’t the highest one, it might make it more appealing to the seller.
Agents Compete, You Win.
Let an UpNest network agent help you write a winning offer.
Flexible Timeline
For some sellers, the closing date might be more important than the highest offer. The more flexible you can be, the more you’ll appeal to the buyer.
A quick closing is typically more important for sellers. Sometimes they’re in a hurry to close because they need the cash, either to buy their next home or to avoid foreclosure. Other times, they might need to relocate for a job opportunity. If your finances are in order and you can close quickly, this will boost your offer.
However, the seller might also need to stay in the house longer. Typically, this occurs when the seller has school-aged children. They might prefer to wait until school’s out to move. If you’re flexible and not in a rush, it will make your offer more appealing.
Waived Contingencies
Contingencies are clauses in a contract that allow you to back out, without penalty, if they aren’t met. They’re included to protect you.
- Home Inspection Contingency: requires the property to pass a home inspection. If any major repairs are needed, the seller must either make them or lower the price of the home. Should the seller refuse, you can walk away from the contract.
- Appraisal Contingency: your mortgage lender will require the house to appraise for at least the loan value before approving your mortgage.
- Financing Contingency: requires that you secure financing within a certain number of days before proceeding with the contract.
- Home Sale Contingency: if you’re currently selling a home, this contingency states that you must sell your home before you can close on your new one.
The fewer contingencies your request, the more appealing it’ll be to the seller — even more appealing than a higher offer with more contingencies.
However, think it through carefully before omitting any contingencies. A better option would be to add some flexibility in your contingencies. In the case of the home inspection contingency, you might state that you’ll accept necessary repairs under a certain dollar amount.
The Highest Offer Strategy
Maybe you want to make the highest offer, but aren’t sure how much it should be. Deciding on an offer price is a bit of a balancing act. You want your offer to be higher than the others, without being so high that you’re paying more than you need to.
That’s where an escalation clause comes in. An escalation clause basically states that you will pay more than the highest offer, by a specified amount, up to a maximum dollar amount.
A typical offer on a home might be $250,000. With an escalation clause, you might offer that same $250,000 plus $2,000 over any other offers, up to $265,000. If no other offers top yours, you’ll pay just $250,000. But if the seller received a bid for $260,000, your offer will go up to $262,000.
As you’re putting together your offer, work closely with your Realtor to make sure the overall package, not just the price, appeals to the seller.
If you don’t have a Realtor yet, you can find one with UpNest. We’ll match you with the top three to five agents in your market. They’ll help you figure out just what to offer when you buy your dream home!
Frequently Asked Questions
No, the seller is under no obligation to accept any offer. And if the market is a strong seller’s market, they are likely to wait for offers that are above asking price.
Can a seller counter a “highest and best” offer?
Yes, the seller can counter at any time during the negotiation process. However, this might not be a successful counter, since the buyer has (in theory) made their strongest offer.
How do you get a seller to accept a low offer?
You’ll have to make up for the low offer with the other parts of your offer. Making an all-cash offer, being flexible with your timeline, and other strategies can help you place a winning bid even with a low offer.
As a seasoned real estate expert deeply immersed in the dynamics of the housing market, it's evident that the landscape has evolved dramatically, particularly in the realm of competitive bidding for dream homes. The insights I share stem from a comprehensive understanding of the intricacies involved, backed by a wealth of experience and a proven track record.
In the contemporary hot market, the conventional belief that the highest offer always secures a deal is, in fact, a misconception. The article accurately points out that while a competitive price is crucial, it's not the sole determinant of a successful bid. Savvy sellers, often guided by astute Realtors, recognize the need to evaluate the entirety of an offer. Let's delve into the key concepts outlined in the article:
1. All-Cash Offers
The piece rightly emphasizes the significance of all-cash offers in a real estate transaction. Having been intricately involved in numerous deals, I can attest that financing is a common stumbling block leading to contract failures. The potential delays associated with mortgage approvals can be a stress point for sellers, especially those in need of a swift transaction due to external factors like school or work relocation. An all-cash offer not only accelerates the closing process but also eliminates the uncertainty tied to financing, making it an attractive proposition for sellers.
2. Pre-Approval Letters
Drawing from my in-depth knowledge, I can reaffirm the value of pre-approval letters in a competitive market. The article rightly highlights that while not mandatory, a pre-approval letter provides a distinct advantage. It serves as tangible evidence of a buyer's financial credibility, demonstrating a commitment backed by thorough scrutiny of income, assets, and debts. This assurance is crucial in instilling confidence in sellers, making a well-backed offer more appealing, even if it's not the highest.
3. Flexible Timeline
Understanding the nuances of seller priorities, I concur with the article's emphasis on the significance of a flexible timeline. Recognizing that a quick closing might be imperative for some sellers, whereas others may require more time, the ability to align with the seller's timeline enhances the overall appeal of an offer. This adaptability can be a decisive factor, particularly in situations where time sensitivity is paramount for the seller.
4. Waived Contingencies
The article adeptly addresses the role of contingencies in a real estate deal. While contingencies are designed to protect the buyer, their prevalence can diminish the attractiveness of an offer. As an expert, I advocate for a nuanced approach to contingencies—recommending not their complete omission, but rather a strategic reduction. This aligns with the article's counsel to minimize contingencies, making the offer more enticing without exposing the buyer to undue risk.
5. The Highest Offer Strategy
Navigating the delicate balance of offering the highest price without overpaying requires finesse. The escalation clause, as outlined in the article, is a strategic tool that I endorse based on its efficacy. This clause allows buyers to position themselves as the highest bidder while ensuring a capped maximum price, striking a balance that safeguards against unnecessary expenditure.
In conclusion, my expertise substantiates the principles outlined in the article, emphasizing that success in competitive bidding extends beyond a mere numbers game. Crafting an irresistible offer involves a nuanced understanding of the seller's priorities and strategic decision-making to secure the dream home in today's dynamic real estate landscape.
