How to Make a Winning Offer to Buy a Home

We’ve all been there including myself. You see the right home at the right price online. You rush over to the open house, its swamped with buyers. You want the home and want to make a great winning offer. How do you win the home? If you’re buying in 2020, your offer to purchase will likely be up against offers from other just as motivated buyers. Learn ways you can make your offer stand out from and be the one that gets accepted.

Please note these strategies are intended for a hot seller’s market and negotiations with multiple competing offers. Market conditions and strategies will change over time. Every offer is unique. In no way should this article be treated as legal advice or as a substitute for the advice you should be seeking from your attorney or buyer agent. 

Ways to make your offer better with a loan

Submit a pre-approval not pre-qualification letter with the offer

This is basic if you are buying a home with a loan. A pre-qualification letter isn’t going to win in a multiple offer situation in fact you might not even get a response from the seller with one. In a seller’s market you need a pre-approval letter and not from an internet lender who sent an email saying you are “pre-approved.” Find a reputable bank and letter to provide you this critical item.

Shorten the time period in the purchase contract for loan and appraisal contingencies

The typical timeframe in the California Residential Purchase agreement is 21 days for this contingencies/conditions to be removed. Buyers can get more than pre-approved for a loan. If you can get fully approved subject only to the bank appraisal and clear title, consider getting a loan commitment letter.

Ask your lender to email and call the listing agent after you make an offer

This simple touch makes a difference and inspires confidence in the seller that you will perform and close the purchase since the lender is good and you as a buyer are solid.

Finance only 80% of the purchase if you can

Not only are you showing the buy you have more money to buy the home, but you can also look and see if your lender will waive the appraisal contingency for the purchase. Waiving the appraisal contingency will help show the seller you are a stronger buyer.

Review any reports, disclosures, and inspections the seller has made available

Get pre-sale inspections, reports, and disclosures if available prior to making an offer

If available these reports can help you streamline what you need to do to purchase the home. You may be able to shorten timelines, pay for items or seller costs, remove contingencies, not pay for your own inspections (accept the seller reports/inspections will save you money). Also makes you a savvy and smart buyer to the seller because you didn’t ask them for an inspection they already paid for.

Make the terms in the offer stand out

Find out when the seller’s preferred date and write it into the offer.

In a competitive situation you want to do all that you can to reasonably address the seller’s preferred terms. Giving the seller their preferred closing date is a great way to tip the scales in your favor. 

Pro Tip: Find out the seller’s preferred date and close 5-10 days early and offer the seller to remain in the home after the close and at no cost. In the end this wins more often than not. The seller isn’t moving until the home is sold, they have the money from the sale, the seller have the time to move out and at no cost.

Make a 1%+ earnest money deposit with your offer

The California residential purchase agreement allows up to 3% of the sales price for a deposit subject to liquidated damages. The typical earnest money check is about 1% of the offer price. Make your offer stand out by submitting a higher than average earnest money amount. Including a check with your offer should be sent as well.

Include proof of funds with your offer

Showing the seller, you have all the money available to purchase the home helps validate you as a strong buyer. You can do this with a letter from your lender saying that proof of funds has been provided or verified or send over a redacted (hide the account numbers) bank statements. More importantly if you are financing over 95% of the home purchase with a loan, showing the seller you have more cash available will help them not discount the seriousness of your offer because of the loan terms.

Waive the appraisal contingency if possible and you are comfortable doing so

If you have an 80% or lower loan amount to the sales price often the lenders can waive the appraisal contingency. Work closely with your lender to see if a waiver is available prior to making an offer. If you waive the appraisal contingency and the bank still requires an appraisal for the loan. If the home doesn’t appraise for the loan you may put your deposit at risk if you don’t complete the purchase.

Consider modifying the appraisal contingency for the loan

If the home doesn’t appraise that you will bring the additional funds to close. This is a risk to the earnest money deposit you made to purchase should you not perform. This strategy should be discussed with your agent.

Don’t make the buyer pay for a home warranty

If you want a home warranty purchase it, if not don’t ask for the seller to provide one anyway. You will learn about the home during your inspections and even if the expense of a warranty makes sense.

Don’t make your offer contingent on the sale of your current home

Instead, work with your lender to get pre-approved for financing which doesn’t require you to sell in order to buy.

Pay for closing costs

Closing costs and other extra fees affect the seller’s bottom line and could cause you to miss out on your dream home. Another option is to increase the offer price to pay for any closing costs. Discuss with your lender if you are buying with a loan if this is allowable.

Add an “escalation clause” or “writing first and countering last” to the offer

An escalation clause is a real estate contract, sometimes called an escalator, that lets a home buyer say: “I will pay x price for this home, but if the seller receives another offer that’s higher than mine, I’m willing to increase my offer to y price.”

In theory, an escalation clause is fairly simple. In practice, there are a lot of details involved with this clause. Again, you should really discuss this strategy with your agent

Shorten contingencies if possible

As much as possible, shorten each contingency deadline (financing, inspection, etc.) to the fewest number of days possible. Talk to your buyer agent about an appropriate number of days for each contingency. The type of property you are buying also should be taken into consideration. For ex, a property on acreage with easements, a private road may not be in your best interests to shorten your investigations.

Purchase the home and property “as-is” subject to inspections

If the property doesn’t have any inspection reports or disclosures available before you make an offer this is a risk. However, a diligent effort on your part can establish the condition and quality of the home and if there is deferred maintenance you need to repair. Showing the seller, you will take the home “as-is” and not request repairs with a financial contribution from the seller make you a stronger buyer. Again, this should be discussed with your agent and you should be comfortable making an offer with this condition.

Write a letter to the seller

Sellers want to like the future owner

Create a connection with your sellers by writing a thoughtful letter. For example, if the sellers raised their family in their home, write a letter which explains why their house is perfect for you and your family. Have everyone in your family sign the letter (the kids with crayons), and include a family photo. Most buyers choose not to write a letter, but very often it’s the personal letter that’s the deciding factor in a multiple offer situation. 

Make the first offer

First offers win more often than not

The first offer has the biggest impact to the seller. In general, there is psychology at play here. The seller is always unsure if the house will sell quickly and for full price. Although there may be competing offers the first offer will be the most impactful. It shows commitment since usually the buyer knows the market, see the home as soon as they can, and quickly submits an offer. These are all signs that the Buyer is very committed to completing the purchase and buying the home

Why Your First Offer is Always Your Best Offer

Final Thoughts

Very often it’s not just the price that determines the best offer. Usually it’s about the offer as a whole, the overall tone of the negotiation, and who the seller trusts are the best fit for their home. That’s why it’s so important to work with an experience local buyer’s agent who sets a positive tone during the negotiation while working with you to assemble a great fair offer.  

Please note these strategies are intended for a hot seller’s market and negotiations with multiple competing offers. Market conditions and strategies will change over time. Every offer is unique. In no way should this article be treated as legal advice or as a substitute for the advice you should be seeking from your attorney or buyer agent.