Ways To Strengthen Offer Outside of Price
Buyer Fatigue Is Real - Here Are Ways To Give Your Offer A Competitive Advantage
The offering price will almost always beat out contract terms but in the event your offer is within arm’s length of the others in a multiple offer scenario - here are some things I have seen buyers do to give themselves a competitive advantage when they are at their max in terms of price:
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Offer ‘Love’ Letter - This isn't going to move the needle a whole bunch if you have a weak offer, however, sometimes when there are two like offers and the seller is trying to decide which to pick - having a 'love letter' to the seller mentioning how you will be a good custodian of the property moving forward as well as referencing admiration of some aspects of the property that you can tell the seller took great pride in can sometimes push an offer forward to acceptance. I always recommend it if you have the time - it doesn’t cost anything and I have seen them do wonders in certain multiple offer situations.
Shortened Inspection Period - Consider shortening this from the normal 10 business days to 5 or 7. There can be complications with scheduling inspections with a shortened period as well as getting contractors out to assess costs of any issues found. But this does shorten the most complex period of the transaction. This is an easy one to do that doesn’t provide much risk or cost to you the buyer.
Appraisal Waiver and/or Remove Appraisal Contingency - This can be tricky if you don’t have a loan that can offer this or don’t have the funds to bridge the gap of a low appraisal in regards to the contract price. With this clause, if you have the extra funds and the lender's appraisal comes in, say, $15,000 less than asking, you can state upfront that in that event you will bridge the gap with your own funds, making your offer comparable to a cash offer. If you have enough down payment and conventional financing, you can ask your lender if they can do an appraisal waiver where an appraisal may not even be needed. Appraisal waivers are often rare but they are given to some borrowers and properties from time to time.
Buying with an "As-Is" Clause - Sellers will love to see this since negotiating repairs is the most frustrating part of any transaction for a seller. Buying 'as-is' still gives you the ability to thoroughly inspect the property, however, if any issues are found it would mainly be a punch list for your own benefit to know what matters of the property may need future correcting as well as noting future costs to absorb on needed repairs. Of course, if something comes up and it’s too egregious to want to move forward, you can always terminate the transaction and earnest money will be returned since it’s within the terms of the sales contract covered by the buyer's inspection contingency and inspection period. (Note: If something comes up during this period you can still ask the seller to make the repair even if you stated upfront to purchase ‘as-is’ - it never hurts to ask and if it’s something serious, the seller may need to correct it for the next buyer anyway)
Early Earnest Money Release - I have seen buyers elect to make earnest money (or a portion of it) non-refundable and released to the seller after a certain time period during the transaction, likely after the inspections and appraisal has been completed. If the transaction makes it all the way to the closing table you would get that money back to apply toward closing costs or down payment, however, in the event the property does not close, you would be out your earnest money - so there is some assumed risk there. Most of the time once the inspection period has passed and the property has appraised there isn’t much cause for concern from that point to get it to the closing table. This can be attractive to sellers knowing that if in the event there is buyer fall out they are still compensated for the time the property was off-market without the nuances of an earnest money dispute.
Seller Rent Back - Often times sellers are very eager to get their property on the market and don’t have a plan for their next home purchase or where to go. Offering a quick close with a pre-negotiated rent-back period where the seller can stay at their own residence at an agreed amount of time after closing is a way the seller can get their funds and have some time to go out and purchase their new property or make moving plans with liquid funds from their house sale. Oftentimes offering a small period at no cost can really move the needle for certain sellers.
Repair Cap - I have seen in some cases where an offer was accepted over another offer due to the buyer stating that they would not seek any repairs from the seller under a defined amount. This can be palatable to a seller in that the inspection period will be specifically a search for integral repairs and that the buyer will not take a collection of small items and try to renegotiate. This can be capped at any amount the buyer feels comfortable with - $2,500, $5,000, $10,000, etc.
*Early Acceptance Incentive - While this does fall in offering the seller more money, in some scenarios where you the buyer are first to view a property and submit a strong offer you can attempt to incentivize the seller to accept your offer before the seller collects more offers in an attempt to create a bidding war. For instance, the first offerer can write a clause that their offer will be $x amount over asking if the seller accepts within a defined time period (typically by end of the day). If the offer is accepted after said time, the offer becomes less.
*Seller Closing Cost Credit - This also falls into the camp of offering more money to the seller, however, if you are in a position to offer to pay some of the seller closing costs in addition to your own, this can put your offer slightly above a like-for-like competing offer.
*Escalation Clause - These can be tricky and do not always work, and oftentimes asked not to be included by the seller or listing agent in a multiple offer scenario. What an escalation clause attempts to produce is that there are set language in the addendum where you offer increments above the highest offer up to a certain limit. For example, if a house is listed at say $400,000, the buyer can offer full price and write an escalation clause that their offer is to be increased by $1,500 over the highest priced offer, not to exceed $425,000. This practice reserves the right that you will be slightly above the highest price offer rather than just going in at $425,000 and making sure you don’t end up paying above your means since you can put a cap to the automatic increases. (Not my favorite practice but in some cases, it has worked.)
Inspection Waiver- Never. Don’t be a fool!
Good luck out there buyers and stay diligent - Your Time Will Come!
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