[WE REPOSTED MUCH OF THE MATERIAL BELOW—BUT ADEED SOME CLARIFYING COMMENTS AS WELL AS CONTRIBUTED OUR OPINION TO MAKE THE MESSAGE MORE SPECIFIC TO OUR MARKET]
You’ve seen every house on the market and you’ve finally found the spot you can’t wait to call home. In fact, you’ve mentally decorated it and planned your new life, down to the barbecues and block parties you’ll have with your awesome new neighbors. Sweet!
Don’t get ahead of your skis.
As you know, you still have one giant hurdle to overcome: You’ve got to make the offer that wins the house. And in a highly competitive housing market, that can be easier said than done. Don’t blow your chances with any of these common home offer mistakes.
- Dragging your feet
If you found the ideal property, the worst thing you can do is wait to make an offer. Of course, you’re allowed to have some feelings of uncertainty—after all, this is likely the biggest financial decision you’ve made in your life. But the longer you vacillate, the greater the chances you’ll set yourself up for failure.
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“Time kills deals,” says Andrew Sandholm of BOND New York Properties, in New York City. “Dragging your feet means you could wind up paying more in a bidding war situation or missing out on the property all together.”
Not only should you be emotionally ready to pounce, but be logistically ready as well. That means pulling together all your paperwork—bank statements, pre-approval letter, and any documents supporting proof of funds—while you’re house hunting.
- Offering your max pre-approved amount
Today’s sellers are often besieged by multiple suitors, and the successful buyer will be one who’s prepared for a bidding war. The best way to arm yourself for battle is to make sure you’ve got a strong financial arsenal. That means getting pre-approved (do this now, if you haven’t already) to show a seller you’re financially prepared to buy a home—their home.
When you make an offer, beware of submitting a price on your pre=approval that exactly matches the amount you were pre-approved for, says Chuck Silverston, principal at Unlimited Sotheby’s International Realty in Brookline, MA.
You want to show financial strength. It’s better to have an approval for the highest loan amount you are qualified for—the difference, will be your down payment.
An exact pre-approval could make a listing agent nervous because not only does the buyer not have any room to increase their offer if they are not the highest, they may look stretched on paper if the home doesn’t appraise.
- Using an obscure lender
Also consider using a well-known local mortgage lender or bank. But before you do, be sure and speak with us. Many agents are leery of certain lenders. You’ll want to make sure your lender has as strong a reputation as that of your agent for closing transactions. Choosing an out-of-area lender could worsen the likelihood of your offer being accepted.
- Having unnecessary contingencies. We wrote an in-depth article about just how much having a contingency in your offer could cost you. If a buyer is nervous enough to want to back out of a deal on a contingency, that is sufficient reason for a seller to be nervous as well. By adding a contingency to their offer, the buyer is shifting the risk of an unknown to the seller, instead of absorbing it themselves. Better to pay for your own additional inspection if you need one prior to delivering your offer, so it’s not contingent upon it. If the contingency is for the appraisal, understand that you are liable for only 80% of the difference. Want to make your offer really stand out? Increase the down payment from 20% to 25% and the seller will feel much more comfortable—especially in a bidding frenzy where the home is selling for far over the asking price. Why? Because it will have to appraise for far less.
If you want the full explanation, read this article we did on how to calculate an appraisal value for you home.
- Letting outsiders sway your offer
When you’re buying a home, you probably want a second opinion. And what you’ll probably get is more like a third, fourth, fifth and so on. We get it. But beware of letting these people—who mean well but probably haven’t seen the many, many other homes you’ve seen—influence your offer.
The trusted adviser does what they think is best and tries to protect the buyer and usually slams the home. Unfortunately, they don’t have the education in seeing the other 10 homes you’ve seen, or understand today’s market. This is especially true if there’s a generational gap. Your parents, as well meaning as they may be, no doubt haven’t kept up on the values. If you hired a professional REALTOR to help you, it’s really best to listen to their advice first, and bounce your thoughts off of your other confidants as a secondary avenue.
- Not selling yourself
Wait, isn’t it the seller who, you know, does the selling? It might not sound quite fair, but in a seller’s market, you want to make sure you—the buyer—look as good to the seller as that picture-perfect house looks to you, Silverston says.
And it’s not just about looking good on paper. In fact, Silverston says, the offer process begins the moment the buyer steps through the door at the open house or showing.
“In today’s highly competitive environment, the listing agent is trying to determine which buyer will be the easiest to deal with,” he says.
That’s why buyers should avoid pointing out defects, asking a lot of nitpicky questions, or even insulting the owner’s taste by discussing changes they want to make.
“Basically buyers who act less than enthusiastic will see themselves at a competitive disadvantage when sellers are comparing multiple offers,” he says.
And, don’t forget to help seal the deal with a love letter—a personal touch could be enough to boost you to the top in the seller’s mind.
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California They may be reached at (650) 508.1441 or emailed at firstname.lastname@example.org.
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario