My offer to purchase a home in Poway, California recently beat out 19 other offers. Literally 19 strong offers!
How did I do it?
Representing myself and my husband as the buyer’s agent, I realized that on this particular property, the seller cared about selling to a family rather than an investor. So I brought my adorable toddler to the open house so that the listing agent and neighbors would fall in love with him (which of course they did)! Then I wrote a sappy (but 100 percent true) cover letter about how badly we wanted to get my son into a great school district and how we could see raising our family in the house. Our offer was accepted and we love our new house!
Of course, we had made five unsuccessful offers prior to nabbing this one.
Real estate markets across the nation are tipping in favor of sellers such that a prospective buyer must hastily make their best offer on a home and, in many cases, compete against savvy investors who can pay cash for the property.
Submitting a winning real estate offer comes down to a combination of business savoir faire and human interest. Let’s take a look at both.
What makes a strong real estate offer?
When comparing offers, sellers usually consider the following:
- Purchase price
- Whether the offer is cash or requires financing
- If financing is required, the loan type and the borrower’s qualifications (i.e., whether they are pre-approved)
- The closing date
- Conditions on the sale (for example: inspections or the sale of another property)
- Other costs that impact the seller’s profit
This last item might include anything from buyers asking the seller to pay for termite repairs, buyers asking for the seller to pay for a home warranty, or buyers asking for sellers to credit them money towards their closing costs. The more you ask the seller to pay on your behalf, the lower the seller’s net and the less likely they are to accept your offer. You still have the right to get all of the home inspections that you want and if you choose to you can purchase a home warranty, but it’s better in this market to pay for these type of items yourself than to ask the seller to do so.
If you are offering to pay all cash for the property, make sure you give your agent a recent proof of funds (such as a bank statement with the account number whited out) to send to the listing agent with the offer. If your purchase offer requires financing, don’t even think about sending in the offer without a preapproval. If you don’t have one yet, stop looking at houses and contact a mortgage lender.
Some bidders include a personal cover letter with their real estate offers. In such letter, you can introduce yourself and briefly describe why you like the home. Obviously, a cover letter won’t always convince a seller to take your lower offer over another, but there is no downside to doing one, so I recommend buyers include it. You can prepare a generic letter introducing yourself and then change the date and details about each house on which you bid.
When the sellers are the homeowners, such a personal appeal may in fact help you win out over close offers that don’t include letters. I should note, however, that a letter probably won’t help you if you’re going after a foreclosure or short sale. The asset managers at banks are not emotional about the properties in their inventory. They don’t care about the details of your family life; unfortunately they only care about their money!
Going above and beyond
Making the terms of your offer stand out by going above and beyond can sometimes do the trick. I recently saw a buyer beat out a plethora of other buyers on their offer of a home here in San Diego but doing something very bold: instead of asking for the seller to pay for the buyer’s closing costs, the buyers put in the offer that they will pay $5,000 towards the seller’s closing costs! Clearly, that made one happy seller. If you have the funds to do so, you can also consider adding in something like “upon successful close of escrow, buyers will pay $500 for seller’s moving van” into the contract.
You would think, “why not simply add $500 to the purchase price?” Although the net result may be nearly the same, human beings are irrational creatures and may be swayed but such nontraditional gestures.
Summarize your offer with bullet points
As a real estate broker, I love it when the agents who send me offers use bullet points to highlight the terms in a simple email or cover letter attachment. Why?
- Real estate contracts are several pages of dense text, and there are sometimes 10-20 offers on one listing.
- Anything that saves time is greatly appreciated.
- Presenting multiple offers to the sellers takes a very long time. Even though it’s required it can still be stressful for the sellers.
- Sellers typically want to look at the highlighted terms such as purchase price, type of loan, how many days the escrow will be and closing costs splits first.
I realize it seems silly and you don’t actually have to write your cover letter using bullet points or request that your agent use them in a formal email submitting the offer, but the main idea here is that both you and the buyer’s agent that you hire need to be extremely organized. The easier you make things for the seller and seller’s agent, the more likely you are to get your offer accepted.
If you’ve already put in several offers and are starting to feel discouraged, take heart; it takes time to buy a home. Making a few changes in the terms and presentation method of your offer can make a big impact. Oh, and I don’t recommend borrowing anyone’s toddler to take to an open house. The listing agent on the house that I bought just happened to be my new next-door neighbor. Good thing I was truthful!
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