Today with a low inventory of homes for sale, favorable interest rates, and more qualified buyers than available properties, the quest to find your piece of the American Dream is much more competitive. Many buyers are losing out over and over in multiple-offer situations.
I read that a couple in the Los Angeles area has made over 100 unsuccessful offers last year. Very frustrating! I don't know the particulars of their personal situation, but there are some things that you can do in any situation to strengthen your position and competitiveness.
You can improve your chances by cleaning up any issues that might cause a seller to discount your offer when compared to more aggressive buyers. If your offer is littered with contingencies that protect you, the sellers are more likely to see your offer as risky. Sellers do not want to get down to 2 or 3 weeks before the close of escrow, then find out that the buyers did not approve the physical condition of the property and are going to cancel the transaction. They have lost time, and time is money.
Here are a few more strategies that may work to strengthen your competitive edge. But remember there are consequences to all of them, consult a real estate attorney and your realtor before finalizing:
A great way to increase your chances is to be prepared to do pre-inspections. That's right: pre-inspections. In some areas, the competition is so intense, some buyers are paying for full inspections even before they make an offer in order to satisfy the inspection contingency. Experts say at the very least, have a licensed contractor take a look.
Your Down Payment Says Everything
Be prepared to put up the largest down payment possible. With multiple offers, your cash can be what gets your offer accepted. Also you must be prepared to come to the table with as much earnest money deposit as possible. At least 2 - 3 percent of the asking price, but in some areas 5 percent earnest money is not uncommon. There are other benefits to 20 percent down payment: better interest rate and no Private Mortgage Insurance saves you hundreds per month.
Closing Costs and Verification of Funds
This is a different market and asking sellers to pay closing costs could be a sign of weakness. Ask parents or relatives to give you a Gift Letter for any funds you may be short on the purchase. However, make sure that they understand that they will have to verify the funds by showing their bank statement. Black out the account number and include a copy of this statement with your offer.
Lender Approval Letter
A lender approval letter is a MUST. Make it specific to the property and the purchase amount. It should include all purchasers' FICO credit scores and state that the lender has scrutinized your credit worthiness.
Be Prepared to Pay Above the Listed Price
Then there are those great homes in pristine condition. Buyer financing is not an issue. It boils down to a matter of the highest bidder. In these situations you find more cash transactions, or offers with the loan and appraisal contingencies removed, and still buyers are standing in line to make offers. These are the hardest circumstances for the sellers to decide, it may boil down to which buyer is more flexible.
Your Real Estate Agent
It's also critical to make sure your real estate agent knows the business, knows the neighborhoods, and educates you about multiple offer strategies. Among the most valuable strategies - be patient and don't give up. Don't get so emotionally tied to one particular house that you take risks that could cost you in the long run.