With shrinking inventories, many home buyers are finding only competitive offers will win them the house they want. A recent article by Kiplinger’s Personal Finance highlighted several ways that home buyers can make more competitive “irresistible” offers.
1. Be preapproved: About three or four months before home buyers even shop for a home, they should review their credit reports to make sure they’re accurate and take short-term steps to improve their credit score, says Michael Corbett, author of Before You Buy! Corbett says buyers then should get a bank’s preapproval. While that won’t guarantee they’ll get the loan, it shows sellers that a lender has verified the buyer’s income and credit score to determine that she can afford payments on a mortgage for a certain amount.
2. Don’t lowball: Buyers may only get one chance to get the home they want in a competitive market. They may not get a second try to sweeten the deal later, so a lowball offer the first time around could cause them to lose out. Buyers should use sales prices of comparable properties in the neighborhood to submit their best offer the first time around.
3. Consider an escalator clause: These purchase contract clauses are becoming more popular again. This is when the buyer agrees to increase their offer if there’s a higher bid from another buyer.
4. Add earnest money: The extra deposit can show sellers how serious the buyer is. Some buyers may even double the amount that the seller requests to show their commitment in purchasing the home.
5. Keep contingencies to a minimum: Sellers prefer no contingencies, but buyers want to protect their interests too. “Offset a financing contingency with preapproval and a strong earnest money deposit,” Kiplinger’s Personal Finance reports. “If you have enough cash, temper an appraisal contingency by assuring sellers that if the appraisal comes in lower than the purchase price, you’ll pay the difference or split it with them (up to a certain amount).”
6. Write a letter: Personal love letters about the home addressed to the sellers are winning over some hearts lately. The letters tell the seller about the buyer (e.g. “We’re relocating from …”) and what drew the buyer to the home (e.g. “We especially love …”).
Source: “Making an irresistible home offer,” Kiplinger’s Personal Finance (May 31, 2013)