2020 has been anything but your typical year. While the hot summer real estate market in Pittsburgh typically begins to cool as summer comes to a close, that simply isn’t the case this year. A variety of factors have lead people to pursuing a real estate purchase, keeping demand high even into the colder autumn months. With so many hoping to acquire their dream home, it’s lead to many cases of terrific offers being outbid.
Fortunately, there are some things you can do to make your offer more attractive to the sellers and increase the chances of getting the property.
- Have Full Pre-Approval – A step beyond pre-qualification, a pre-approval involves submitting your full application to underwriting. Your lender will collect all your financial data and submit for review. This is stronger than a pre-qualification; a pre-approval requires the buyer to provide the proof of their ability to qualify for the loan. When making a choice, sellers will choose to accept the offer that is less likely to fall through- so make sure you’re the safe choice with pre-approval!
- Increase the Earnest Money – Earnest money, or hand money, is the deposit held in escrow. While the contract will dictate how monies are disbursed in the event of a cancellation, increasing the amount offered can show the seller you’re serious. Much like pre-approval, buyers want to know that their time isn’t going to be wasted, negotiating terms with a buyer who could back out at any moment. Few things show commitment like hard earned dollars.
- Pay any Appraisal Shortage – When offering more than asking price, sellers become concerned about the appraisal coming in too low. If you are willing to pay over market value, include the amount of shortage you are willing to pay.
- Remove Inspection Contingency – This option can be tricky, but if you are planning a large remodel or are willing to tackle any defects found, then you can make your offer stronger by accepting the home as-is. Take into account the age and general condition of the property, as the need for an appraisal on new construction may not warrant an inspection as much as a historic building.
- Add an Escalation Clause – An escalation clause is one of the best ways to help prevent your offer from being overbid. Much like automatic bidding on an auction site, you submit a base offer for what you’d like to purchase the property for. The escalation clause then allows you to specify a dollar amount that is most you are willing to pay– essentially giving you a price “range”. In the event of a bidding war, the escalation clause will increase your initial bid- typically in $1000 increments- up to that secondary amount. For example, you start with a $550k offer, with an escalation clause up to $560k, with $1k increments. In the event an offer for $555k is put in by another buyer, your offer will escalate up to $556k. Escalation clauses can help win bidding wars.
- Don’t Delay – In a hot market, being willing to put an offer on a property quickly can often be the most important factor in getting your offer accepted. The early bird gets the worm, and when combined with good terms and an acceptable price, you could be the one to get a new set of house keys! Having your dream home sold before you even put in an offer can be a crushing experience.
Like anything in life, people want to sell what they have for the most they can get…and in a fast-moving, competitive real estate market, it can mean extra effort is required to get the property you want. Satisfying a seller’s desire isn’t as simple as the right dollar amount- move fast and consider terms and conditions that may be more attractive to the seller, otherwise you may be outbid.