Your finances are in order, and you’ve found your ideal neighborhood. Now, the next step is to locate the perfect property and make a competitive offer. So, how do you put together an offer that will capture the sellers' attention? Let’s take a look at the following five parts of an offer that can make yours stand out from the rest:

1.    Mortgage pre-approval or pre-underwriting

Pre-approval is a preliminary assessment where a lender examines your financial details and issues a letter indicating the amount you are expected to be granted when you submit a formal application for a mortgage. Without at least a pre-approval letter, sellers will wonder about your plans for financing and are far less likely to even consider your offer as serious. If you’re looking to make an offer on a home, having a pre-approval letter, from a reputable lender, is one way to make your offer stand out.

Did you know that some lenders offer pre-underwriting too? Pre-underwriting is a process that enables you to undergo a thorough underwriting review before making any offers. Essentially, pre-underwriting involves submitting your loan application to the scrutiny of the underwriting process before making offers. By doing so, an underwriter can evaluate your financial information, making it easier to get full approval for a loan amount. Presenting an offer that includes a pre-underwriting letter places you in a similar spot as cash buyers in the eyes of sellers.

2.    Make an offer that’s competitive

A good rule of thumb, specifically in a seller’s market, is to start strong. However, in a highly competitive market, you’ll want to consider offering an amount above the asking price to ensure that your offer is the most attractive. Your real estate agent can help you determine the right price based on comparable sales in the area.

For sellers, the offer price is a critical aspect of the home selling process. The proceeds they receive at settlement are often the sole benefit they receive from selling their home. This money may be essential to purchase their next home or to support them during their retirement.

However, as the buyer, a higher offer price may not impact you as much as you think. In fact, any increase in price will be added to your mortgage and paid off over the life of the loan. This will likely only make a small difference in your monthly payment.

Keep this in mind as you put together your offer. While you ultimately have to be comfortable with the price you pay, if you love the home, it may be worth it to be more flexible on the offer price to put yourself in a better bargaining position.

3.    Limit contingencies

To protect your interests when making a home purchase, you can include contingencies in your offer. These clauses set certain conditions that must be met before the sale can proceed. For instance, you may include a contingency that the sale is subject to the home inspection or appraisal. While these kinds of contingencies are standard, sellers may be wary of too many as they each represent a risk of the deal falling apart. So, when the market is competitive, you might choose to waive some of them.

According to the National Association of Realtors (NAR), the home offer with the fewest contingencies is often the most attractive. NAR states that “…removing restrictions related to the sale of a current home and being flexible with things like the move-in date can make an offer stand out to a seller.”

Keep in mind that waiving certain contingencies when buying a house can be risky. For example, if you waive the appraisal contingency and the home is appraised below the asking price, you may need to make up the difference in cash. Your real estate agent can offer guidance on which contingencies make sense to waive in your circumstances.

4.    Increase your earnest money

Once you've found a home that you're interested in purchasing, the next step is to decide how much money you want to put towards your earnest money deposit. This deposit is a show of good faith to the seller and demonstrates your commitment to the purchase.

At the beginning of the transaction, the deposit is placed in an escrow account and is held until the closing. If you successfully complete the sale, the funds will be applied to your down payment. However, if you fail to comply with the terms of the contract, the seller can keep the deposit as compensation for the loss of the deal. Be sure to understand when this deposit may or may not be refundable to you in the event that you choose not to move ahead with the purchase.

Typically, earnest money deposits range between 1% to 3% of the sale price. However, you can opt to deposit more money to demonstrate your level of interest in the property. A larger deposit can help convey your seriousness to the seller and potentially improve your chances of securing the sale.

5.    Closing Date

Understanding the seller’s motive for selling can be helpful in crafting an offer that meets their needs. For instance, if you know that the seller won't be able to move out for another two months, offering a closing date that's convenient for them would be ideal. On the other hand, if the seller needs to move quickly, you may have to agree to speed up the closing process.

If you have already sold your previous home, you may have a particular moving date on the calendar. But if you have some flexibility, it can work to your advantage. Strengthen your offer by matching the closing date to the seller’s desired timeline.

NEXT steps

If you're just starting your home search, call the team at Spitzer Rutland to assist you. They can help with navigating the local market and guide you on how to write an offer for a house that gets accepted.