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How to Strengthen Your Offer to Purchase a Home

Write a Strong Offer to Purchase a House Strategy

Write a Strong Offer to Purchase a House Strategy

One goal as a buyer’s agent is to help my buyers pay less for their house, but when there are other buyers competing for the same homes, sometimes my clients want to focus on being the winning offer rather than paying the least possible. At the time I’m writing this, there’s been a bit of a downturn in the market, and more buyers are actually purchasing for less than the sellers’ asking price. These tips are good in that situation too because you may want to strengthen your offer to offset offering less than the seller listed for.

Most home sellers aren’t aware of all these possibilities, so this is a great resource for sellers to read too and consider what things they may value.

There are several ways to make your offer more appealing to home sellers so they’ll be more likely to accept your offer instead of another. I do not recommend all these strategies in every situation or to every buyer. As a buyer’s agent, I ask the listing agents (with my buyers’ direction) which of these items they and their sellers value in an offer so we won’t have to guess how to move the needle. Some sellers value certain provisions more than a higher purchase price, so being creative and willing may save you money.

Here are several strategies starting with non-purchase price options and ending with some insights about offer amounts and presentation.

Reduce or waive the inspection contingency.

For starters, if you can schedule your home inspection in advance and communicate that, the listing agent will observe how serious and on top of it you are.

If you and your agent are confident you can inspect the property to your satisfaction in fewer days than typical (10 business days in Portland), you can shorten the inspection period. Consider that if the seller is reviewing offers on a Monday (rather than a weekend), then the standard 10 business days already gives you an “extra” weekend, and you might be able to make enough of an impression by writing 9 instead of the default 10. Keep in mind that getting actual bids for repairs is often difficult within a short timeline.

If you are willing to forego any extra inspections, your offer could emphasize that you won’t inspect for certain things. Most Portland buyers inspect other things not covered by the general whole home inspection such as radon levels, a sewer scope, and a scan for cesspools/septic tanks or oil tanks. There are also specific tests for mold, asbestos, lead-based paint, termites/pests, and others.

Finally, one option is to waive the inspection contingency altogether. I’ve never recommended it to anyone, but some people are savvy enough that they feel confident in doing that. I’ve also heard of buyers completing an inspection before they write an offer so they can waive the inspection contingency, but that could be tough to accomplish in time (and expensive if the seller rejects your offer).

Increase your earnest money and/or down payment.

You can be more competitive by increasing your earnest money (the amount of money the seller would keep if you back out of the transaction in a way not protected in the contract). The typical amount in Portland is 1% of the purchase price. Earnest money eventually becomes part of your down payment anyway, so it’s not super risky to increase the earnest money amount.

Sellers like large down payments because it suggests you can afford more repairs. If the inspection reveals surprise issues, they think that you are financially established and perhaps less likely to walk away from the deal or ask for repairs. Putting down at least 20% would prevent you from paying monthly private mortgage insurance (PMI) too.

Make your earnest money non-refundable.

To show how serious you are about closing the deal, you could make some or all of your earnest money non-refundable so the seller would keep that amount if you cancel the transaction for any reason.

Deposit your earnest money right away.

It’s a small gesture, but you could limit yourself to one business day to deposit your earnest money instead of the usual 2-3 days. A personal check or wire typically works.

Close on the seller’s preferred timeline.

Many sellers want to close as soon as possible, and in that case, communicate with your agent and lender about what’s realistically possible. If you’re paying cash, then a few days is usually all it takes, but keep your inspection period in mind. Other sellers might want more time or might want to close on a very specific date.

Offer to rent the house back to the seller.

Many sellers need time after closing to utilize their proceeds to buy their next home or would love extra time to move. If the sellers seem like people who would be good temporary tenants for you, your agent can draft an addendum on a form specific to this situation that has built-in protections for you as the eventual landlord. A rent back can have a fee or be for free, and it could be for any duration such as one day, ninety days, or more.

Offer a reverse contingency.

You could offer the sellers the ability to cancel the sale if they can’t find their next place to live within a certain timeline. This can be very risky, so you might build in some protections such as delaying the beginning of your timelines or the seller’s reimbursement of your costs for inspections, appraisal, and more.

Offer to accept personal property, or don’t ask for certain personal property.

Find out from the seller if there’s any personal property (typically appliances, but also yard décor, garage tools, paint cans, etc.) that they would prefer to take with them or leave behind. Sometimes it’s a hassle to get rid of old things when you’re moving, so the seller might appreciate not needing to. Some sellers might want to keep their bulky appliances whereas it’s often assumed they’d prefer to leave them.

Use your lender’s strengths.

Each mortgage company has special offerings, so be sure you understand what your lender offers or seek out a lender based on what you think may help you most. Some lenders pre-underwrite their borrowers (faster, less hassle at end of the transaction, more certain deal), some offer the seller earnest money if the lender can’t approve your loan after all, and some know they are much faster at processing loans and receiving appraisal reports than typical. Those are just a few ideas, and your lender may have even more creative financing ideas for you that could make a larger loan or better terms available to you.

Offer something unique.

I’ve heard of buyers who own a restaurant offering a year of pizza to the sellers. That wouldn’t make sense for most of us, but drawing from your specific situation and what you know or assume about the seller, you might be able to come up with a creative offer as well.

Getting Creative with Your Offer Amount!

Write an escalation clause.

An escalation clause essentially allows you to turn the offer process into an auction. For example, you could offer an amount such as $500,000 but also include an escalation clause such as “If Seller has received a Competing Offer for the Property in a net amount greater than the amount of this offer, then the purchase price of this offer shall be increased to an amount $5,000 more than the net amount of any other Competing Offer (from a pre-approved buyer or buyer with proof of funds) up to a maximum price of $531,000.” There are a few other considerations to be aware of, so dive into the details with your agent or read up about it. Note that some listing agents and sellers don’t want to receive an escalation clause, don’t value it compared with a high offer, or don’t understand them.

Offer to cover the appraisal gap.

If your offer is particularly high or there’s a specific concern that the house might not appraise for your offer amount, you can offer to pay more than the appraised amount. Typically, in the event of a low appraisal, the buyer can cancel the deal, or the buyer and seller can agree to a lower sale price. Sellers fear the appraiser will squash their high sales prices, so agreeing to pay more than the appraisal amount assuages their fear. This can actually be more involved and complicated than it may seem, and my brokerage has recommended buyers consult an attorney before offering to pay over the appraised amount. That may not be necessary, but at minimum, go over the specific details with your agent and mortgage lender and be meticulous about the wording in your offer.

Know your limit for the specific home based on tax and HOA.

If you want to offer the absolute maximum dollar amount your lender will approve you for, ask your lender to review the specific property including its tax amount and HOA dues to tell you the exact dollar amount you can offer, which may be a little higher than what the lender estimated as your maximum.

Pay the seller’s closing costs.

It would probably be easier to offer more money, but a seller might like a buyer to pay the seller’s closing costs. You should set specific a limit so you don’t end up paying more than you expected.

“One up” a round number.

Most buyers gravitate towards numbers in increments of $5,000 and $10,000. If you’re leaning towards an offer of $510,000 in a competitive situation, you could instead offer $511,000 or $512,700 to “one up” the competition who might offer $510,000 without going way above your comfort level.

Don’t ask for extras.

To be more competitive, don’t ask the seller to pay your closing costs, a home warranty, or any other finances.

Presentation and Communication

As a buyer, your agent will do all of the communication with the seller’s listing agent, so most of this is out of your control. You can ask your agent if she or he will do/is doing these things and make sure you feel comfortable with the way you’re being represented. Each agent has a different personality and approach, and their communication does inform the listing agent and seller about how a transaction with you might go.

Attend the open house.

One of the only ways a buyer can directlymake an impression on the listing agent or his/her colleague is by showing up for the open house. You can kindly introduce yourself and let the agent know that you made an offer or will make an offer. Consider this interaction from the listing agent’s perspective. A buyer asking nosy questions may be a red flag. Some buyers can be too aggressive (or passive aggressive) about having their offer accepted. The opportunity is for the agent to like you and feel confident you’d be a good buyer who’s likely to close the deal. The open house agent might not be the actual listing agent, so if that’s the case, you could ask that person to inform the listing agent that you were there.

Write a “love letter.”

Many sellers have pride in their homes and a relational attachment to their neighbors. They want to feel good about who will be taking care of their home and being a neighbor. Many buyers include a personal letter to the seller that might include what they love about the home and neighborhood, some personal information, and even a photo. As a listing agent, I don’t like these because unfortunately, people are more discriminatory than they admit. In my experience, my clients haven’t discriminated against race/ethnicity or nationality. They might discriminate about age or family status, or they might favor someone they feel an affinity with. The Oregon legislature actually made these illegal, but that was overturned. I’d prefer this not to be a part of my job even though it makes things more personal, but as a buyer’s agent, I will submit a love letter with my buyer’s offer and can help people craft them.

Have excellent agent communication.

As a buyer’s agent, I try to sense how the listing agent might like to be communicated with and develop a professional rapport. When I’m the listing agent, I’ve been struck by how many buyer’s agents barely communicate or sometimes overcommunicate and nag me with pleasantries or ask for too many updates. I try to genuinely communicate often without annoying the listing agent. When I present the offer, I communicate kindly, summarize the highlights of the offer for convenience, and sometimes emphasize my experience if I think it will inspire confidence. I always call the listing agent throughout the process and confirm the agent received the offer.

Sign all available addendums.

It’s a little time-consuming, but if you can sign the seller’s property disclosures or any other available documents when you submit your offer, it shows the listing agent that you and your buyer’s agent are attentive. It also removes one loophole contingency, giving your offer more strength. Be sure to read the disclosures before signing, of course.

Include a pre-approval letter or proof of funds & have lender communication.

Always include a pre-approval letter or proof of funds with your offer showing you can purchase for at least the amount of your offer. If you’re offering a large earnest money or down payment amount, you could provide proof of funds for that too. I like to CC the lender on my offer email and ask the lender to proactively contact the listing agent to increase their confidence in both the lender and buyer.

Organize documents well with neat digital signatures.

This is another agent task, but I always want my documents to be clearly labeled and divided in a convenient way. As a listing agent, I don’t like receiving one large PDF with a bunch of addendums included and scanned documents with ink signatures because they’re harder to read, and they often appear messy. It’s nice to have a personal touch, but if someone is using ink in this day and age, that may suggest that the agent, buyer, or both are not savvy, which could make the transaction slower and more difficult.

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