How-To-Make-an-Offer-They-Can't-Refuse--The-Art-of-Negotiating-Your-Dream-Home's-Price

So, you’ve found a home that you absolutely love and you’re ready to put an offer on it. The only problem? Everyone else loves it, too. There are multiple offers on your dream home, and now you’re crossing your fingers and wishing upon a star that your offer gets picked. But what if I told you there’s something else you can do to influence the seller into choosing you?

In fact, there’s more than one thing you can do to create an irresistible offer on your dream home. Let’s talk about that now.

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Get Pre-Approved

From a seller’s perspective, there’s nothing worse than almost selling a home only to find that the prospective buyer’s financing fell through. For this reason, sellers favor offers from pre-approved buyers.

Pre-approved is different from pre-qualified.

Pre-qualified means you provide a lender with an introduction to your financial situation, including your income, assets, and debt. The lender will then make an educated guess on how much you might qualify for. It’s pretty much for kicks and giggles and is not guaranteed by the bank. It just sorta, kinda gives you an idea of what to expect.

Pre-approved is the real deal. It means that a lender has looked at your credit history and other financial information and is willing to lend a certain amount of money to you. Sellers love seeing a pre-approval letter.

Although pre-approval does not guarantee that you’ll get a loan to purchase the home, it does mean that you’re ready to put in offers on a home. You’re backed by a letter from the lender that says you’re a good loan candidate (or at least you were at the time of the pre-approval process). This can influence the seller to choose your offer, especially when paired with one or more of the following.

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Add an Escalation Clause

If you’re competing against multiple offers, it may be useful to add an escalation clause to your offer.

In an escalation clause, you provide a base offer with the ability to increase your offer in increments up to a certain limit. Confused? Let’s break this down:

Let’s say your dream home goes for $200,000 and you offer full asking price. However, another offer comes in at $205,000. If you have an escalation clause, you can immediately increase your offer incrementally above that top offer. Let’s say you’ve assigned an incremental increase of $2000. So, now your offer is $207,000. As higher offers are placed, your offer raises, or escalates, to become the highest offer.

You can repeat this process up until a certain point—that is the limit you place on your offer. Perhaps you will not go higher than $225,000 on the home. If no other offers escalate to your final offer, you’re golden. However, if an offer rolls in at $226,000, you’re out of luck.

An escalation clause works best when there are multiple offers expected on a home. It can be risky otherwise, because it gives the seller an upper hand. The seller knows that the initial offer is not the maximum amount that the buyer is willing to pay, and will likely force an escalation.

It happens.

Overall, an escalation clause can be a great when you want to purchase your must-have dream home. But keep in mind that if you do attach an escalation clause, you should include an appraisal contingency. This is so important if you’re financing your purchase. Otherwise, make sure that you have enough funds to cover the difference if your home is appraised for less than you’ve agreed to pay.

Waive the Appraisal Contingency

Here's some advice you may not get from other agents: we recommend waiving the appraisal contingency in the contract. So, what's an appraisal contingency?

An appraisal contingency is essentially buyer protection. Let's say the home appraises for $10,000 less than the sale price. Having an appraisal contingency gives the buyer an easy out.

By waiving the appraisal contingency, you can inspire confidence in the seller. You see, the seller can't control how much the home appraises and that's a big cause for concern. If you (the buyer) waive this contingency, you'll look better than the other offers who didn't.

But, that doesn't mean you're vulnerable in a worse case scenario. We have a proven strategy to make sure you're protected. Learn more about this strategy in an upcoming post.

Don’t Ask for Extra

In other words, don’t ask for closing costs. Don’t make the purchase of the home depend on whether you can sell your old home first. Don’t include an inspection contingency where you can negotiate the seller down or perhaps walk away if something unexpected turns up.

All of these contingencies and demands can horribly disfigure your offer. Now, that’s not to say that I don’t love a good contingency, but when you’re looking to set yourself above every other offer (including those higher than yours), you’ve got to go further than the competition.

Do you really, really want this home? Are you willing to sacrifice three or four thousand dollars in closing costs to get it? It may be worth it.

Offer Extra

Consider adding a small amount of money to sweeten the deal. This is known as earnest money and it protects the seller in case you change your mind about buying the house.

There's a common myth that you'll lose the earnest money if something goes wrong on the seller's end. If that happens, you'll actually get the earnest money back in the form of a settlement– the seller doesn't keep it.

Offering one or two percent of the home’s total price in earnest money can influence the seller to choose you. The more you can afford to put down in earnest money, the more serious you look to the seller. They know you're less likely to cancel the contract in that case.

Be Flexible

Do you know the seller’s time schedule? Perhaps they’re extremely motivated to sell quickly to move across country. Or, they could need extra time before they move out. Perhaps they’re hoping to finish the school year in the same school before uprooting their kids.

If you have the ability to speed things up or wait to move in, do it. For example, if they need to continue living in the home after closing, you can enter into a rent back agreement where you allow the seller to stay in your home for a fee payable to you.

Final Thoughts

Consider doing one or more of these strategies to secure your dream home. It may be radical, it may be crazy, but it may also be effective. Let’s talk.

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