Home Buyer Beware: Six Reasons Your Offer Isn't Going to Win
By Ryan Taaffe, REALTOR® | Keller Williams Realty
Once you find a home you’d like to buy, and you decide to write an offer, it’s natural to think about one thing: the price. Deciding how much to offer isn’t necessarily easy, but the impact of the price you offer is pretty straightforward: more money is probably going to be more appealing to the seller. But price isn’t everything! There are other ways you can catch the seller’s eye and make your offer more competitive.
When you start thinking about putting an offer together, your real estate agent should start getting to work on your behalf. A call to the seller’s agent should be their first step. The purpose of this call is to learn more about the seller’s circumstances and preferences, information that can help you make your offer as compelling as possible. Many sellers have specific timing requirements and only will consider an offer that aligns with their schedule. Others are just looking for a simple transaction and don’t want to worry about contingencies and potential delays.
Blindly writing an offer may work, but if you’re unsuccessful, there’s a good chance it’ll be due to one of these common mistakes:
You picked the wrong settlement date
When you put together an offer on a home, one of the first decisions you’ll have to make is the settlement (or closing) date. You may have limited flexibility, but it’s best to at least know what date the seller is looking for. Do they want to close immediately? Or are they not able to close for another few months? Ideally, you’ll be able to match their preferred timing as closely as possible. This will help your offer stand out against the competition.
Timing can be a major strength for first-time buyers who don’t need to sell another home in order to close. If you’re renting, it may be worth closing on your new home before your lease ends – or paying to break your lease early – to make your offer that much stronger. If the seller wants to close as soon as possible, make sure you’re working with a lender who can handle the quick turnaround. Ask your real estate agent for lender recommendations and other ways to make your closing date a win-win.
You don’t have enough skin in the game
Another decision you’ll need to make is how much you’ll put forth as an earnest money deposit (EMD), also known as a “good faith” deposit. This money is put into escrow – held by a third party, not the seller – shortly after your offer is accepted. It’s then applied to your down payment or closing costs at settlement. If the sale falls apart, you can get your EMD back so long as you’ve followed the terms in the contract. If you just get cold feet and decide not to move forward with the purchase, the seller may keep your deposit.
Many people say one to two percent of the home’s sale price is sufficient for the earnest money deposit, but you’re more than welcome to go higher! A larger EMD shows the seller you are serious and have every intention of buying their home. Make sure your real estate agent can clearly explain the terms of the contract and the situations in which you can and cannot back out. Then, you can determine your level of comfort with a larger EMD.
You have too many contingencies
If you’re not familiar with the term, contingencies involve steps that must be completed prior to closing. Inspections, financing, and other contingencies are common, but in hyper-competitive markets that favor the seller, they’re often waived by serious buyers. For example, some buyers’ offers aren’t contingent upon financing, because they plan to use all cash and don’t need a loan.
Contingencies aren’t always inherently risky to the seller, but competing offers with no (or fewer) contingencies present less risk. If a buyer includes an inspection contingency in their offer to purchase a well-maintained home, there’s a good chance they’ll find no major problems… but why go through the trouble if someone else waived the inspection entirely?
When you know of or anticipate other offers, you may want to consider waiving contingencies to stay competitive. What you decide to waive will depend on the home, your financial situation, and your risk tolerance. Talk to your agent about your options, and consider the seller’s priorities when deciding how to proceed.
The sellers are uncertain about your financial situation
This goes hand in hand with the previous section. When there is lots of competition, including an appraisal contingency – or even just a financing contingency – can be a deal breaker. If you’re unable to waive these contingencies, don’t worry – your agent can help you remain competitive. They can connect your lender and the seller’s agent, allowing the lender to emphasize your strong financial position and give you credibility. If you’re working with a trusted lender and you’ve been pre-approved, the seller should take your offer plenty seriously. Even if you’re up against an all-cash offer, the rest of your offer’s terms might be better. Calls from your agent and lender could be enough to help you win!
Your offer is a mess
Sometimes, offers must be put together very quickly, either to be the first offer submitted or to meet a deadline imposed by the sellers. Depending on the number of contingencies and other factors, there may be numerous documents needed. Your agent should carefully review every page so that no incorrect dates or pieces of information are included. After the documents have been filled out completely, your agent also will need to add various fields for you to initial and sign. If your agent doesn’t correctly manage this process, the seller may discover problems requiring more proofreading and back and forth for signatures. If there’s too much missing or wrong, and especially if the seller is on a short timeline, they may ignore your offer entirely!
While these mistakes may seem insignificant compared to the price and other terms of the contract, they make a bad first impression to the seller and their agent. Neither will want to worry about mistake-filled contracts; the speed and certainty associated with a carefully written offer might be all it takes to set yours apart.
You don’t know the competition
Throughout this article, you might’ve noticed the numerous references to other offers. Unfortunately, buyers do have to compete when writing offers to buy great homes. This is particularly common in hot real estate markets with limited supply like Northern Virginia. If you really like the home, you’re probably not alone! Especially if the list price is reasonable, sellers may receive ten or more offers – and that could happen over just one weekend.
When your agent reaches out to the seller’s agent before you write an offer, they should be asking how many offers have been submitted already. This can help you and your agent determine how strong of an offer might be necessary to get accepted. For example, if the seller already has ten offers, chances are at least one is at a higher price point, and another might waive all contingencies. On the other hand, if the seller hasn’t received a single offer and wants to sell right away, they might be willing to budge.
No matter your flexibility on price, timing, or other terms of the contract, it’s important to have as much information as possible. Without any knowledge about the seller and other potential buyers, it’s difficult to craft the best possible offer.
Want to learn more about how to write a winning offer? Questions about the homebuying process in general? Reach out to Ryan Taaffe, a real estate agent and licensed REALTOR® in Virginia and DC.
Ryan Taaffe, REALTOR® | Keller Williams Realty