Now, we're going to talk about how to win a bidding war and get your offer accepted by a seller. So if you're in a competitive market, you're going to learn how to make sure you put in an offer that has the highest chance of getting accepted and beating out every other buyer.
So if you're in this situation, you're probably in a seller's market, which means the sellers have control, and there are a lot of buyers fighting over houses.
So before we talk about some tips, we first have to get into the seller's mind and think why in the first place are they entertaining multiple different offers. Also, in their mind, the seller wants to be able to walk away from their home quickly. They want to do it with as little work as possible and as much money as possible.
So the struggle here between buyers and sellers is the sellers' everything over here. And as the buyer, you want everything over here and they're normally working a little bit against each other. So this is why you are setting up a bid to be placed on the property so that you can both come to an agreement on what the terms are.
So number one, the first way to make your bid attractive to a seller is to not ask for too much. Often, it's really easy to place a bid on a home and ask for it. So outside of the purchase price, you might be asking for things like seller concessions, which is the money that the seller is giving to you as the buyer to pay down some of your closing costs.
If someone came to you and said, I'll give you a hundred thousand dollars for your house, but I need $3,000 from you to go towards my closing costs. And another buyer said, I'll give you a hundred thousand and $0 in closing costs. Then obviously you're going to go with the person who didn't ask for seller concessions. That's money that the seller doesn't want to give over.
So if you're in a competitive market, you might want to consider dropping any seller credits that you're asking for. So that your bid can come through a lot cleaner, the same thing with anything else of value that you're asking or contract. Sometimes you can ask for furniture or items in the house to stay there. Make sure that you're not asking for any of those items, even watch out for things like refrigerators or microwaves to see if those are in your contract and if those can be negotiated. And if that's going to help your offer stand out a little bit better.
Also, a lot of contracts have a few hidden ways that the seller will end up paying credit to the buyer. So you could have things like a tax proration or home warranties or title insurance, make sure that those aren't included in your contract. If you're really wanting to stand out and make sure that the seller gets the most money possible because, in the end, that's what they want. They want to move quickly. They want to get the most money possible and they want to do it with the least amount of work.
Number two is tried and true method of writing an emotional letter to appeal to the seller. So this is a pretty common practice. It's not used all that much any more, except in situations where it's really competitive, but basically what you could do when you put in your offer is you could write a letter to the seller explaining why you want to move into this house, why this house is going to be beneficial for the growth of you and your family.
Now, this doesn't always work. Sometimes sellers don't care, but sometimes they do. I know realtors this past month who had. Their buyer writes a letter to the seller to appeal to their emotions. And they're talking about how their military family who just moved here. They're just starting to grow their family, and the seller accepted that offer because of the letter.
It's because sellers want to feel like they're doing good. When they're passing on that home, they've built up a legacy in that home. They've built up some emotions and memories in that home and they want to pass it on to good buyers. That emotional appeal can really strengthen your offer. Also, make sure that you're going with the most attractive type of financing if you are financing.
So the most attractive way that you can put in an offer is with a cash offer. The downside is most people don't have the cash for an entire home. So the next best type of financing is conventional financing.
Conventional financing is considered one of the fastest methods of financing. And if you qualify for conventional, it usually means you're pretty solid buyer. So if you can go conventional, a seller is going to look at that more favorable than other government-backed loans.
So things like FHA or VA or USDA or any portfolio loans, they're all great loans, but sellers think they're a little bit riskier or they take longer because of the government's involvement in some of those loans.
As a side note, too, if you are having financing for your home, you can ask your lender or your loan officer to call the sellers. So I do this often on anytime I have a prequalification and one of my buyers is putting in an offer and it's competitive. What I'll do is I can actually call the seller's agent and then pitch my buyer to them and tell them how strong my buyer is. How quickly we can close. And it gives that seller's agent, extra certainty that the deal is going to close because what ends up happening for the seller and for the seller's real estate agent is they'll get multiple offers. Most of them are going to be financing and they're going to have different mortgage companies behind them.
So the seller's agent is trying to figure out is one, going with a reputable company is not going with a reputable company because they want that. They want that deal to close. So if your loan officer can call the seller's agent and just add that extra layer of trust, and integrity that the loan is going to close.
It's going to put you one step ahead. Of every other buyer whose loan officer is not calling the seller's agent.
Another good way to have an attractive offer is with earnest money. Earnest money is a way to put skin in the game and show the seller that you really do intend on closing on the property.
Also, the earnest money is like an upfront payment that you put in with a contract once it gets accepted. So let's say that with your contract, you said you want to put a thousand dollars in earnest money on that contract.
Once the seller accepts, you'll go ahead and put down that thousand dollars upfront before that deal ever closes. And that just shows good faith that you intend on closing on the property. And if you back out of that contract, that thousand dollars has to be decided on what happens with it by the seller.
Now, different counties have different laws in different states have different laws of how earnest money is handled. But it's basically saying we're putting up a thousand dollars binding us to this contract. And if we back out of this contract, we have the potential to lose a thousand dollars. So that shows sellers that you're committed to that deal. And you're not going to flake out on them or get cold feet because you put money down upfront.
Also, you can look at having more aggressive scheduling dates. So when you're setting up your contract, there are going to be multiple dates on when things happen in the deal. So for instance, how long do you have for your inspection period? Most people put this around 10 to 15 days. If you want to be more aggressive on your offer, you could even shorten that down to five days. Another thing that you could do is talk with your lender about how quickly you can close instead of saying. Maybe a 45 or a 60-day window for closing, shrink that down to 30 days or 25 days. If your loan officer has everything they need and knows that you can close the deal on time.
Finally, one of the last ways to stand out is one that's pretty uncommon. I don't really see it a lot unless the market is really competitive, it's a really heavy seller's market, but this is to put in an escalation clause or a purchase price at denim that shows how much you're willing to go up to.
Basically what this is saying is you put in your initial. And then the escalation clause is going to say in increments of how much you're willing to raise that offer. If the seller gets another bid coming in the max purchase price that you'll pay for it.
So let's say the escalation clause that you wanted to write was for a hundred thousand dollars. So you're saying I want to purchase the home for a hundred thousand dollars, but in $2,000 increments, you're willing to up the purchase price up to let's say 110,000. So you put that together in your bid and give it to the seller. So if the seller is willing to entertain an escalation clause like that, think of it like if you went on eBay and you had that auto-bid so when somebody puts in a bid higher than you, you get to come in and you have a higher bid and it automatically happens.
So for instance, if you put in the escalation clause at a hundred thousand dollars, $2,000 increment up to 110,000. And then let's say another buyer comes in and they offer 105.
Your escalation clause immediately is going to put you up to $106,000 in your offer. That way the seller can accept it without you having to go back and forth and renegotiate and wasting some of that precious time in that negotiation. So an escalation clause is a thing to do if you're willing to have some wiggle room in your budget but talk with your realtor about it.
It's a more complicated strategy. It's not all that difficult, but it's a little bit rare and you want to make sure that you're using it for it. So hope these tips help you think about the bid that you're wanting to put in and see if there are some opportunities for you to be able to put in a more attractive offer.