My team and I have written thousands of offers on homes all over Phoenix. Here are the 10 strategies we have used to get our offers accepted even when they aren’t always the highest priced offer!
Strategies You Should Almost Always Use
These first few strategies entail no real risk and therefore make sense to use even if you don’t think you are up against other offers.
1. Write a love letter
While it’s tempting to think that all a seller cares about is their bottom line, this is often not the case. Many sellers have an emotional attachment to their home and really care about who will take over making memories in their beloved castle.
For that reason, we have found great success in attaching “love letters” to our offers. These are simple, one-page letters explaining who you are and why this home is the perfect fit for you.
2. Let them choose the closing date
You will need to include a closing date on the offer so have your agent find out when the seller would like to close and choose that date. Closing faster is often better but not always. It’s best to pick a date they will be happy with by asking rather than assuming.
3. Get there first
Speed matters, especially in our hot Phoenix market and it almost never hurts to be the first offer. This is especially true on a listing that gets 5 or more offers. Most listing agents and sellers will tire of fielding offers and tend to preference earlier offers. Be sure to have auto alerts set up by your agent for new listings that become available. These direct-updated listings from the Multiple Listing Service are much faster than third party sites like Zillow.
4. Make your best offer up front
5. Get prequalified for a mortgage
6. Increase the amount of earnest money
— Strategies that have some risk (use with caution) —
7. Inspection contingency
8. Appraisal Contingency
Your lender will require you (most of the time) to get an appraisal. This is a third party opinion, which you will pay for (approximately $600), of what the house you want to purchase is worth. The lender wants to be sure you are not overpaying for the house so as to protect their loan. If the home appraises at a value lower than the purchase price of the home then the lender will only lend based on that lower appraisal value. For example:
Purchase price: $225,000
Appraised Value: $200,000
If your loan program calls for the lender to lend 80% of the value of the home then in this case they would only loan $160,000 (80% of the appraised value, since it is lower) leaving you to put $65,000 down. Basically, when a home appraises low you have to put more money down. The alternative is for you to cancel the purchase of the home and get your earnest money back.
You can waive this right to cancel based on a low appraisal. This ensures the seller that if the home appraises low they need not worry about you canceling for that reason. Waiving this right is moderately risky. If you have the extra cash needed to make a bigger down payment if needed then you might not be concerned about this. Additionally, agents can often speed up the process of getting an appraisal done so that you get the appraisal back fast enough to cancel during the ten day inspection period, should the appraisal come in too low. That right there is a sneaky little trick!
9. Loan contingency
The loan contingency allows you to cancel the contract and receive your earnest money back if you are denied a loan. The crazy thing about this contingency is that it has no time frame, meaning you can cancel the day you are supposed to close! This is a huge risk for the seller. As a buyer, you can waive this contingency but it’s very risky to do so. Waiving this right means that if you lose your job or some other unforeseen circumstance pops up and your loan is denied you lose your earnest money. In some cases this risk is low and the earnest money is not substantial enough to be concerned with so this might make sense to do. However, a more moderate approach is to attach a timeline to this contingency, like waiving it after 25 days (a timeframe that will likely be enough time for your loan to get fully approved). This reassures the seller with little risk to you.
10. Use an escalation clause
These are the magic bullets of making real estate offers in Phoenix. In an escalation clause you offer a certain price, say $200,000, AND you offer to beat any other offers but a given amount. For example “purchase price to be $200,000. Buyer will increase purchase price to $2,000 net more than any other higher competitive offer”. In this case you are offering to pay $204,000, for example, if the seller gets an offer for $202,000. This style of offer guarantees you will be the highest offer (unless another offer uses this technique which is rare. In that case generally the seller talks to both parties and asks for a highest number).
But what if the seller gets an offer way higher than I’m willing to pay $2,000 more than? What’s great about this strategy is that you need not fear this circumstance. You can always cancel right away during the inspection period if this happens.
While these are powerful and safe strategies it is CRITICAL that you work with a real estate agent who is familiar with them and knows the contract inside and out. It is very easy to screw these things up by using incorrect language or missing a detail.