A good contract begins with a thoughtful offer.
In any type of market, buyers that design thoughtful offers make a great first impression, put sellers at ease, increase their negotiation power, and gain some ability to focus negotiations on what matters most to the buyer. Read on for smalls ways to set your offer up for success.
know the seller’s motivation & pain points
One of the easiest ways to start off on the right footing is to understand the sellers motivation, pressing timelines they need to meet, what concerns or fears they have, and what items are most important to them. A great buyer’s agent should communicate with the seller’s agent before writing an offer to gain insight on these things and help the buyer learn ways they can give the seller peace of mind while making requests that suit the buyer’s needs.
work with a local lender & offer transparency
Local lenders often have a good record of timely closings and regular communication, and they are typically easier to reach than lenders in a different timezone. Because of these things, sellers and listing agents may favor local lenders over big banks and national lenders.
When an offer is received, sellers and their agents often have clarifying questions for lenders, so keep everyone in the loop and make it easy for them to get answers and feel confident with the following steps. Work with a responsive local lender, notify your lender before you submit and offer and provide them with the address and contact information for the seller’s agent, submit an up-to-date pre-approval letter with your offer, provide your lender’s contact information, and allow your lender to speak with the seller’s agent.
offer a solid earnest money deposit
A buyer’s earnest money deposit is the amount of money that they risk if they breech the contract. An earnest money deposit of 1-2% of the purchase price shows sellers that a buyer is serious about the purchase, willing to accept some risk, and financially stable enough to put that money down within 2-3 days of signing a contract.
show proof of down payment and closing cost funds
Sellers long for security. Showing sellers evidence that you currently have, or soon will have, the down payment and closing cost funds necessary to close on the property helps to ease some of their anxiety. It's a way to make them feel good about your ability to qualify for a loan and follow through with buying the house. In addition, disclosing where the funds are being held, who they belong to, and when they will be converted to liquid funds, if currently not, protects a buyer’s financing contingency, so it’s a win-win.
Proof of funds can be made using a recent statement, account snapshot, or a letter from an account manager at the bank or brokerage. When disclosing the location of funds, buyers should always redact account numbers and routing numbers to protect their privacy and account information.
shorten your inspection deadline
The default deadline for completing a home inspection and requesting repairs and maintenance is 10 calendar days. Because the home inspection causes high anxiety for sellers, shortening the initial inspection period to 3-5 business days, gives sellers a shorter wait period and helps them move past the fear of the inspection quickly.
If the home inspector recommends additional inspections, buyers have the ability to gain an additional 5 business days for further inspections, so shortening the initial inspection period doesn’t greatly increase buyer risk. Also, a buyer with concerns about specific items can line up additional inspections and estimates during the initial inspection period in order to move things along as quickly and efficiently as possible.
strategically use contingencies
As a general rule, I recommend that buyers retain as many contingencies as possible. However, some buyers choose to strategically waive or reduce contingencies in order to focus their negotiations on items of great importance. Buyers that are already familiar with a neighborhood or HOA may not feel the need for a neighborhood or HOA review. Buyers that had the opportunity to review the seller’s disclosure before they put in an offering may not feel that they need 3 additional days to go over that document. Whatever the scenario, a buyer considering a strategic reduction of contingencies should carefully weigh the potential risks with the potential benefits and do their best to ensure that the contract still offers adequate protections.