Making a Strong Offer in 3 Strategic Stages

You’re financially ready. You’re excited to be shopping for your new home. But you’re getting slammed by the competition! Now, how do you make offers with confidence and get your home purchase goal back on track?

There are three key parts of this home-buying adventure. You can break them down into:

1. Preparing your finances.

2. Choosing homes you’d like to buy, assessing their value and appropriate pricing.

3. Negotiating with sellers.

When the going gets tough, a few competitive tips might help strengthen your hand in each of these three stages. Then we offer a few lesser-known ideas. What follows is a range of possible strategies to work with, so you can choose what resonates with you.

Phase 1. Prepare Like a Champ

Every home-buying success is based on good preparation. This involves readying your loan pre-approval. When you find the right house, sellers and their agents look for preapproval documentation to judge an offer as reliable.

Optimally, you want to have a down payment money of 20% or more. Are you in the position to offer cash? If so, you’ll be quite likely to win out when a seller gets multiple offers. In any case, stick to the amount you’re prepared to spend. Sticking to a plan helps avert buyer’s remorse.

☛ Shopping for an attractive, desirable, well-maintained house? You’ll thank yourself later. See our guide to Owning Without Remorse — Including 6 Questions to Ask Yourself Before Buying a Home.

Phase 2. Short-List the Homes and Prepare Your Offers

Assess the value of the homes on your short list. Sit down with your agent and compare notes on each home’s condition, how long each seller has been waiting to sell, and how well each seller’s price conforms to comparable sale prices in the area.

Don’t neglect the importance of making a backup offer to a seller who has a buyer lined up. The seller’s first choice of deals could fall through. In hot markets it’s not unusual for a buyer to bid well over the fair value, only to find the agreed-upon price slashed by the appraiser.

☛ It can happen. A seller who has overvalued the home might need to lower the price if the appraisal does not support it. Learn more about the buyer’s experience with a home appraisal, and what to do if the appraisal value falls short.

And some buyers submit high offers, then try to get concessions after the inspection report comes back. The buyer may start asking for non-essential changes and cleanup tasks. The psychology? “I’m offering to pay more than the asking price, so I expect to get everything I want!”

When you’re not being “that buyer” but market competition keeps getting the best of you anyway, it might be time to change course. Try:

• Shifting your focus to the more affordable homes in your buy zone. Then offer a bit above the seller’s asking price. By picking an easily affordable home, you’ll be well positioned to handle routine fixes and add your personal touches to the home after you move in.

• Alternatively, avoiding the cheaper end of your range if it’s jam-packed with buyers. Bidders may not be fighting over homes at a somewhat higher price.

Study what happened to the ones that got away. What prices did they ultimately close for? Your attention to how your losing offers played out can help you make the winning offer next.

Phase 3. Negotiate With the Seller

When it’s time to negotiate, you can lean on the instincts of an experienced real estate agent. In a challenging market, you might avoid seeking closing costs from the seller. After consulting with your agent, you also might decide to do without a contingency based on your current home sale — or at least commit to having a deal done on your home within a specific number of days, letting the seller move along to the next offer rather than wait indefinitely for you to sell.

How much earnest money you can put down? A relatively high amount — at least two percent of the purchase price — can help you win the deal. Until closing, your earnest money will stay safely in escrow. Then it becomes part of your mortgage down payment and closing costs.

Once you’re ready to put the offer in writing, your real estate agent will draft it and give it to the seller’s agent. You’ll include your bid and financing preapproval; the names of the buyers; any contingencies; fixtures to be included with the house; proposed closing and move-in dates; and a reply-by date. For an especially attractive offer, you could include an already-scheduled inspection date. You can cancel or change that if your offer isn’t accepted. And you may change your mind and withdraw an offer before signing the purchase contract.

☛ It’s up to you how much risk to take when reaching your home-buying goal. But in many areas, it is possible to succeed with a contingent offer in a seller’s market.

If there’s a meeting of the minds, sign your agreement! If the seller makes a counteroffer, you might go higher in exchange for some fixes the seller doesn’t mind providing. Or you might stick with your offer but help your sellers in some way that matters to them. Perhaps they want a quick closing — but maybe they don’t. It never hurts to ask!

Smooth Moves: Other Strategies to Get Your Offer Accepted

There’s a lot to be said for the early bird who makes the first offer. Some motivated buyers check the real estate websites daily and contact the sellers’ agents before any showings are scheduled, asking to drop by. Then they pounce, showing their pre-approvals and making their offers.  

Then there’s the escalation clause, which can make for a winning offer. With the escalator, you’re offering a certain amount; but should the seller get a higher offer, you’ll raise your offer.

You and your agent can discuss strengthening your offer by vowing not to back out of it unless the inspection turns up a legitimate safety concern. Or you might promise no post-inspection requests below a certain dollar amount — to showing you won’t sweat the small stuff.

Write a Letter to the Seller? Pros and Cons

Leaving a home to someone else may be hard. Some sellers appreciate a buyer’s love for the home, and may be moved to choose a certain buyer on account of it. Rocket Mortgage suggests writing “a heartfelt letter from you to the seller that lays out your reasons for wanting to buy their home.”

The National Association of REALTORS® has a different take. Personal letters from hopeful buyers can create legal risks, NAR writes,

…because they often contain personal information and reveal characteristics of the buyer, such as race, religion, or familial status, which could then be used, knowingly or through unconscious bias, as an unlawful basis for a seller’s decision to accept or reject an offer.

NAR goes on to tell its agents: “If your client insists on drafting a buyer love letter, do not help your client draft or deliver it.”

Yet beyond sharing personal information or beating the competition, there are benefits to reaching out to your sellers. A seller who knows the buyer can convey helpful information about the home. As long as you stay professional and respectful, it’s OK to forge trust and mutual understanding. That said, look to your real estate agent’s professional guidance to steer clear of errors. If you do write a letter, avoid including pictures or putting anything on paper that mentions your familial status, religious holidays, or any cultural identifiers. Be careful not to put your agent on the spot.

And remember: In home buying, money speaks louder than words.

Supporting References

Victoria Araj for RocketMortgage.com: How to Make an Offer on a House in 5 Steps (May 28, 2021).

NAR Fair Housing Corner: Love Letters or Liability Letters? (Oct. 23, 2020).

Photo credits: Anastasia Gepp via Pixabay