Why Your Offer Isn't Competitive

By
Real Estate Broker/Owner with Providence Group Realty TREC# 0608931
https://activerain.com/droplet/4gwx

"We have submitted over 20 offers with our agent, and we haven't had any of them accepted."  My frustrated caller  went on to describe how their repeated attempts to offer above list price didn't get the job done.  Now, feeling weary and without hope, they were coming to the realization that something needed to change. 

It's Not All About Price 

Both new agents and buyers alike can fail to realize that it isn't just a buyer that must qualify for financing. Properties, too, must meet underwriting guidelines in order for a buyer's loan to be approved.  A Buyer may offer DOUBLE the asking price on a house that will not qualify for his financing type (or any financing type), and the offer will get rejected. 

When you are competing with other offers, offers with less risk to the seller will always win. Cash is king. Next to cash, conventional financing with a hefty down payment advertises buyer solvency.  FHA, VA, and USDA loans simply bear more risk to a seller. Appraisal concerns alone can diminish the value of an offer using FHA financing compared to an offer bringing conventional financing.  FHA buyers are typically cash challenged and have higher debt to income ratios. Going above list price will immediately raise eyebrows.  It's the same as offering a check that just won't cash. Whether it is $5,000 or $50,000 over list price, if your offer causes an appraisal issue, it will almost certainly be the seller's problem to solve. Plus, there is the added "bonus" of getting saddled with an appraisal that will follow the property if your transaction fails to close. 

Ways To Compete Outside of Offer Price (Geared for Texas Transactions) 

There are plenty of articles and blog posts touting strategies for turning sellers' heads in a crazy seller's market. If you are tied to FHA, VA, or USDA financing, you may have less control in terms of escalating the purchase timeline or waiving a financing contingency. However, there are provocative things you could consider that may entice a seller to find favor with your offer outside of a price offering: 

  1. Put your money where your mouth is. Triple the option fee and shorten the number of days to the absolute minimum you will need to get and inspection completed. Chop it down from the standard '10 days ' to 7. Or 5. Or 3!! Send the seller a message that you aren't messing around, and that your intention is not to tie up the property in a lengthy beat down just to waste time.
     
  2. Minimize the time period requested for your third party financing protection period. Most Buyer's agents have a reflexive approach to bubble-wrap their buyers. A Seller will almost certainly dismiss an offer where the Buyer has been positioned as 'risky' enough to warrant a financing protection period from execution through 3 days before closing.  Be realistic with this number.
     
  3. Offer to waive the appraisal contingency in conjunction with the expiration of your third party financing protection period. Similar to strategy #1, this sends a message that you will work to get it done -- or get out -- and release the Seller to return to the business of selling his property if your deal goes sideways on appraisal.
     
  4. Offer an expedited closing date with the option to provide a complimentary lease back period for the seller to complete his next purchase and move. Often, this is more valuable than a spiff on offer price in a seller's market. Discuss the commitment with your lender prior to making the offer.
     
  5. While stepping up the offer price can cause appraisal issues, there are other ways you can increase the seller's net, if you have the funds to do so. Consider picking up the costs for title policy, survey, home warranty, closing costs, and the HOA transfer fees / certificate. Remember, it 's not all about price. A competent Listing agent will help a Seller compare the risk and net value against each offer. You can turn the tables on a higher offer price by bumping up your contributions within the contract. Assuming the listing agent and seller performed proper due diligence with the list price, and your Agent can corroborate project home value with a CMA, then it would be a much fairer expectation to ask a Seller to help solve an appraisal issue, should one occur. 

 

Using these strategies, it still may take a few tries, but you should have better success, providing you are targeting properties appropriate for your financing type. If you find that you are still unable to capture a property of interest, consider new home construction as an alternative path to success. 

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Topic:
Home Buying
Location:
Texas Collin County Plano
Tags:
sellers market
multiple offers
winning
appraisal issues
competing offers
price alternatives

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Rainmaker
370,463
Travis "the SOLD man" Parker; Associate Broker
iXL Real Estate-Wiregrasss\ - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

Numbers three and five are interesting. Some ideas that I haven't thought of.

THANK YOU!!

May 11, 2014 10:55 AM #1
Rainmaker
158,829
Amanda Thomas
Providence Group Realty - Plano, TX
​Broker, SRES®, BPOR, MCNE, ​Certified DRS Agent™

Blessings, Travis! To your success!

May 11, 2014 11:33 AM #2
Rainmaker
234,255
Mark Neighbor
A O Home Solutions - Sell House Georgia - Buy House Georgia - McDonough, GA
Sell House Fast In Georgia

Great article. These ideas all work.

May 11, 2014 01:27 PM #3
Rainmaker
1,675,413
Larry Johnston
Broker, Friends & Neighbors Real Estate and Elkhart County Subdivisions, LLC - Elkhart, IN
Broker,Friends & Neighbors Real Estate, Elkhart,IN

Hi Amanda, Very nice blog. keep up the good work  "Suggested"

May 12, 2014 07:38 AM #4
Rainmaker
158,829
Amanda Thomas
Providence Group Realty - Plano, TX
​Broker, SRES®, BPOR, MCNE, ​Certified DRS Agent™

Thank you so much, Mark and Larry! 

Larry, your high praise means the world to me. Thank you for your support, and vote of confidence. 

May 12, 2014 07:54 AM #5
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Rainmaker
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Amanda Thomas

​Broker, SRES®, BPOR, MCNE, ​Certified DRS Agent™
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