How to Get Your Offer Accepted on a Home
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The current market has been everything but friendly to buyers. If you’re looking for a home right now, you know that the competition is incredibly high and the availability of homes is drastically lower than what it’s been in the past.
Several home buyers have attested in many markets to offering $20,000 or more over the asking price and still being beat to the punch by other home buyers. So, in a market with this much competition and this low demand, how do you stay in front of the crowd and make your offer stand out?
Here are a few ways to get your offer on a home accepted:
Understand Appraisal Gaps
If you don’t know what appraisal gaps are, let us take a second to describe it because it is SO important when making an offer on a home.
After you make an offer on a house that gets accepted, an “appraiser” decides how much the home is actually “worth.” If you happen to offer over what they think the home is worth, that amount of money in your offer that exceeds the value of the home has to be paid up front. But here’s the problem – it is the seller’s responsibility to pay it if they accept the offer.
Extreme example: A home is listed at $450,000. You offer them $1 million. The appraiser says the value of the home is only $490,000. Even if the seller accepts your offer of $1 million, they only made $40,000 over asking price, because they need to pay $510,000 (the amount that exceeds the value of the home as deemed by the appraiser) out of pocket. So, your $1 million offer isn’t any better than a $490,000 offer.
With that in mind, here’s how to get your offer accepted – make sure you are considering the amount an appraiser may deem the home is worth, and offer an appraisal gap guarantee. This is a way of telling the seller, “I will pay up to $___ of an appraisal gap if necessary.” It basically makes an offer over asking price relatively risk free for them since they know they won’t be stuck covering a huge appraisal gap on their own. Just make sure you have that money available in the bank before guaranteeing it since it needs to be paid up front.
Offer Over Asking Price
Everyone knows this is kind of the norm right now, but it’s true – if you want a home, you may need to offer over the asking price. But the trick in getting an offer accepted is all in the balance between the offer over asking price and the appraisal gap.
Make sure you do a lot of research on homes in the area. The more homes and prices you look at, the more you may be able to somewhat forecast what an appraiser will deem a home is worth, and that information can factor heavily into your decision on how much to offer over vs. cover in an appraisal gap guarantee.
Make it Convenient for the Seller
Here’s the deal – you really don’t have much leverage in a market where 20 buyers are bidding over asking price on a home that a seller put on the market over the weekend. The best thing you can do? Embrace it and do whatever you can to make the transaction as convenient as possible for the seller.
Some sellers want to move fast. If that’s the case, do what you can to line up an inspection immediately so it doesn’t impede on closing timelines. In some instances, if the home is relatively new and you feel confident an inspection isn’t going to change your ultimate decision, you may consider it worth it to wave the inspection entirely (this is entirely up to you, but it’s often the one little extra thing a homeowner wants to see to accept your offer.)
If the seller wants to move slow, meet them where they’re at. If it means you’ll have to pay an extra month of rent before you move in, so be it. It’s not an ideal market for buyers, and so the gist of it is this – make it as convenient as possible for the seller and meet them where they’re at in the process.
However, if you decide to forgo selling your home and would rather renovate your home, give Tony McClung a call! He will use his expertise to make your home feel brand new, without even changing locations!