As a homebuyer in this competitive market, you will experience stress and pressure each time your offer is rejected. Watching other buyers win homes that you wanted to buy is exhausting. I hope this list will help you feel more empowered the next time we make an offer on your dream home. These tactics range from mild to extreme. You can mix and match different variations of these tactics based on your circumstances. If we haven’t already had a consultation on what best fits your needs or if we’ve talked before but may want to try something different, set an appointment with me immediately. Your dream home may have just hit the market!

1. Offer an Escalation Clause

An escalation clause is a provision added to a contract stating that the buyer will escalate their offer above the highest sales price submitted. The buyer’s contract price is automatically escalated without the need to resubmit a new contract or amend an existing one. This clause usually has a maximum escalation amount. When a bidding war takes place, this tactic keeps your offer at the top of the list.

Here’s an example:

• Buyer Jones offered $200,000 on a $190,000 home, with an escalation clause to go $2,000 over the highest competing bid, up to a maximum of $260,000.
• Seller Smith receives 30 offers and the highest bid is from Buyer Johnson at $250,000.
• Buyer Jones’ contract sales price is automatically escalated to $252,000.

This method is one of the most common tactics used to outbid the competition in a highly competitive market.

You should only use an escalation clause when you can afford to escalate your offer far above the list price. The pro of an escalation clause is that they immediately put your bid at the top of the list.

Escalation clauses became popular in 2018 and have since become the norm in many real estate markets. They can be a legal nightmare to navigate if they are not appropriately structured. This is why I have specific language to address these concerns.

2. Offer a Leaseback

A leaseback allows the sellers to lease the property from the buyers after closing until they can secure a new home. This can be very motivating for some sellers as they know they will have a place to live while searching for their next home. The pro of using a leaseback structured offer is it may place you at the top of the list even if your offer isn’t the highest. A con to consider is that with COVID-19, there’s a moratorium on evictions, so if the seller cannot find new housing in the agreed upon time, this could be a potential issue. Leasebacks can be a nightmare if they’re not handled properly.

3. Include an Appraisal Gap or Consider Not Including an Appraisal Rider

Removing the Appraisal Rider or offering Appraisal Gaps are among some of the most common strategies used by buyers to get their offer accepted in this competitive market. An appraiser may value a home for less than its contract price when homes appreciate faster than appraisers can justify. If the buyers don’t have the funds to cover this difference, then they can be in serious trouble.

If the buyers add an Appraisal Gap or decide not to make their loan contingent upon an appraisal, they state that they have extra funds available to fill in the gap between a low appraised value and the contract price. These perks provides the sellers extra assurance that they won’t be in a situation where they have to drop their home’s agreed sale price.

If you’re a seller and accept an offer without an Appraisal Contingency or with an Appraisal Gap, be sure to ask for proof of funds to show the buyers have the extra cash to cover the difference. Some buyers will offer these options out of desperation to get their contract accepted, but they have no actual plans of going through with it.

If you’re a buyer offering one of these options, take some time to understand these methods’ ramifications. You are essentially paying more than you normally would in a traditional market. No one can tell the future, but if you happen to do this right before the real estate market tanks you may be upside-down on your mortgage.

4. Offer More Earnest Money

Earnest money is offered with a sales contract to help the sellers justify taking their house off the market. It’s a way of proving that the buyers “earnestly” desire to purchase the home beyond the contract alone. Locally, 1% of the sale price is the most commonly accepted practice, but offering more can really make your offer stand out.

The sale contract is designed with numerous contingencies that allow the buyer to retrieve their earnest money if the deal falls apart for related to one of the contingencies. These reasons may include home inspection issues or financing problems. While typically earnest money disputes are not a common issue, there is no guarantee there won’t be. Make certain you can afford to lose whatever dollar amount you feel is appropriate in the event you are offering it in compensation for acting outside of the contract. An example of this is if the buyers decided on the day of closing they just didn’t want the home anymore. Contractually the buyers are obligated to purchase the home, but could offer the sellers the earnest money for compensation.

By offering more than the standard amount of earnest money requested, you are showing strong intent to purchase the sellers’ home, which is very appealing to the sellers. You can also make your earnest money “go hard.” This term means that you will waive all contingencies to retrieve your earnest money if the deal does not close. This tactic shows serious intent to buy, pushing your offer above others that are less serious.

5. Get Pre-Qualified and Use a Reputable Local Mortgage Lender

I cannot stress enough how important it for buyers is to get prequalified before starting their search. Because homes are selling so quickly, you don’t want to be scrambling trying to get approved while the sellers are receiving offers on your dream home. You may lose out. Additionally, it is very common to find mistakes on your credit history. While this might not keep you from obtaining a loan, you may be eligible for better terms had your credit history been correct. You will not have time to correct any mistakes after getting your offer accepted and before closing.

When listing agents receive offers from buyers, one of the first things they do is verify the mortgage lender and pre-approval letter. If the listing agent is a high producer, they will know many of the local lenders. Some lenders have bad reputations for sabotaging deals. If you happen to be using one of these lenders, the listing agent will likely share that information with their sellers. Listing agents are often concerned with internet or national lenders. It is more common to experience problems with these types of lenders so the listing agent may advise their sellers to opt for a different offer.

If you’re working with an experienced real estate agent, ask their advice on the best lenders to use to get your offer accepted. In smaller cities, this point is even more critical when making an offer. Real estate professionals tend to notice each other more frequently in smaller towns. Your Realtor© and mortgage broker’s experience and reputation can have a substantial impact on your contract’s strength.

6. Offer to Pay the Sellers Moving Expenses

If you’re making an offer on a competitive home that is occupied, consider offering a monetary value to help pay for the seller’s moving expenses. This is a unique strategy that is not very common, which makes it more effective.

The higher the contract price rises above the listing price, the more likely the transaction will experience appraisal value issues. When you offer money for moving expenses, the seller gains the financial benefits without being added to the home’s sales price. This tactic bypasses the appraisal and mortgage process, making it appealing to knowledgeable sellers.

7. No Personal Letters

If you read through some of the other blogs on this topic, you’ll see suggestions that you should write a personal letter to the sellers. That advice is old information, as listing agents now view these letters as a problem.

As bidding wars became more common in 2018, some Realtors would encourage their buyers to write a personal letter to create an emotional bond with the seller. The buyer’s agent would include this letter in their offer on a home, along with pictures and personal details about their client. Unfortunately, this practice caused fair-housing lawsuits because buyers would assume the seller rejected their contact due to race and social class.

Once these lawsuits started popping up all over the country, agents were advised by the National Association of Realtors (NAR) to avoid these letters. NAR suggests agents only submit relevant contract details with no personal information exchanged about the buyer. Real estate agents now avoid these letters. Most listing agents will not even present a personal letter to their clients in today’s legal environment.

By attaching a personal letter to your offer, you are creating extra tension for the listing agent, which will not help you in any way.

8. Close on Their Terms

Every seller has different circumstances that motivate them to sell. One seller may be selling their primary residence through a relocation company, while another may be selling an investment property. Both of these sellers will have different terms that are appealing to each of them.

When buying a home in a competitive seller’s market, it’s wise to have your Realtor© contact the listing agent before submitting your offer. Your agent can ask the seller’s agent precisely what their client is looking for in a contract. If your agent can get this information, you can tailor your offer to the most appealing terms for the seller. This method will put your bid at the top of the list every time. Unfortunately, local listing agents are currently not providing much information on what the seller desires, so don’t be surprised if they don’t provide this information. Your agent should be through though and always ask because you may get some information that will put your offer at the top.

9. Be the First to View and Submit an Offer

If you’ve submitted offers on multiple properties and have had no luck getting one under contract, consider a more aggressive showing approach. Some sellers do not want a bunch of contracts to work through. If you can be the first buyer to view the home and submit your highest and best offer immediately, you may entice the seller to accept your contract.

To be the first buyer, you’ll need an aggressive real estate agent who can schedule showings within minutes of a home hitting the market. You and your Realtor will need to be on a saved search from your MLS to notify you of new listings as soon as they hit the market. Once you see a new property that looks promising, you’ll need to stop everything and get it scheduled right away. This is also even more imperative with COVID-19 restrictions. Showings are limited and often fill up fast, so be as aggressive as you can on getting in early.

10. Offer to Pay All Title Insurance Fees

Nationally, it’s customary for sellers to choose the title company and pay for both the buyers’ and the sellers’ title fees. This is not common in the St Louis region; buyers typically choose their own title company and pay their own fees. In a less competitive market this was very common and true, but not something you want to do now.

To help your offer stand out, consider paying the sellers’ title fees to alleviate that burden from the seller. If you’re in a highly competitive market, the chances are high that competing buyers will not offer this and may set you apart from the crowd.

11. Waive All or Part of the Inspection Contingency

Once a home goes under contract, the deal is not done. The next step is to perform a home inspection. This process is stressful for the sellers because they have no control over the home inspector’s competency. Ten different home inspections could yield ten different results. Sellers are on pins and needles in anticipation of the results.

Some buyers will offer to waive the inspection process to increase their contract’s chances of being accepted. This method is a very risky move that requires plenty of research to understand fully. It’s also a highly effective move that can yield positive results. Take some time to consider if this aggressive tactic may be something you should try to get a home under contract in a highly competitive market.

A less aggressive approach would be to offer to purchase the property “As-Is”. This offers the sellers the comfort of knowing that you are stating while you will have inspections performed, they are strictly informational purposes, and you will not ask the sellers for any repairs or compensation. While this is like removing the Inspection Contingency in that the sellers will not have to perform any repairs, you (as a buyer) will still have the right to walk away from the deal if you discover any issues you don’t want to deal with during the inspection. From the sellers’ perspective, the removal of the Inspection Contingency is preferable because regardless of what the buyers discovered, they’d agree to continue with the purchase.

12. Removal of the Passing Occupancy Inspection

As part of the contract, the sellers agree to provide a passing occupancy inspection if the local jurisdiction requires one, not all do. What this means is the sellers will have a local occupancy inspection performed and if any repairs are mandated, the seller will have to perform these repairs. While typically the repairs required associated with this inspection don’t typically cost a lot, there is no guarantee. The buyers agreeing to handle this task takes an additional burden off of the sellers and may be more appealing.

The issue with doing this (besides the extra expense) is that you will not be able to live in the home until you can obtain a passing occupancy inspection. This may mean a week or two (or longer) delay in getting into your home after closing. Make sure you can continue your current living conditions until you can schedule an inspection, perform the mandated repairs and have a reinspection completed.

13. Remove the Financing Contingency

In most states, the sales contract will have provisions for the buyer to receive their earnest money back if the mortgage financing falls apart. If this happens, the seller ends up putting their house back on the market and starting the whole process over with no benefit from the process. This scenario is exhausting for sellers and listing agents.

To alleviate the sellers of this concern, you may choose to waive your financing contingencies. This step may allow the seller to inherit the earnest money if something goes wrong with your financing. This strategy is very appealing to sellers and helps strengthen your reputation as a strong buyer. The method is becoming standard practice in highly competitive markets. Let’s discuss this option before deciding on this strategy as there is much to discuss.

14. Larger Down Payment

When sellers review contracts from buyers, they consider the down payment as a sign of financial strength. Buyers putting more cash down have more money in the bank to access if an issue arises. Low appraisal value or expensive repair costs are less likely to sabotage a deal if the buyer has more cash.

If you have more money to contribute for a down payment, you may consider increasing this amount to show the seller that you are a financially secure buyer. If you’re using a VA loan, which requires no down payment, consider structuring your contract to show that you have extra cash to make the deal work. Sellers are likely to choose a buyer with the most money accessible to increase their chances of closing the transaction.

15. Have Your Lender Pre-Underwrite Your Loan

The mortgage loan process is always at risk of sabotaging a deal. Buyers may hide negative financial details that are later discovered during the underwriting process. This scenario is a concern for listing agents and sellers. No one wants a deal to fall apart due to discoveries about the buyer’s financial situation.

To alleviate this concern, consider using a reputable local lender who will pre-underwrite your loan. This method lets the listing agent and seller know that you have been thoroughly vetted and stand the highest chance of closing. This tactic is creative and can be very effective when mixed with other methods on this list.

16. Use an Experienced Realtor©

I’ve been representing buyers and sellers since 2005. I believe in the Golden Rule in life and practice that in real estate. I am not looking to sell you the next home, I am looking for the right home for you. That may mean we’ll spend more time looking, but it’s time well invested. I pride myself on treating others as I want to be treated and that is why I am highly rated on both Zillow and Google, receiving the Best of Zillow award.

Mark Becker was great! He took all my requirements and considered all the nice to haves to ensure he was sending me listings that were custom to me. His patience is outstanding as he went on multiple showings months on end to fit my busy life schedule and never hesitated to answer the million questions I had. I highly recommend Mark if you are looking for someone who cares for your best interest and will get the best deal for you! ~ Stevie H

My husband and I would highly recommend Mark! He helped us buy our dream home and sell our old home very quickly. We had a very small area we were interested in buying in (our son's elementary school). When houses hit the market, Mark always made sure we were one of the first to see them. We got our wonderful home largely due to the terms he recommended we use. We also happened to be selling during the COVID situation. He sold our home prior to it hitting the market which limited our family's exposure and made the process much less stressful for our family. ~ Laura H

If you end up stuck with a Realtor© who is inexperienced, especially with how to write a competitive offer, you may waste many months missing out on great homes. Be sure to choose an agent who is closing transactions and knows the current market very well.

Some Realtors can even help you find homes that are not on the market yet. The agent you choose will have a direct effect on your success in buying a home. Don’t underestimate their influence and ability.

17. Keep your Offer Clean and Simple

Over the years, I’ve seen more additional information written into contracts than ever before. The practice of writing further details into a contract can keep an offer from being considered. The initial offer contract needs to be clean and free of wasted text that is unnecessary for the initial offer.

When the sellers’ agent review a buyers’ offer, they look for signs that convey the other agent’s competency and flexibility. Some agents will fill a contract with unnecessary jargon that does not need to there. For example, the sellers’ agent will question the buyer agent’s experience if they include additional language in the contract for items that are already considered part of the home ( asking for the stove, built-in dishwasher, a particular light fixture, etc.). Make sure your agent understands and knows the contract.

Again, keep your contracts clean and easy for the seller to understand. It will convey signs that you and your agent are easy to work with. Only add extra words if they are necessary and help strengthen your contract.

18. Position Yourself to be Flexible

As a home buyer in a competitive market, it is essential to stay flexible to meet any unique demands that the seller may have. Every seller has different needs. If you are positioned to move fast and meet their requests, you can beat other competing buyers.

If you have a house to sell before you can buy another property, you may need to get creative. Sellers with multiple offers on their property will not accept contracts contingent on another home selling. Sellers are looking for the least amount of contingencies and delays in closing as possible.

Consider selling your home and renting an Air BnB or short-term rental to give yourself flexibility. This is a risky move when there is limited inventory, but it may give you the edge you need to entice the seller to accept your contract.

Some companies offer to buy your home after finding another house, but they do charge for it. Lenders and Realtors are getting more creative as the demand for homes rises every year. Take some time to research companies in your area that offer services to buy another home before selling your property.

19. Close Extra Fast on Vacant Homes

If you're making an offer on a vacant home, the seller will want to close as soon as possible. No one wants a vacant home sitting empty for very long.

Position yourself to close as fast as possible on vacant properties. Since mortgage lenders are the ones who specify the time needed to close, you’ll need to coordinate your timeline with them. Having your mortgage pre-underwrite your loan will help with this. Hire a lender who can close fast so that you have some leverage on vacant properties.

Summary

Stay positive and continue to work on your contract drafting skills using the methods and tactics above. In this competitive market, the tactics utilized for being the winning bid are changing day-to-day. It’s imperative to stay on top of what is working and to be flexible for the sellers.