CLOSING DATES & EXTENDED POSSESSION | It’s important your REALTOR contacts the Sellers Agent & inquires about any specifics the seller may desire. The seller may have a desired closing or possession date in mind. Writing your offer to accomodate the needs of the seller will make your offer stronger.
- A quicker close may be appealing to the seller, especially if the home is vacant.
- Rent-back agreements allow the seller to remain in the home for a specified period of time after closing—sometimes without charging any rent at all. There are several reasons why an extended possession option is helpful to the seller… they may need to find another home, close on another home, maybe having both their new home and current home at the same time will provide ease with the transition, etc.
LOVE LETTERS | This is something some agents still use… however… it’s no longer recommended. Due to many fair housing lawsuits and complaints, it can actually hurt you. Most sellers’ agents will immediately reject an offer that has a letter attached. The BEST love letter a seller can ever receive is a call from your lender reassuring them that you qualify.
HOMES INSPECTION | Buyers have the right to have a home inspection during the contract process. The main purpose of an inspection is to focus on health, safety and structural concerns, not to address cosmetic issues. During this period repairs can be negotiated with the seller & the buyer has the option to terminate if any deal-breakers arise. Below are some options to waive this contingency and strengthen your offer.
- Waive home inspection all together | To entice a seller… buyers may choose to waive a home inspection when submitting their offer. This is a very strong strategy for your offer, but buyers do relinquish the right to object. In this case, if you did terminate the contract due to the inspection, you would lose your earnest money. This saves sellers from having to deal with repairs (which also saves them money), and it shows you are more serious about buying the property.
- Waive home inspection objection… but… keep option to terminate | In this scenario, we keep the deadline for “Inspection Termination” in the contract, but waive the option to “object”. This means you can have an inspection and terminate if a deal-breaker arises.
APPRAISAL GAP CLAUSE | This clause states that IF the property appraises for lower than the contract price, the buyer will pay the difference up to a “capped amount”.
At a contracted price of $455,000… with $10,000 appraisal gap cap.
- EXAMPLE #1: Appraisal comes in at $425,000… Seller would lower the price to $435,000 & you would bring $10,000 to closing.
- EXAMPLE #2: Appraisal comes in at $450,000… Contract price remains at $455,000 & you would bring $5,000 to closing.
- EXAMPLE #3: Appraisal comes in at $455,000… Nothing changes & appraisal gap clause is not needed.
CLEANING FEES | Buyer offers to pay professional cleaning fees upon the sellers move-out.
EARNEST MONEY | Typically this amount is 1% of the purchase price, but is negotiable. This money is due within 3 days of a seller accepting your offer. It will be deposited into a safe bank account and this money is returned to you at closing. The earnest money deposit may also be returned to you if you need to terminate the contract due to an issue.There are a couple of things you can do with earnest money to strengthen your offer.
- Increase the amount: Let the sellers know you’re serious about their home and increase the amount you are depositing for earnest money.
- Make it non-refundable: This is a STRONG tactic & can be customized. For example, write a clause into the offer that states “Earnest Money will be non-refundable after the inspection phase”.
ESCALATION CLAUSE | This is a tool buyers use to outbid competitors…it works similar to an “auto-bid”. The clause states that IF the property appraises for lower than the contract price, buyer will pay the difference up to a “capped amount”.If you don’t have savings set aside to use or feel uncomfortable with this option, you can disregard and skip looking at the example below.
Here is an example… Your agent recommends an offer of $400,000. You don’t want to miss out, but you also don’t want to overpay… this is where an escalation clause would come into play. It’s important to submit a “no regrets” offer. An amount you’d feel good winning or losing at.
- You submit an offer of $400,000 and add an escalation clause stating that in increments of $2,000 you’ll offer MORE than the next highest offer up to a capped amount of $420,000.
- If someone else bids $410,000 you’re offer automatically increases to $412,000
- If someone else bids $422,000 you’re offer remains at the cap of $420,000