Get preapproved for a mortgage loan. Don’t simply get prequalified. Pre-qualification is when you’ve supplied a lender with your overall financial picture, including debt, income and assets. The lender then provides you with an idea of the mortgage amount for which you qualify. A pre-approval, on the other hand, is much more involved. You complete a mortgage application and supply the lender with necessary documentation to perform an extensive check on your financial background and credit rating. This information will allow the lender to provide you with a specific mortgage amount for which you are approved. It’s easy to see why a Seller would choose a pre-approved Buyer over a pre-qualified Buyer.
Be prepared to write an offer above asking price. In a Seller’s market, it is very common for Buyers to offer more than the asking price of the home. For example, a home that is listed at $200,000 has attracted several buyers. In this situation, you may want to offer $205,000 or whatever amount you decide on with your Realtor’s assistance. Be sure the amount is within your preapproved amount and is not outside the realm of possible appraisal value. Your Realtor will guide you through reasonable offer amounts by completing a thorough Comparative Market Analysis.
Increase the amount of your earnest deposit. A typical earnest deposit (money held by escrow company to confirm a contract) is $1,000. Increasing that amount shows the Seller you’re serious about purchasing their property.
Write a Letter to the Homeowner. Most Sellers have an emotional attachment to their home and they want to know their home is going to a good person/family. While not all Sellers will read them, personalized letters are one way in which Buyers are making their offers stand out to the Seller. If you choose this method, take the time to write a letter that is no more than one page and that strikes an emotional cord with the homeowner.
Include an Escalation Clause (only if you have received a Multiple Counter Offer from Seller) In a multiple offer situation wherein you have received a Multiple Counter Offer from the Seller, you may wish to include an Escalation Clause in your Counter Offer to the Seller. An escalation clause lets a home Buyer say something like, "I will pay X price for this home, but if the seller receives another offer that's higher than mine, I'm willing to increase my offer to Y price with written proof of the higher offer." For example, Buyer One offers $200,000 for a home. His Realtor adds an escalation clause that states, “In the case of a higher competing offer, Buyer One will increase his offer in increments of $1,000 above the competing offer to a maximum of $210,000. Seller to provide written proof of the higher competing offer.”
If no other counter offers are submitted, Buyer One’s counter offer remains at $200,000. If Buyer Two counter offers the Seller $204,000, then Buyer One’s offer will automatically escalate to $1,000 above that, bringing Buyer One’s offer to $205,000. If Buyer Three offers $211,000 for the home, then Buyer One’s maximum of $210,000 will have been surpassed and Buyer Three will have the top offer.
If you have any questions about the home purchasing process, please feel free to contact me.