As
the Washington, D.C. real estate market continues its hot streak, and demand
outpaces inventory, buyers need to know what it takes to get a seller to accept
their offer in this competitive, multiple contract environment. To
get the answer to this question, I spoke to Long and Foster Super-Agent Ron Sitrin. Ron, who is ranked in the top one percent of real estate agents
nationwide and averages over $30 million in sales volume annually, gave the
following advice to make your contract stand out in the eyes of a seller who is
considering multiple offers. Buyers and their agents should consider the following:
- Be
Price Competitive and Include an Escalation Clause: For properties where
you are expecting to be competing against multiple offers, consider making
a full price offer with an escalation clause. Nothing catches the
eye of a seller who is reviewing multiple contracts like more money,
although other factors may come into play in the seller’s ultimate
decision.
- Waive
the Financing and Appraisal Contingencies. Full price offers plus
an escalation clause are great, but sellers want to be assured that you
can close on the contract. A contract $100,000.00 over the asking
price is meaningless if you can’t close on it. There are few things
that provide more assurance to a seller that a deal will close than when a
buyer is paying cash or is willing to waive the financing and appraisal
contingencies. But, before you agree to waive the financing and
appraisal contingencies, make sure that you either have the cash necessary
to close or your lender has clearly indicated that you will not have any
problems obtaining a loan. If you have waived the appraisal
contingency, and the property does not appraise at the purchase price, you
will likely need to bring more money to the table since your loan will be
based on the appraised value of the property, not the sales price.
- Increase
the Size of the Earnest Money Deposit. A large earnest money
deposit will show sellers that you are committed to buying the
property. The average earnest money deposit ranges between three and
five percent of the purchase price, so if your EMD is more than that, it
will stand out to a seller. Note, however, if you do not close on
the transaction, you are at risk of losing the EMD depending upon the
terms of the contract.
- Shorten
the Home Inspection Periods. You may also want to consider shortening the
period of time to conduct your home inspection. Pre-arrange an
inspection before submitting your contract or have an inspection completed
before you submit the contract. Inspection issues are one less
contingency the seller would then need to be worried about. You may
also want to consider waiving the radon inspection as the maximum expense,
even if there was a radon issue, is not substantial.
- Offer
a Free Rent Back. If the seller need some additional time in the
property, consider offering a free rent back or reduced cost rent
back. You may also want to determine when the seller is looking to
close and pre-coordinate a settlement date to be included in your contract.
- Consider
Writing a Letter to the Seller. A heart felt hand written letter attached to the
contract about why the seller should sell you the house over other bidders
may carry some weight For many sellers, the house for sale may
have been their home for many years, where their children were raised and
the site of many important milestones in their lives and they may be
interested in learning about who is looking to buy their home and why they
want their property.
- Pick
the Right Settlement Company. Okay,
this was not one of Ron’s suggestions, but the right settlement company
can make a big difference in a contract. Some settlement companies
in Montgomery County charge the seller significant fees – I’ve seen
charges up to $850.00 to the seller on a HUD-1 – but Peninsula Settlements
does not. Our flat fee to the seller is only $250.00 and includes
everything that we need to do for the seller in the transaction. We
do not charge payoff or recording fees, power of attorney preparation, or
courier or delivery fees. Selecting the right settlement company can
put up to $600.00 more dollars in the seller’s pocket, so make sure you
list Peninsula Settlements as the settlement company on your next contract.
Please
feel to contact me if you have any questions regarding this post or any
real estate issue. Good luck on getting your contract accepted!
Bruce Stern
301-444-4664
