5 Ways to Make a Stronger Offer

The struggle is real right now for home buyers in the St. Louis real estate market. In almost every part of St. Louis City & County, demand far outweighs supply which tips the scales in favor of sellers. It has become commonplace for sellers to receive multiple offers within the first few days on the market, and often for more than their asking price! Buyers are feeling the sting of loosing their dream home to the fierce competition vying for the same listing.

If you have an agent who knows the market and how to leverage the Missouri Residential Sales Contract, you can stack the deck in your favor.

It’s critical to understand the market conditions of the neighborhoods where you’re focusing your home search. A balanced real estate market will have about 6 months of supply which means if no new homes were listed, it would take 6 months to sell through the inventory currently on the market. Any more than 6 months of supply is considered a buyer’s market (more supply than demand), and any less is considered a seller’s market (more demand than supply). As of August 2016, the state of Missouri has an average of 4.1 months of supply.

For example, Clayton has 3.3 months of supply making it a fairly robust seller’s market. Ladue on the other hand, has 6.15 months of supply and is a balanced market.

1. Offer More Earnest Money

Earnest money is an important part of the home buying process. It shows the seller that you’re a committed buyer, and helps fund your down payment. A 1% deposit is fairly customary in the St. Louis market.

Think of your downpayment as leverage for your offer. If you’re putting 10% down on a $200,000 house, you’ll need to bring $20,000 to closing for your downpayment. Since earnest money goes toward your downpayment, you can use that $20,000 to adjust the amount of leverage you have in a multiple-offer situation. More earnest money means more skin in the game and might be the boost you need to squash the competition. So, knowing that 1% is customary and you have 10% to play with (your downpayment), how aggressive do you want to be?

The Missouri Residential Sales Contract affords you a second opportunity to leverage your contract with earnest money. You can offer a specific additional amount to be deposited after your contract has been accepted by the Seller.

Talk through these options with your agent to make sure that when it comes to earnest money, you’re getting maximum bang for your buck. Be certain you understand how earnest money is governed within the contract so that if the deal doesn’t work out, the earnest money is returned to you.

2. Minimize Contingencies

A contingent offer is pretty standard. It means an offer on a home has been made, the seller accepted it, but the finalized sale is contingent upon certain criteria that must be bet. These criteria are called contingencies and they typically fall under three major categories: appraisal, mortgage approval, and home inspection. Simply put, fewer contingencies means a stronger offer.

Talk with your agent about which contingencies to include or exclude to position yourself as the strongest buyer. Depending upon your unique situation, there may be certain contingencies which you are unable to give up such as the sale of your current home.

3. Use an Escalation Clause

In this market the hot listings are receiving multiple offers from interested buyers and using an escalation clause increases the likelihood that your offer will rise to the top. This is strategy is pretty similar to bidding on eBay. Your offer will specify a purchase price and the escalation clause automatically escalates that purchase price to beat higher offers by an increment predetermined by you.

Let’s use a $200,000 base offer as an example and we’ll say that you’re willing to beat any higher offers by $1,000, up to a maximum offer of $210,000. In this scenario if another buyer offers $205,000, your offer would automatically escalate to $206,000 to beat theirs!

This is not a foolproof strategy so you must discuss it carefully with your agent. It’s important to consider whether you’re willing to escalate your offer regardless of appraised value or if the offer will remain contingent upon appraisal. You’ll also want to ensure you’re comparing apples to apples be specifying that your escalation applies only to the ‘net’ offer. If you’re not sure whether this strategy is right for you, ask your agent for a copy of their escalation addendum and discuss any concerns with them in advance.

4. Make Your Best Offer, Upfront

There’s nothing worse than the sting of rejection and heartbreak of missing out on the perfect home. If you know it’s the one, make your very best offer and ask your agent to communicate to the listing agent that you’ve made your highest and best offer in lieu of negotiating back and forth.

5. Forget the Small Stuff

It may be tempting to ask for the washer and dryer to stay, or for  the sellers to buy you a home warranty or pay some of your closing costs. When writing your offer, decide if you’re willing to loose the home over these things. The fewer small items in your offer, the cleaner and more attractive it looks to sellers.

Make an offer you feel comfortable with, that is the most important thing.

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