Ok, You found the house and now it time to make an offer. Demand for the property and your love for the house will dictate the offer you make. In this short article I’ll explain 9 different components of the offer and how they can be used to make your offer stronger. When a seller choses an offer to accept they are always looking for the best offer with the least uncertainty.
This is the total amount you are offering to the sellers as compensation for their property.
Purchase price (PP) is made up of the Down Payment, Ernest Money & Loan Amount
You can make your offer stronger by increasing the PP.
If you are getting a loan on the house the lender will require an appraisal. Unless you have the cash on hand your ability to increase PP will be limited by the appraisal value.
This is the cash you are offering to giving to the seller at the Close of Escrow (COE). At COE you will either bring a cashiers check or wire the Down Payment (DP) plus Closing Costs (CC) to the title company.
You can make your offer stronger by increasing the amount of your down payment. The larger the down payment the greater the odds the deal will go through.
If you are getting a Down Payment Assistance loan, your down payment offer will be limited to the programs grant limit.
This is the cash you are offering to the seller to be deposited at the title company to open escrow and begin the buying process.
This money is refundable during the inspection period.
You can make your offer stronger by increasing the earnest money offer.
Another way to make you offer stronger is by offering non-refundable EM. In this option buyers are risking the loss of the EM if the deal does not go through. There are two ways to offer Non-refundable EM. You can offer a portion or all of the EM as non-refundable at contract acceptance. In this situation you’re basically buying the sellers acceptance. The other way to offer non-refundable EM is to offer it after the inspection period by waving the appraisal contingency. You might do this if there is a concern the house won’t appraise for the PP.
This is the amount of money you must barrow to purchase the house. To make an offer you’ll need to be Pre Qualified for a Mortgage by a Lender.
You can make your offer stronger by borrowing less money and putting more cash down.
You can also make you offer stronger by taking the next step of being Pre Approved for your mortgage.
There are 2 types of loans, Government backed (FHA, VA, USDA) and Privately backed (Conventional). Sellers tend to look more favorably on Conventional loans because buyers must meet higher standards to qualify and the loans have fewer obligations for sellers.
As part of the offer you propose a date for the Close of Escrow (COE).
Typically this period is 30 - 45 days.
You can make your offer stronger by offering a shorter COE. If you are getting a loan, the COE will have to afford enough time for the approval process, 30-45 days.
There are items in every house that belong on the house and convey with the sale, the oven and range for example. Then there is everything else that belongs to the sellers. It’s typical for the refrigerator, washer & dryer to be negotiated as part of the offer.
You can make your offer stronger by following what is outlined in the MLS listing information. If they aren’t offering the refrigerator in the MLS, don’t ask for it.
At COE there are Closing Costs (CC) which the buyer is responsible to pay and CC the seller is responsible to pay. It is common for buyers to request that the sellers pay for some or all of their CC in the form of a Seller Concession (SC) to the buyer. Keep in mind the SC is money the seller in giving to the buyer out of their profit from selling the house.
You can make your offer stronger by limiting or eliminating the Seller Concession.
In the offer the buyer purposes: If a Home Warranty (HW) will be purchased, who will pay for it and how much it will cost.
To make your offer stronger the buyer can offer to pay for the HW or decline a HW.
It is very common for the seller to pay for the HW.
Other Items to bolster your offer
I have found it can be helpful to write a short and sweet letter to the sellers. In the letter you include a picture, introduce yourself, compliment the house, tell them why the house would be perfect for you and thank them for their consideration. This is not necessary but can prove helpful to set your offer a part.