According to Lawrence Yun, Chief Economist at the National Association of Realtors, “For every listing there are 5.1 offers. Half of the homes are being sold above list price.”

It takes some real thought and desires to win in a bidding war. Knowing your options is key. There are many things that you can do to make your offer stand out.

1.) First realize that if you are getting a mortgage, the lender will only allow the loan amount to be up to the appraised amount. That means that if you offer more than the appraised amount, you will have to come up with the difference. If you have the extra cash, then this should not be a problem. If you don’t, then you could negotiate and see if the owner would take the appraised amount. Another solution would be to offer a price but then in the “Further Conditions” in the Purchase Agreement, write something like “if the home appraises under offer price, then the buyer will pay up to appraised amount”. This would eliminate any question as to what you would be willing to pay and eliminate negotiations after appraisal.

2.) Don’t request any appliances even if the seller is willing to leave them. This would show the seller that you are willing to buy the house without the appliances. The seller might like the fact that they could take some/all appliances with them.

3.) The earnest money was designed to show the seller how interested you were in buying the house. The bigger the earnest money, the more you want the house. It also shows that you are willing to put skin in the game. Larger amounts of earnest money could make a difference.

4.) How you finance the home and what your down payment is can be critical. Basically, there are 3 types of loans. FHA, insured conventional and conventional. If you have a down payment of less than 20 percent, then the lender will add a Private Mortgage Insurance policy to the loan. FHA appraisals are always a little more demanding. This could be a little more challenging for the seller if their home is not up to par. Bigger down payments do have one advantage when it comes to appraisals. Example: Buyer offers $200,000 on a house. They put down 10 percent as a down payment. Now house only has to appraise for $180,000 because that is all the loan would have to be. This could be a big concern for sellers if the house does not appraise. Having a bigger down payment could give the seller some relief.

5.) Don’t ask the seller for any closing costs. This might be the only way a buyer could afford the house but you are taking money out of the seller’s pocket.

6.) Work with the seller on a closing date. A buyer’s agent could call the listing agent and ask what would work best for the seller. The seller might need time to close on their next house or might want to close as soon as possible.

7.) Traditionally the closing fee (the fee charged to have the table closing by the title company) is split between the buyer and seller. The fee usually is around a total of $300 to $400. The seller will pay more attention and appreciate the offer if the buyer pays the sellers half of the fee.

8.) In this market, possession of the new property can make or break a deal. Traditionally, possession was always at closing. Now, giving the seller days, weeks, or a month to vacate the house has become more of the norm. This protects the seller from having to move out before closing. It is possible (and happens many times) that the buyer can’t get the loan but does not find out until a day or two before closing. Maybe the seller has bought a new house and has moved into it. Now the seller has to face two mortgages until they can find a new buyer for the old house. Giving the seller extra time to vacate is a huge plus.

9.) Either waving the right to have a home inspection, taking the property as-is, or using the “AS IS” ADDENDUM TO PURCHASE AGREEMENT is a benefit to the seller. This allows the buyer to have an inspection, terminate the transaction if any undisclosed defects were found in the inspection. The seller has no obligation whatsoever to correct the defects found in the inspection. This protects the seller from any inspection repair expense. Normally this would work well if the house is in good condition and has no defects and needs no repairs.

10.) Don’t ask the seller to pay for a home warranty for the buyer. This is an added expense for the seller. The buyer can order and pay for a home warranty any time after the closing for the same price.

11.) The buyer could pay for the seller’s title insurance policy. This cost could vary based on the price of the house. This could mean a lot to the seller.

12.) Because Indiana property taxes are paid in arrears, the bills you get this year in May and November pay for the first 6 months of last year and the last 6 months of last year. The seller owes the buyer a credit at closing based on what the last payment covered to the closing date. The title company prorates it and gives the buyer a credit and the seller a debit on the closing statement. Otherwise, the buyer would be paying the seller’s property taxes from their escrowed mortgage payments. The buyer could relinquish the credit or part of it which would save the seller some money. These tips are ways to influence the seller in a multiple offer situation. The whole idea is to reduce the seller’s costs and inconvenience. The more tips you can use the more likely you are to get the seller’s attention and maybe win the bidding war. When I represent the seller in a multiple offer situation, I start an Excel spreadsheet with all the variable contingencies. This makes it easier for the seller and me to decide which the best offers are. The last multiple offers I did this to had 9 offers. The one before that had 15 offers. It’s a seller’s market.

DISCLOSURE – You should be careful about waiving the inspection. As a licensed Real Estate Agent, we have a fiduciary responsibility to educate our buyers of the importance and benefits of an inspection. And, as a Realtor, the Code of Ethics states that we make sure that any known issues are still disclosed. There are benefits and liabilities to each of these above tips. Make sure you understand them before you use them.

Tim Lord