Buying properties is the essence of real estate investing. It sounds so easy but those first several investment properties seem to evade new real estate investors time and time again. Why? When looking at what it takes to make a strong offer on a property far too many people focus on one thing, PRICE. While dollars and cents are very important, price is only one component of a winning offer.
Put yourself in the seller’s shoes; of course you want to get the most money possible, that’s a given. But what happens when two offers come in at the same price, how then does a seller decide which offer to choose?
- Price: we have already mentioned price and it is generally speaking the first thing considered. A seller wants to receive the most money possible.
- Odds of Closing: nothing makes selling a property more frustrating than buyers who cannot perform. Sellers want to accept an offer they are confident will close.
- Speed of Closing: we are an impatient society and sellers are especially so. Sellers want to close as quickly as possible.
- Ease of Closing: the fewer problems and less potential for problems, the better. Sellers are searching for a pain free process.
With these things in mind it becomes a little easier to figure out ways to make an offer which will appeal to sellers and give you a better chance of landing the property. Here are some ways to make an offer difficult for any seller to refuse:
Tips for Making Stronger Real Estate Offers
- Increase Earnest Money: earnest money (good faith money) is used in real estate transactions to show the buyer’s intent to purchase the property. The amount or percentage of the deposit varies based on several factors but generally speaking a seller will look more favorably at a larger earnest money deposit, as it shows the buyer is serious, supporting number two in the above list.
- Shorter Inspection Period: typical inspection periods vary from market to market but 7-10 days is fairly common. However, if you have a working relationship with a good inspector you will need less time to get an inspection completed which means you can shorten the window on the contract. Being able to complete the inspection process quickly and move forward towards a successful closing helps satisfy number three in the previous list and can help defeat similar offers which move slowly.
- Pre-approval Letter: while a cash offer is always king, a pre-approval letter from a lender can help ease any doubts a seller might have about your ability to obtain the funds to close on the property, helping satisfy numbers two and four on the above list.
- Fewer Contingencies: the less you ask from the seller, the better (in their eyes). Many sellers are eager to move on and do not want to fool with dozens of nit-picky requests. If you are confident in your ability to assess and analyze properties, you may consider making “as-is” offers, meaning you will not ask the seller to fix any issues with property. Sellers are usually thrilled knowing they will not have to deal with fixing a list of problems (large or small), potentially making your offer much sweeter than competing offers.
Making offers on real estate purchases can be difficult, but knowing what the seller is looking for and being able to cater to their desires will put you in the best position to get those great deals under contract. While every seller is a little different and each is in a unique situation, most have the same end goal in mind; to get the most money for their asset, as soon as possible and with no delays or problems. While it seems like a lot to ask for, and clean closings are not always possible, if you satisfy as many of those as possible, you give yourself a great chance to land some real estate deals.Tips for Making Stronger Real Estate Offers by James W. Vermillion III