In today’s competitive housing market where multiple offers are the norm, it is very important that a buyer’s offer stands out from the crowd. Home buyers and Realtors have to get creative with their offers and also provide full transparency upfront, so the seller will feel comfortable that a buyer will be able to obtain financing and close escrow. Here are 7 tips that will help your purchase offer stand out from the crowd and get accepted.
1. Include a Personal Cover Letter From the Buyer
A great idea in this competitive market, is to include a personal cover letter with your purchase offer, that introduces your family and why you are the right candidate to purchase the home. Also include a family picture too.
If you can tug at the heart strings of the seller, they may be more inclined to choose your offer over others. Many agents and buyers tell me this strategy works!
2. Your Loan Approval Letter Verifies Your Type of Financing
Include a loan approval letter that clearly explains what type of financing you are getting and how much of a down payment you are applying towards the transaction. For example, if a buyer is qualified for conventional financing and is putting down 20%, make sure to write this into the loan approval letter, as this will usually place ahead of a FHA buyer that has a 3.5% down payment or a VA purchase offer that has no down payment.
If a buyer is submitting a FHA or a VA offer and is using a limited or no down payment, make sure to follow the rest of these steps below to strengthen the buyers offer, so it has a better chance of standing up against the conventional offer with 20% down.
3. Include a DU Underwriting Approval With The Offer
Always include a DU underwriting approval with your offer. A DU (desktop) underwriting approval is when the buyers loan application and credit report has been approved by Fannie Mae’s, FHA’s or VA’s underwriting system.
A DU underwriting approval displays the most important information on a buyers profile, which gives the seller a good idea of the strength of the buyer. For example, a DU approval lists the buyers credit scores, debt to income ratios, assets, reserves, down payment and the type of loan program they are approved for.
This is a great tool to discuss the strengths of the buyers profile with the seller, so they can see how well qualified the buyer is.
Make sure the loan approval terms on the DU underwriting approval match up with the loan program that is listed on the buyers loan approval letter, (see # 2 above).
4. Provide Proof of Down Payment Funds
Always include proof of down payment funds with your purchase offer. Make sure the name on the bank statements, or any other account being used for the down payment, matches the buyers name on the contract and approval, and also verify there are enough funds in the statements to cover the down payment listed on the offer.
Or, if a buyer is getting a gift from a family member, provide a gift letter and proof of funds from the donor. Many of the offers I review do not have proof of funds provided, or there are not enough funds to cover a 20% down payment and reserves for example, so make sure there is always enough funds to cover the terms on the buyers approval.
5. Increase your Deposit
Want to show a seller how serious your offer is? Consider putting down a bigger deposit in earnest money. This may seem risky for some, but earnest money is there for a reason. If you are uncertain about putting a “noticeable” amount of earnest money on the table, it may be a sign to the seller that you are uncertain about the house itself.
Assuming you hold up your end of the bargain and you have the right contingencies in place, it won’t cost you any more in the long run since the deposit goes towards your down payment if financing is involved.
6. Be flexible and don’t ask the seller for credits to cover closing costs
It’s a good idea to ask the seller’s agent upfront what you can do to make the offer more enticing to the sellers. Can you be flexible on the closing date for the seller?
Also, a purchase offer asking for seller credits to pay for your closing costs will usually place behind an offer that does NOT ask for any seller credits. Some people assume just because a buyer does not have funds for closing costs, to just ask the seller to cover them.
SOLUTION: To make a buyers offer more competitive, the lender can pay for ALL the buyers closing costs with a lender credit. How does this work? It’s easy, instead of taking say a 3.875% 30 year fixed rate, just take a slightly higher rate of 4.25% instead, and now there is a lender credit of roughly 2.5% available that can be used to pay ALL a buyers closing costs.
Not only is this a good negotiating tactic, but of course it saves a buyer money too. We present this option to all our buyers.
Another Tip, is to offer to pay for the sellers Owners title policy and transfer tax, these fees amount to roughly $2,500 on a $400k home, so this is another way to sweeten the deal for the seller to accept your offer. If the buyer does not have the funds, e can also pay for these fees with a lender credit.
7. Close the Transaction Faster
Being able to close a transaction faster is another way to entice the seller to accept your offer in this competitive market. For example, if a seller is reviewing 3 offers, and there is a 17 day offer, a 30 day and 45 day offer, usually the seller will take the fastest closing.
My company can close a Conventional, FHA or VA Purchase Transaction in 21 days, and even 17 days if a major rush is needed. I have an outstanding team set up with 2 assistants dedicated to help close transactions fast!
I hope you found these tips useful. I help review loan approval letters and offers every week with my Realtor partners, which is a great opportunity to look at the different types of offers that buyers are submitting in this current market. The majority of offers I review usually only have 2-3 of these items above provided.
I believe full transparency upfront is the key to getting an offer accepted these days, because usually the “Path of Least Resistance” is what we look for when reviewing offers! As many times the offer that is presented the clearest, is flexible and addresses any issues upfront, is the offer that stands a better chance of getting accepted.
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