Until recently, the prognosis for the housing market wasn't great. With the economy in a free fall, home sellers swiftly took down their "For Sale" signs and many buyers chose to wait out the
6 Reasons Why Your Higher Offer Wont Win The House
You've finally found your dream home, and it's actually in your budget. You can swing it—with cash to spare—but with competition fierce, why not go all in and offer way above asking? The seller will be in no position to refuse, right?
Well, hang on for a second. While cash—and lots of it—is certainly king, there are other factors that play into a seller’s decision to accept an offer.
In fact, sometimes there are things in your purchase contract that can outweigh even your supersized offer.
Sounds crazy, doesn’t it? But often—especially in today's red-hot market—a successful sale goes beyond money. Here are a few scenarios in which your highest offer might not land you the keys to the front door.
1. You're not flexible on the timeline
First and foremost among possible deal breakers is timing.
“Sellers look at the terms to their specific situation," says Francine Brown, broker/owner and Realtor® at Brown Estate Realty in Norwalk, CT. "Maybe they need more than 30 days to move out, so if someone is pressuring them to move out sooner, that can sometimes be a turnoff if they haven't found a new home to move into.”
On the other hand, the sellers might have already vacated the property, and are eager to unload it pronto.
That’s why customizing the length of the closing period to meet the sellers' needs can be more important than the bottom line. Have your real estate agent find out what they need, and let them know you can accommodate them.
2. You don't have your paperwork squared away
Yes, we've preached and prattled on about the importance of being pre-approved for a mortgage before you start your home search. And here's just one of many reasons why: You can blow up the deal if you haven’t been pre-approved, says Sharon Paxson, a Realtor with Arbor Real Estate in Newport Beach, CA.
Why? If you don't have the financing in place to make your initial down payment and closing costs, it doesn't matter how many dollars you promise the sellers.
“Buyers must have that in place as opposed to tying up a house when they're not really qualified to do so,” Paxson says. “When you're ready to put in an offer, make sure your pre-approval is within 30 days or less. [If sellers] see that the pre-approval was done more than 60 days ago, that could make them wonder if you're still credit-worthy to get a loan."
Speaking of being credit-worthy, here’s another no-no: Making a large purchase (such as a car) during the escrow period—even if you have the money to do so. It might affect your ability to obtain financing, and that'll be another major red flag to the seller.
3. You're asking for too many contingencies and concessions
If you’re in a bidding war for your must-have home, you’ll want to go in not only with the highest offer, but also with the cleanest one.
“You want the deal to be as sweet and competitive as possible, so that if the seller takes it, there's a very good chance that the sale will go through,” Paxson says.
For example, a contingency stipulating that your home must sell before you purchase the seller’s house is usually a deal breaker, Brown says.
“The seller may not consider your offer as favorable because you're still shaky until your house actually sells,” she says.
Another potential turnoff: Negotiating for a large concession, like for the seller to pay all of the closing costs.
Instead, ask for the bare minimum closing costs—or none at all—and make sure the concession doesn't dip into the seller's price tag, Paxson advises.
“So if a house is listed for $300,000, and you can go up to $310,00, then put in $310,000 with a $10,000 seller's concession,” she says.
4. You're requesting too many things be included with the home
On a related note: If you ask for the custom drapes, the Smeg appliances, and the Scandinavian hot tub to all be thrown in with the house, sellers might wave you off, Brown says.
“If the sellers had put in the listing that the chandelier wasn't included, then don’t ask for it to be thrown in,” Brown says.
You might think you're paying for all that stuff with your higher offer, but if you really want the house, tread lightly here. You risk offending the sellers if it looks like you're trying to squeeze as much out of them as possible.
5. You haven't expressed your love—for the house
You might not be the only one bidding high. And when similar offers are on the table, sometimes the sellers look for other factors to break the tie—that another happy family will live in their cherished home, for example. Or that the buyers won’t be gutting it and turning it into something totally different.
So how can you sway sellers who love their home? Put some heart into your offer by giving them some idea of who you are and why you want their home.
“I’ve seen buyers take a picture of themselves and their family. If that’s what works to make it more emotional, then do it," Paxson says. "It just depends on who your target is. If your seller is an investor, they’re probably not going to care—they just want the money. But if they raised their family there and want to sell it to another nice family, an emotional appeal might work.”
Writing a love letter to the sellers can sometimes seal the deal, Brown adds.
“A buyer may outline why they feel this house would suit their family needs and how they can keep on the tradition of what the previous owner has,” she says.
6. You gave up after your offer was initially refused
If, for whatever reason, the sellers reject your bid, hang in there, Brown says. Contracts that come in way over asking price tend to have a high cancellation rate, perhaps because the buyers didn’t have pre-approval and their financing falls through.
“I make sure things always end nicely with the listing agent, and tell them that we want to be kept in the loop should there be any problems with the accepted offer,” she says.
Ask your agent to check in every two or three weeks. Because then, instead of putting it back on the market and creating a whole new bidding war, the listing agent may just go to the next most attractive offer: yours.
For Mark Ross, founder of Ross NW Real Estate and professional real estate broker, real estate has always been the career of choice. During his 25+ years in the industry, Mark has gained experience in....