The Nuances of a Competitive Offer

While interest rates have slowed buyer activity in the Denver housing market, there are still plenty of home sellers out there getting top dollar and multiple offers – making a competitive offer a topic of conversation.

In recent years, bidding wars, escalation clauses, and creative offer strategies have become more common due to a low supply of available inventory.

Many would-be home sellers have been hesitant to enter the market due to their current low-interest rates. However, those who have been able to cash out their home equity are finding a golden opportunity. Depending on your neighborhood, multiple offers, flexible closings, and contracts being signed within days are still happening.

If you want to sell your house, what should you be looking for in a desirable, beneficial, and profitable offer? While some people focus on profit and return on investment, there are certainly other considerations that may go into your decision to accept one offer over another. Here are a few points that make a competitive offer:

Earnest Money

To make a move as a serious contender for purchasing a home, a buyer will “show you the money.” This deposit is made after an offer is accepted and goes towards the down payment at closing. Sometimes the buyer will waive the right for it to be returned if they decide not to buy the home after the loan objection deadline passes. Either way, a large amount of earnest money is usually a signal that the buyer is committed to the process and is willing to stay the course toward the purchase.

Escalation Clause

To assure the buyer is the highest bidder in a multiple offer situation, an escalation clause can be offered which includes the amount of money the buyer is willing to increase over the asking price and the increments of money being escalated. Two prospective buyers could have the same maximum bid but whoever has the highest designated increment increase will be the highest offer on the table.

Home Appraisal Gap

This is a popular inclusion for buyers in a multiple offer situation. Since home values have risen so quickly, home appraisals often are not representative of what is happening in the real estate market, much less in a particular neighborhood. A home price from even one month ago in a popular neighborhood may not be representative of the current situation. As a result, home buyers are willing to cover the “gap” between the home’s appraised value and the contract offer price. Sometimes, this amount may be a couple of thousand dollars; other times, it may be tens of thousands.

The offer should address this issue, and note what amount the buyer is willing to offer above the appraised value. Remember, their loan amount will be contingent on the home appraisal and any amount over the designated home value will have to come out of their own pocket. Some buyers can sidestep this if they have a large down payment, thereby limiting the risk to the lender.

If the buyer is paying cash, an appraisal is often waived unless the buyer wants to confirm they aren’t paying more than the property is worth. Waiving the appraisal certainly strengthens the offer and beats out the competition for an in-demand property.

Home Inspection

This is a tricky one and it can take many forms. The home inspection is ordered and paid by the prospective home buyer, and the inspector examines all the internal and external mechanisms and features of the home. A written report is provided which outlines the condition of the home. If a buyer feels comfortable with the home, they can waive the inspection (which is typically not recommended). Or, they can limit what the homeowner has to address, typically only items that are related to health and safety, and sometimes only up to a certain amount. 

Title Work

Before a home can be transferred to a new owner, the title of the property must be clear. As a result, a title “search” is conducted to prove there are no outstanding liens or claims against the property. A home buyer may offer to waive the title work or offer to pay for the title work, which means one less expense for the seller.

Flexible Closing Date

If the buyer requests your input on the closing date, this can be very favorable for the homeowner. This prospect is often associated with a cash buyer. If the buyer is seeking a loan, most lenders want to close within 30 days or less. The home seller can select an agreeable timeframe and allow more (or less) time in the home before having to move. This can also tie in with a rent-back option (see below).

Rent Back

If you haven’t purchased or rented a new place, home buyers are sometimes willing to rent the home back to you post-closing. This allows you some time to figure out your next move and establish a flexible move-out date. The home buyer may ask for a 30- or 60-day rent back or even allow you to stay rent-free.

Work with a Usaj Realty Broker to Learn More

There are several other favorable items to look for when selling your home, and your Usaj Realty broker will help you determine the most important ones given your particular situation and the specific property. For example:

• Waiving the loan objection
• Waiving the ILC
• Offer to pay your moving costs
• Allowing you to leave unwanted furniture/items in the home

Usaj Realty and its experienced bevy of brokers will fill you in on other suggestions and language to create a favorable sellers’ contract. If you are considering selling your home, learn more by calling us at 720.398.2999 or visiting our website, usajrealty.com.