6 Ways to Get Your Offer Accepted in a Hot Market

A number of U.S. housing markets remain red hot. Some are even hotter than they have ever been before!

The reason? Low inventory & lots of homebuyers taking advantage of historically low-interest rates. And more buyers means more sellers are getting multiple offers for their properties.

So, how can you make your offer stand out and get accepted in a multiple offer situation? Here are several tactics to help you write a competitive offer and win the bidding war:

  1. Provide appraisal gap coverage

In order to get an offer accepted, you may have to go over the asking price. But when offering above the asking price on a property, there is a chance that it may be more than what the bank appraises the home for.

Sellers may want a guarantee that you will pay the difference between the appraisal and your offer if they believe there’s a chance the property may not appraise out. An advantage you may have on other buyers is to indicate that you will pay the difference if the appraisal comes up short. In other words, you will fill the appraisal gap.

If a seller is looking at two equal offers and one offer has appraisal gap coverage but the other offer doesn’t, they are going to go with the offer with appraisal gap coverage.

  1. Increase your earnest money deposit

Earnest money deposits are used to show that you have skin in the game when making an offer to buy a property. The amount of money you put down as earnest money differs from market to market but is typically 1-2% of the purchase price. That 1-2% is not a hard and fast rule though. You can increase your earnest money deposit to more than 1-2%—maybe 3% or more—to show you really want a home. You have even more skin in the game.

Now, the earnest money deposit is refundable if you have to back out of the contract due to inspection, financing, or other issues. The earnest money deposit also comes out of your down payment, so it’s not money you are just giving away.

Offers with a larger earnest money deposit can lead to you getting your offer accepted over other offers.

You can make your earnest money deposit non-refundable if you are REALLY serious about the property. Proceed with caution, though.

  1. Shorten your inspection period

The inspection period is where you get a licensed inspector and contractors to walk through the home and do an in-depth assessment on the structure and systems, such as furnace and AC. This is often the time when homes fall out of contract due to a poor inspection.

If you offer a shorter window for inspection, such as a 3-5 day inspection period compared to a 10-day, a seller might accept your offer over others. They know that if something comes back bad from the inspection, they can go back to market sooner rather than later.

If you do go with a short inspection window, though, make sure you have your contractors and inspectors lined up and ready to move so you can do your proper due diligence.

Some serious and seasoned investors will even waive inspections on properties they know they are going to do a gut rehab on.

  1. Cover your own closing costs

Many first-time homebuyers scrape just enough money together to come up with the down payment for a home—they don’t have enough to cover the closing costs for the lender and the prepaid expenses for funding the escrow account. A way for property buyers to get this cost covered is by asking the seller to cover a certain amount of the buyer’s closing costs.

This can be effective in a buyer’s market, but in a hot seller’s market, if you offer $100K and ask for $5,000 in closing costs to be covered by the seller, your offer is essentially $95K to seller. If another buyer comes in and offers $100K without any closing costs to be covered by the seller, you are going to lose that bid!

Do your best to cover your own closing costs when writing an offer in a competitive market.

  1. Include escalation clauses

The escalation clause can be a very powerful tool when making an offer on a property. Escalation clauses generally say that you will beat any other offer a seller has by $1,000 up to a certain purchase price.

However, when there are a large number of offers on a single property, an escalation clause makes your offer confusing and complicated to the sellers. It may get it moved the bottom of the pile. If you know you are offering on a property that has a lot of offers, your best bet is to send in a clean and simple offer at your highest and best price. The easier it is to understand your offer and compare it to the other offers in the mix, the better your chances of getting your offer considered and accepted.

  1. Provide occupancy

This is a pretty simple one: If a seller needs time after closing on the house to pack their things and move or buy another house, give it to them! Many times, a seller may ask for 10 days or as many as 60-plus days to get their ducks in a row and move out of a property. If you give the sellers the occupancy they need after closing and another buyer doesn’t provide occupancy, your offer is more likely to get accepted.

Plus, in many cases—depending on the length of occupancy the seller needs—you may even collect rent from sellers or collect a fee for days they stay in the home past the agreed upon occupancy period. Boom! Now you have a short-term tenant while you look for other long-term tenants. Sounds like a huge win to me!