Should You Write a “Love Letter” to a Home Seller?
So you've been shopping around for a home for what feels like ages. You've put together a solid game plan with a top-notch Realtor® who knows how to compete in a seller's market and you're confident you have the best mortgage lender in the market, known for closing deals on time and without hiccups. And most importantly, you've found a house you love. A lot. But you know it’s a tough market out there, and there will be stiff competition. You're looking for something to set you apart from other buyers, to convince the seller how much you really want (dare say, deserve) this home. We're willing to bet you've read home-buying advice telling you to write a letter to the seller, perhaps with photos, explaining how much you love the house, why it's perfect for you, and why the owners should pick you over other buyers. Maybe talk about the charming sight of your kids and dog running down the stairs on Christmas morning in the home of your dreams. You've read you could ask your agent to help you craft the perfect letter to the seller of a home to get that edge over the competition. Sounds like a great idea, right? And what's the best template for writing a successful letter to the owner? Before you put pen to paper, let's pause for a moment. Here's why you shouldn't do it. Real Estate Love Letters: Why They’re Discouraged Real estate love letters used to be common practice until relatively recently. It seems like a solid strategy on the surface, and that's because they used to be effective. Some sentimental sellers might respond favorably to a physical letter containing family photos and a heartfelt note. There's no harm in trying to establish a personal connection with the seller in an attempt to make a winning offer on the house, right? As it turns out, that's not exactly true. According to guidelines released by the California Association of Realtors, these letters can actually constitute a legal risk. A love letter can create unconscious or implicit bias in the seller — perhaps because the buyer and seller have things in common, like religion, economic class, background, marital status, language, color, ancestry, or race. If so, the seller might think "they'll fit right into the neighborhood!" But here's the issue. These are considered protected characteristics and any biases based on these factors are expressly prohibited by the Fair Housing Act. So if a seller takes an offer based on those criteria, instead of the objective facts of the offer itself, it could potentially expose them to a discrimination lawsuit. The state of Oregon has gone as far as trying to make "love letters" to woo sellers illegal — while that law is under review, expect the practice to come under increased scrutiny around the country. And many real estate agents across the country, following guidance from the National Association of Realtors, recommend against writing a letter to a home seller, and most of them won't — or at least shouldn't — help you craft one or present it to the seller. Even beyond the legal risks, there’s a chance a love letter could backfire — the seller might find it manipulative, an attempt to tug at the seller’s heartstrings to get an edge on the competition. Or you might have the best offer, but the plea you thought gave you an edge is in fact something the seller has a bias against. Just another reason not to risk it. What to Focus On Instead: The Power of the Cash Offer So if a love letter is off the table, what can you do to convince a seller to accept your offer — especially when you're competing with all-cash offers in a bidding war with other buyers? Rather than putting your time and energy into swaying a seller with your life's story, it's best to work with your agent on writing the best offer you possibly can. Keep in mind that when it comes to closing a deal, a seller isn't just looking for the highest bidder. A seller wants a deal that’s the most likely to close, and close as quickly as possible. This is one of the reasons why all-cash offers are so much more likely to succeed in a multi-bid situation — in fact, all-cash offers are four times more likely to be accepted. All-cash offers account for a full 36% of successful home sales. In an ocean full of competing fish, the all-cash offer is a killer whale. What makes all-cash offers so appealing? For one, showing "proof of funds" means the seller can be assured you don't still need to pass underwriting and secure the loan after the contract is accepted. A traditional mortgage application can still fall through even if a buyer has been pre-qualified. With a cash offer, that isn’t a risk. (Learn about other reasons sellers prefer cash buyers.) With Accept.inc as your alternative mortgage lender, you can secure the funds for an all-cash offer by getting Cash Approved™ up front. We'll provide you with the proof of funds you need to make offers with the power of cash, but allow you to pay off your home over time, just like a regular mortgage. That means you'll be able to compete against all-cash buyers or negotiate stronger terms against higher offers that have more contingencies attached. Get Cash Approved™ today and improve your chances of scoring your dream home by 4X.
Dan S | Apr 26, 2022
What to Expect from a Home Inspection
Buying a home can be overwhelming, especially if you’re doing it for the first time. Even after your offer is accepted (hooray!) you're dealing with paperwork, deadlines, negotiations, and a seemingly endless list of things that have to be done before the sale is actually finalized. You might be tempted to skip or shortchange parts of the process to get to closing faster (and we don’t blame you!), but there's one step every home buyer should take seriously: the home inspection. What Is an Inspection Contingency? If you’re in the middle of the homebuying process, you may have already heard of the inspection contingency (and if not, you will). But what is it, exactly? A real estate contingency is a clause in your home offer that lets you back out of the contract if something goes wrong or specific requirements aren't met (in other words, the sale is contingent on meeting the terms of the clause). More specifically, a home inspection contingency clause makes the sale dependent on the results of a home inspection. If the inspection reveals a problem with the home (such as plumbing, electrical, or structural problems), you can walk away from the contract, or try to negotiate repairs with the seller. A home inspection contingency is just one of several types of real estate contingencies that can be included in a home offer. The Inspection Process So how does the inspection process work? Don’t fret — we’ll walk you through it. After your house offer is accepted, you are responsible for hiring, booking, and paying for a home inspector to come to the home and look for defects. The timeframe for this inspection will be included in the purchase agreement — usually ten days after the offer is accepted. (If you don’t know where to look for a home inspector, the American Society of Home Inspectors is a great resource to get you started.) You’ll make an appointment with the inspector, with the understanding that the seller will have the house prepared and available for inspection. Now for the not-so-great news. A typical home inspection usually costs somewhere between $300 and $500, and as the buyer, you’ll probably be the one paying for it. There’s a chance the seller might offer a seller-paid home warranty as an extra incentive to buyers — some companies will give a discount on home warranties for sellers, and it can save them money on repairs if some are needed before a sale closes — but don't expect them to offer one. One estimate says only about 25% of existing homes sold last year in the U.S. had home warranties purchased by either the buyer or the seller. During the inspection, the inspector takes photos and makes notes, indicating any areas where repairs are needed (or have recently been made). The inspector will then provide you with a detailed summary of any issues they found. Some also include an estimated cost of any needed repairs — although these are not legally binding (inspectors are not contractors). It's common for inspectors to advise a buyer to consult other professionals, like electricians or plumbers, about specific problems they find. Once the inspector has presented their findings, you have a set number of days (probably laid out in the purchase agreement) to either move forward with the sale, ask the seller for repairs, or back out entirely. You can also ask for more time to further consult with professionals about the repairs, or ask the seller to lower the sale price based on the likely repair costs. This negotiation usually takes place between your agent and the listing agent, not you and the seller directly. The seller may ask for a copy of the inspection report in order to evaluate the time needed for any repairs. They might decide whether to perform the repairs or negotiate some more. If you’re not satisfied with the results of the inspection or the seller's response, you may choose to terminate the contract and receive your earnest money back, so long as the termination takes place within any deadline given in the sales agreement. What's Not Included in a Home Inspection When going through the home buying process, it's also important to know what a home inspection will not cover. A typical home inspection is a visual examination of the property, which means some things often don't get looked at or dealt with during an inspection. Things that generally aren’t included in a home inspection: Any areas that aren't readily accessible (for instance, blocked by snow or vegetation).Any areas that are dangerous to enter, such as areas with exposed wiring.Any systems (such as HVAC units) that aren't working and need to be taken apart to be inspected. Inspectors may also refrain from operating shut-off valves, taking off outlet covers to look at wiring, or doing anything else that might cause further damage. Common Problems Found During Inspections During a typical inspection, the home inspector will look at the following aspects of the home: Electrical, heating and cooling, mechanical, plumbing, roofing, structural, and ventilation problemsThe house's attic, interior, fireplaces, and outbuildingsLead based paints, pests, mold, radon, and proper permits While potential problems could arise in any of these areas, some of the most common problems found during a home inspection include: Faulty wiring, open junction boxes, or poor wiring jobsCracks or leaks in the foundationBent or clogged rain guttersMold, mildew, water stains, or other water damageRoof issues, such as broken flashings or curled shinglesFlaws in the foundation causing sloping floors or sticking doorsFaulty plumbing, such as problems with water pressure or slow drainsVentilation or heating problemsPoor upkeep (such as peeling paint, worn carpets, or minor structural damage). Can You Fail a Home Inspection? Technically speaking, you can't really fail a home inspection, because home inspectors don't deliver a "grade" on an inspection — they simply report on any problems they find. But it's certainly possible for a home inspection to reveal problems that you would consider to be deal breakers. Although most home inspections will reveal some issues (no house is perfect), it's fairly uncommon for an inspection to make a buyer walk away — only about 4% of home contracts fall through because of things like a bad inspection. Should You Waive the Inspection Contingency? So should you waive the home inspection contingency or not? Let’s face it: in a fiercely competitive home market, it can be hard enough to find your dream home, and even harder to win a bidding war. Many buyers are looking for any advantage they can get over other interested buyers. One way buyers can gain an edge is to waive contingencies in the sales agreement to make the entire process faster and less complicated for everyone — and that can potentially include waiving the home inspection contingency. But is it a good idea? The short answer is: almost never. Waiving a home inspection contingency can be very risky. Without a home inspection, serious problems might go undiscovered until after the sale is complete — a crack in the foundation, a deteriorating roof, or the dreaded mold problems. All that could lead to thousands of dollars in repair costs, which will be entirely the buyer's responsibility to bear. In other words, it’s a recipe for regret. Granted, waiving a home inspection contingency can greatly increase the appeal of an offer to the seller, since it reduces their risk and potentially saves them time and money negotiating and paying for repairs. But in turn, you'd be shouldering much more risk. If the buyer has the finances and means to accept that much risk, then waiving the home inspection contingency is certainly an option — but it's generally not recommended. Even if money is tight, you should especially avoid waiving the inspection contingency to save money on the inspection fee — the cost of an inspection is very small compared to the potential financial risk. Ask your real estate agent for their advice on waiving the inspection contingency, and they're likely to tell you the same thing. When to Walk Away Let’s imagine your home inspection has turned up some major problems. When should you walk away and get your deposit back? The short answer is, "it depends." Unfortunately, there's no hard and fast rule for when to make use of that home inspection contingency and back out of a contract. Here are the main factors to consider when deciding whether or not to walk: How badly do you want the home?Is the seller being reasonable about repair negotiations?Can you afford any repairs that you'll be responsible for? During the home-buying process, you should weigh these questions carefully, preferably working with an experienced real estate agent before deciding on the best move. Setting Yourself Up for Success Losing your dream home due to the results of a bad home inspection, or because the seller went with an offer with no such contingency, is not nearly as heartbreaking as learning your dream home is actually a nightmare of a money pit after already moving in. At the same time, you should have realistic expectations about what you can reasonably fix (and whether you can afford it). If you can’t, then be prepared to walk away. And while we don't recommend waiving the inspection contingency, we do recommend writing the most compelling bid possible by making an all-cash offer that does not include a financing or appraisal contingency. Want to learn how a cash offer, with no financing contingencies and no additional costs, can increase your likelihood of making a winning offer by 4X? Apply to get Cash Approved™ today!
Dan S | Apr 22, 2022
7 Types of Real Estate Contingencies and When to Waive Them
When you finally have your dream home in your sights and you (finally!) made the winning offer, the last thing you want is for the deal to fall through. But at the same time, you want to be able to walk away if a huge deal breaker is revealed in the time between your offer being accepted and closing. If the home inspection reveals the house is actually a money pit or the property title is in dispute, for example, of course you want to be able to get out of the contract. This is where contract contingencies come in. What is a contingency clause, why is it important, and when should you think about waiving contingencies when buying a home? Read on to find out about 7 types of real estate contingencies – from common to obscure. What Is a Contingency in Real Estate? A contingency is a condition that must be met before a deal is finalized. In a real estate transaction, contingencies are usually designed to protect the buyer by letting them walk away from the sale if specific conditions are not met. Contingencies can also slow down and complicate the home-buying process. Or terminate the deal entirely. And who wants that? In a sellers' market, anything that slows down the process puts buyers at a disadvantage, especially if they're trying to win a bidding war against other interested buyers who have fewer strings on their offers. That doesn't mean you can or should remove every contingency in your offer. Here are explanations of different types of real estate contingencies and when they are useful (and when you should consider waiving them). 7 Types of Real Estate Contingencies1. Appraisal Contingency What to know: Typically, a mortgage lender will not approve a loan where the loan amount is out of line with the appraised house value.That's because a low appraisal means the property may not provide enough collateral to support the amount of the loan. An appraisal contingency allows the buyer to back out of the contract with no consequences when a home appraisal reveals the value of the home is lower than the offer price. For a seller, a low appraisal coupled with an appraisal contingency means they'll either be forced to renegotiate the sales price or find another buyer who will meet the sale price despite the appraisal value. When to waive: Waiving an appraisal contingency can be the difference between winning and losing in a multi-offer situation. According to the January 2022 RealtorsⓇ Confidence Index Survey, 22% of buyers in the previous three months waived an appraisal contingency. If the buyer has the means to make a cash offer — or can cover the appraisal gap out of pocket — this tells the seller that the buyer can pay the price they bid even if the appraisal comes in lower. Buyers using traditional financing will be limited in their ability to waive this contingency by their lender's rules if they don't have enough additional cash to cover the deficit. Waiving the appraisal contingency can be risky because the gap may be much higher than you expect or are able to budget for. If you make an aggressive bid in order to win, and you waive the appraisal contingency, you may find yourself needing to come up with many tens of thousands of dollars out of pocket – or find yourself in breach of contract. If you make an offer backed by Accept.inc, on the other hand, you buy with the power of cash and waive your appraisal contingency entirely. That's because Accept.inc provides a Value Check on the home before you make your bid. Our process guarantees that you'll know the maximum appraisal gap you might need to cover; your gap will not be more than the difference between your bid amount and the Value Check (assuming your offer is higher than the value check). Why does this matter? It means no surprises. With traditional financing, you won't know until well into the process how much extra cash you need to have lying around to make up the difference between your offer and the appraised value (or your loan amount). With a Value Check in hand, on the other hand, you'll have the confidence to make an offer knowing your maximum appraisal gap amount and how much you can bid. It protects you — and the seller — from appraisal gap uncertainties. 2. Financing Contingency What to know: A financing contingency, sometimes called a mortgage contingency, allows a buyer to pull out of the contract with limited consequences if they're not able to secure the needed mortgage.The simple pre-approval that a typical lender does when you're shopping rates doesn't guarantee that your financing will come through during the final underwriting process. If a buyer chooses to omit the financing clause in their offer but cannot get the funds in time for the closing date, they likely have to forfeit their earnest money deposit. The seller would have to choose between delaying settlement in hopes that giving the buyer additional time will allow them to secure a loan or putting the home back on the market. In Q4 of 2021, nearly 30% of home contracts were delayed or terminated and more than 20% of those delays and terminations were due to financing issues. (Source: January 2022 RealtorsⓇ Confidence Index Survey) When to waive: If you're making an offer that depends on a traditional mortgage, there is a risk that financing will fall through. And you don't want to be on the hook if you waived this contingency. Cash buyers, on the other hand, make offers without a financing contingency; they can show proof they have the liquidity to pay the full offer price with cash in the bank – no strings attached. How do you compete with a cash buyer that's flashing a metaphorical trunk full of cash? By making a good-as-cash offer yourself! When you're Cash Approved by Accept.inc, you get all the benefits of paying a mortgage over time, but you are able to make a full cash offer using Accept.inc's proof of funds. Learn more about the difference between a mere pre-approval and an Accept.inc Cash Approval. 3. Home Inspection Contingency What to know: A home inspection contingency, also known as an inspection rider, allows the buyer a chance to back out of the sale if the home inspection reveals significant problems or issues with the property.This contingency can also allow for negotiating repairs and the associated costs with the seller.It is the buyer's responsibility to arrange for the home inspection within a week or two of the contract being signed. When to waive: In a highly competitive market, a lot of buyers find themselves under pressure to waive the inspection contingency because they know a seller will prefer offers that don't include one. But if you've seen the Tom Hanks and Shelley Long classic "The Money Pit," you might be leery of buying a house without knowing what's wrong with it and how much it would cost to fix. And rightly so! That's why some serious buyers ask for what's called a pre-offer inspection. If they find issues with the home, they would simply choose not to put an offer in. This makes the inspection contingency a moot point. Unfortunately for buyers, a pre-offer inspection is nearly impossible to do in highly competitive seller's markets because it requires the owner to agree to let an inspector into the home prior to going under contract. As you've undoubtedly seen in the frenzy of the market in the last few years, many homes are pending sale mere days after the listing goes live (which often means offers were submitted after the first open house, if not before). Allowing for a full pre-sale inspection isn't attractive to sellers, especially if you consider that they would be required to disclose any major issues that come up in an inspection once they are made aware of it. Doing a pre-sale inspection can be a great strategy for avoiding the inspection contingency, but it is often not a viable option in a seller's market like we are seeing in many metro areas these days. That said, skipping the home inspection entirely, even if you're worried it might be the only way to win your offer, is an exceptionally risky move. 4. Home Sale Contingency What to know: Sometimes a buyer needs to sell their current home before they are able to afford a new home. A "home sale contingency," therefore, stipulates the buyer's current home must be sold before the new sale can proceed.This contingency usually comes with a deadline. If the house is not sold by the end of the contingency period, the contract can be extended, or the seller can back out of the deal.There are two types of home sale contingencies: a sale and settlement contingency, and a settlement contingency.A sale and settlement contingency is used when the buyer is selling their existing home but hasn't yet received an offer or signed a contract. Under this contingency, the seller may use the "kick-out clause." A kick-out clause means the seller may continue to list the home and entertain other offers, potentially "kicking out" the current buyer in favor of another offer.Under a settlement contingency, the buyer's home is already under contract, but they just need to complete closing on their old property. In this case, the "kick-out clause" is not applicable, and the seller cannot continue to market the property as for sale. When to waive: While being able to sell a home before starting payments on a new one is obviously ideal for the buyer, be warned that including a home sale contingency in your offer (also known as making a "contingent offer") is highly unattractive to sellers. If you have no choice but to submit an offer with a home sale contingency, do everything you can to make it significantly more competitive. That may mean offering a higher price or making a cash offer (which eliminates financing and appraisal contingencies), or possibly both. Strategize with your real estate agent about what it will take to be competitive if there's no way around this requirement. The good news: If you're a first-time home buyer, then this contingency isn't relevant. 5. Title Contingency What to know: In real estate, the "title" is the legal right to ownership of the property. The title changes hands every time a property is bought and sold. During the closing process, a title company conducts a title search of public records to ensure that the seller has the rights to sell the property and that there are no other claims to it. In short, the title search makes sure the seller is legally able to sell the property and that no one else can claim it after the sale.A title contingency, therefore, is a clause in the contract that ensures the buyer can back out of the contract if the title search throws ownership of the property into question. When to waive: Lenders will not close a loan if the ownership of the title is in question, so it won't be possible to waive this contingency with traditional financing. Even with a cash offer, it is not advisable to skip the title contingency since no buyer should be willing to purchase a home without a clear title. Note that a title contingency is not the same thing as title insurance (which provides remedies if the initial title search missed something and another party lays claim to the property later down the line). 6. Home Insurance Contingency What to know: A home insurance contingency requires the home buyer to apply for and secure homeowner's insurance before the sale can complete.This contingency may be added by the mortgage lender as one of the terms of the loan -- in other words, they will not issue a mortgage loan until the buyer has homeowner's insurance.A home insurance contingency can also be requested by home buyers. If the home happens to be in a state at high risk for certain hazardous conditions (like hurricanes, fires, earthquakes, etc.) some insurance carriers may flatly refuse to issue homeowner's insurance. This contingency allows the buyer to walk away from the deal and keep their deposit if they're unable to secure an insurance policy. When to waive: Even if you've been doing a ton of research on home buying and real estate contingencies, you may not have heard of this one. This is a pretty typical requirement for home buyers and not something that would be considered a stumbling block. Most mortgage lenders will not issue you a loan in the first place if you don't have homeowner's insurance to protect your investment (and their collateral) and there's no reason to waive this contingency. 7. "Right to Assign" Contingency What to know: This contingency is generally only used by real estate wholesalers and investors. Investors agree to purchase a property, then sell them to another investor at a wholesale price.The "right to assign" contingency allows the investor to back out if they can't find another buyer for the property, for whatever reason. When to waive: As an everyday home buyer this contingency isn't something that would come up in your home-buying journey, even if you're buying another residential property to rent out for income purposes.Key Take-Aways About Real Estate Contingencies As you can see, there are common contingencies you can waive if you're making a cash offer, common contingencies that you may choose to keep to protect yourself, and any number of obscure contingencies you might write into an offer for very specific and niche needs. But the more contingencies an offer carries, the less attractive it is to a seller because these contract riders can slow down and even completely derail the home purchase. That's why removing the financing and appraisal contingencies with an all-cash offer is one home-buying strategy that is sure to give you a competitive edge over other buyers. Learn how getting Cash Approved brings you one step closer to moving into the home of your dreams!
Dan S | Apr 4, 2022
How to Make an Offer on a Home: Step-By-Step
So let's say you've made the decision to buy a home and you're ready to get started with the process soon. Congrats! That's a huge first step. Now you want to know, "How do I make a successful offer on a house?" The process of writing an offer can seem confusing, especially if you're a first-time home buyer. But making the actual offer on a home is just one step of a larger process — a step that should be fairly straightforward if you've put all the other pieces into place ahead of time. 1. Understand your mortgage options Before you get to the part in the home-buying process where you're thinking of writing an offer, you should already have talked to a lender about your budget and mortgage options. Selecting the right mortgage lender and getting Cash Approved™ (vs merely prequalified) allows you to shop the housing market with confidence.There are many different types of home loans, and Denver-based Accept.inc makes it possible to upgrade most typical mortgage types into a cash offer! (Sellers prefer all-cash offers over offers based on simple pre-approvals -- so much so that a seller will often choose an all-cash offer over a higher bid. Taking advantage of this option could be the ace up your sleeve when it comes time to make an offer.) 2. Find a real estate agent If finding a real estate agent to help you navigate the home-buying process wasn't your first step before selecting a lender, then this should be your next action item. Can you get through the home-buying process without hiring a real estate agent? We don't advise it. Taking the time to choose the right real estate agent is actually the smart play. Because the fees for a buyer's agent come out of commissions paid by the seller, there's no extra cost to you to work with an agent. A savvy agent is not just there to help you find a house; they're there to strategize with you, negotiate on your behalf, and help you navigate (and avoid) any obstacles in your journey to becoming a homeowner. Hiring the right agent is critical not only to the process of making a winning offer, but getting you past the finish line of the settlement process. 3. Discuss how to make a strong offer Once you're ready to get serious, it's time to sit down with your agent and discuss your strategy for putting an offer on a house or condo. We recommend doing this before you find your dream home, because in a competitive market, it pays to move quickly. Don't wait until after you've found the home of your dreams to learn how the home-buying process works or what your budget is! Talk to your agent about: What you're willing to pay and how much you can go over askingWhat you can afford on a monthly basisHow much earnest money you're willing to put downWhich contingencies you are able and willing to waiveWhat your deal breakers areWhat things you're willing to compromise onWhether you're willing to negotiate or use an escalation clauseAny issues related to timingHow much cash you can bring to the table, either for a full cash offer or for a substantial down payment One of the first things you should know: price is not the only factor when it comes to a seller accepting your offer! Let's talk about what else can sway a seller (and the seller's agent who is advising them). Consider that sellers want assurances that you're a serious buyer. A higher earnest money deposit (EMD) is one way to show you're motivated (and in a good financial position). Dustin Pruitt, of EXP Realty in the Greater Portland Area, explains that a low EMD "communicates to the seller that the buyer is unwilling or unable to make the seller whole should they breach their contractual obligation." A stronger offer is one that (also) keeps contingencies to a minimum, because each contingency represents one more opportunity for the deal to fall through. We've talked before about how cash buyers don't have financing and appraisal contingencies, but there are other points — and other types of contingencies — to consider in your offer strategy. Even if you don't plan to waive the inspection contingency, what can you do to signal that you're a highly qualified and motivated buyer who is likely to seal the deal? Pruitt suggests cutting the inspection period down to half of the standard time in a highly competitive market: "A long or detailed additional inspection from a buyer indicates they are nervous about the house. The last thing a listing agent wants to do is tie up a house with a long inspection contingency only to have a buyer terminate." On top of that, consider limiting the types of inspection issues you'll consider a deal breaker. It'll give sellers more confidence in your offer if they know you'll only use the inspection contingency to terminate if the report reveals structural issues, for example. For the same reason, Pruitt strongly advises against writing offers that contain a home sale contingency — a clause that the sale can only move forward when the buyer's own home is sold first. As Pruitt explains, these types of offers "are riddled with risk for a seller. What if the home doesn't sell, or the sale falls through? It's much better to figure out a plan with your Realtor® to not be a contingent buyer." Besides cash and limiting contingencies, are there other ways to strengthen your offer? What about writing a personalized note to sellers to tug at their heart strings and clinch the deal? Although it used to be a common strategy to send a letter with personal details explaining why you deserve the house more, "real estate love letters" have fallen out of practice and the National Association of Realtors considers them to be a liability. So, instead of sending a heartfelt letter, let the strength of the offer speak for you. 4. Decide if you should make a bid Now that you've laid the groundwork and have identified one or more homes you're interested in, decide whether it's a good idea to submit an offer (and on which home). Hopefully you've already been spending a lot of time crunching numbers and understanding your budget, but it definitely won't hurt to verify again that your chosen home is in an appropriate price range for your budget and that you're comfortable with the monthly payments. Don't forget that your budget needs to include taxes, insurance, HOA fees, and other costs, not only the principal and interest payments! If this is your dream home, chances are it might be someone else's too. You'll want to have your agent find out how many competing offers there are and if you're competing against (other) cash offers. Next, have your real estate agent pull the sale prices of comparable homes (also known as "comps") from the past month or two. Is the list price in line with what the home is actually worth? If the list price is substantially lower than the comps, you can be sure the seller's agent is trying to generate high demand to spur a bidding war and the home is expected to sell for way above list price. These details will help you and your agent decide if it makes sense to submit an offer and what to include. 5. Draft your offer letter If you're ready to move forward, it's time to make an offer. And quickly! Don't worry about searching for "offer letter templates" in a search engine. Your agent will know what to do and work with you on the details. Typically, an offer letter will include: The address of the propertyThe price you're offeringAn escalation clause, if applicable, with details of how much you'll increase your bid in case of a bidding warThe earnest money deposit you're putting downWhether you're making a cash offer or, in the case of a financed offer, how much you have available for a down payment Contingencies (such as financing, appraisal, home inspection, or home sale) which must be met before the sale goes throughTarget date for closing the saleTerms for prorating utilities, real estate taxes, and other bills between buyer and sellerWho will pay for title insurance, inspections, and other necessitiesA termination date for when the offer expires There may be some additional details to include, depending on your specific circumstances (or the seller's). 6. Wait for a response from the seller Once your agent submits the offer letter, one of three things will happen: The seller accepts the offer (in which case, congratulations!)The seller rejects the offerThe seller make a counter-offer If your offer is rejected, that doesn't necessarily mean the end — you may be asked to come back with another, more appealing, offer if you have the means to do so ... or you can move on and look elsewhere for a new home. A counter-offer might entail a change in the price, fewer contingencies, or other adjustments to the offer. The choice is yours whether to accept the counter-offer or walk away. 7. Finalize the contract Once the seller accepts your offer, you will both sign the offer letter. You'll then produce the earnest money deposit and sign the sales contract. Depending on your offer, you'll likely arrange your home inspection as soon as possible at this point to clear your inspection contingency. Before you can take possession of the home, all the contingencies must be satisfied, including getting final approval of your home loan if you've chosen to go with a traditional mortgage. However, if you wrote a cash offer, you can skip the financing and appraisal contingencies. That's because with an Accept.inc Cash Approved offer, your financing is already secured and the Value Check guarantees you won't run into any issues with the appraisal, which clears two major hurdles that threaten traditionally underwritten loans. Once all the requirements of the contract are met, you'll sign the final paperwork and close on the house. It's time to break out the bubbly! Want to write a cash offer that's 4x more likely to win than an offer using traditional financing? Get in touch with us and get Cash Approved™ today.
Dan S | Mar 18, 2022