As anyone who has looked at the Chicagoland real estate market recently knows, things are moving fast. The past two years have reflected a varied, dynamic, but mostly hot seller’s market, with demand outstripping supply and pandemic-influenced delays affecting the pace of new construction. In a seller’s market, getting an offer accepted can be difficult, as sellers frequently have multiple offers to sort through — all while juggling their own next home purchase.
In an environment where a lot of offers look alike, making your offer stand out from the crowd can make a big difference. Learn what to do — and what to avoid — when crafting a purchase offer in a seller’s market.
Compromise On Contingencies
Other than offering a higher price, the easiest way to make your offer stand out is to be willing to compromise on the contingencies you’re requesting from the seller. In a hot market, an offer that is loaded down with “what-ifs” can seem like a recipe for a failed escrow. Financing or home sale contingencies, for example, may be off-putting to a seller who doesn’t want closing to be dependent on something the buyer does or doesn’t do. A buyer who has been pre-approved for financing and who is able to manage without a sale contingency will seem more attractive to a seller, and may be more likely to have an offer accepted.
With that being said, buyers shouldn’t compromise so far that they’re risking future losses. Buyers should think long and hard about waiving things like attorney review and inspection contingencies, as these contract clauses can mitigate against substantial risk in the future. Consult with your broker and the other professionals on your side before deciding which standard clauses to waive, and which are deal-breakers.
Work With A Reputable Agent
Working with a well-connected and reputable agent has benefits far above and beyond just getting expert advice on your offer. A great agent can help you find properties just as they come onto the market — or even before they’re listed — which can help make your strong offer one of the first the seller sees. Having an agent with a great reputation in your corner also pays dividends when it comes to negotiations. If the seller’s agent knows that your representative is someone who works in good faith and gets deals done, that can go a long way toward getting your offer to the top of the pile.
Have Mortgage Pre-Approval In Hand
Getting pre-approved for financing is one of the easiest ways to make your offer stand out. Not only does a pre-approval demonstrate that you’ve got the wherewithal to finance your offer, it removes the possibility that you’ll need to ask for additional financing contingencies in the purchase contract. Absent major price variations, the seller is likely to choose the offer that seems most likely to close, and a buyer who comes to the table with financing already in place is likely to be a more attractive candidate.
Come In With A Strong Earnest Money Deposit
Earnest money is a good faith deposit put down by the buyer when an offer is accepted. It is intended to demonstrate the buyer’s intention to follow through with the deal, and to compensate the seller if the deal falls through for a reason not covered in the purchase contract. If the buyer gets cold feet, opts to buy a different property, or otherwise fails to complete the deal for any reason other than those specified in the purchase contract, the seller receives the buyer’s deposit. If the deal closes, the buyer’s earnest money becomes part of the down payment on the home.
The average earnest money deposit usually comes out to about one to three percent of the purchase price of the home. In a competitive market, a larger than average earnest money offer might demonstrate the buyer’s seriousness about closing, as well as offer the seller additional compensation if the buyer ever pulls out of the deal.
Think About An Escalation Clause
Buyers and sellers in competitive markets are all too aware that the list price for a property isn’t necessarily the sale price. Bidding wars aren’t uncommon, and buyers who put in an early offer at the seller’s asking price can find themselves at a disadvantage as other buyers try to jump in later with higher offers.
Buyers can hedge against this possibility by including an escalation clause in their offer. In such a clause, the buyer offers to match or exceed offers made by other interested purchasers, up to a predetermined amount. Such a clause can benefit the buyer, by creating a predictable cap on the offer and avoiding emotional decision making in the heat of a bidding war. They can also offer the seller some reassurance that accepting a buyer’s early offer doesn’t mean they’re forgoing a higher price if a more competitive offer comes in later. An escalation clause can, then, eliminate the seller’s uncertainty and make your offer more likely to be accepted.
Offer Compromises That Benefit The Seller
When crafting an offer, think about the fact that your seller is likely also a buyer, usually in a similar market to the one in which you find yourself. Offering perks to your seller can help to get the deal closed. For example, in much the same way you’re unlikely to secure a home sale contingency, your seller is likely to be in the same boat, which may mean they’re waiting on the sale to make offers on new properties. Offering a short-term home leaseback option, in which your seller can stay in the home pending closing of their new deal, may sweeten the pot enough to get your offer some attention. This sort of offer isn’t without some risk, however, so be sure to consult with your agent or real estate attorney on the risks and benefits of this option.
Similarly, offering to let the seller set the escrow and closing timeline, or shortening the periods for some contingencies, can work to the seller’s advantage and may give your offer a leg up on other bids. If the seller is already under contract on a new home, for example, they may need to move quickly to closing. Being flexible and willing to compromise in ways that benefit the seller can be surprisingly motivating to a seller who is already feeling stressed.
Shouldn’t Buying a Home Be Easier?
Writing an offer that gets you noticed can be stressful, but a Baird & Warner agent can make the process easier. As the largest independent and locally owned real estate brokerage in Chicagoland, Baird & Warner is home to thousands of the most highly skilled real estate professionals in the area. Our brokers are hyperlocal experts who know just what it takes to prepare, market, and sell your home, while helping you navigate the process with ease at every step of the way. With mortgage and title services in-house and innovative partners who are as committed to giving clients the best possible service as we are… It’s just easier here.