2018: ADVANCED BUYER'S GUIDE
It's 11:14 p.m. The email comes in. You've been waiting your whole life for this email. Why? It's the perfect home. It has everything you need - and somehow the spouse loves it just as much as you do.
You want it. You need it.
The problem? 11 other buyers need this home too.
If your Realtor® is just emailing your offers in, fire them now. We break down cutting-edge tactics so you offer for the LAST time. From the components of your mortgage, to your offer, to how to find homes, and most importantly, your Realtor®, this is the last article you'll have to read.
**DISCLAIMER: SHOULD ONLY BE PERFORMED BY AN EXPERT REALTOR®**
1. Your Mortgage Loan
Waive Appraisal and Loan Contingency
The contingency is a milestone in escrow that you remove once you reach a certain point. You can not recover your earnest money deposit if you decide to cancel based on the contingency.
For example, if you remove your loan contingency, you can't cancel your escrow if the loan falls through. If you remove your appraisal contingency, you can't cancel the escrow if the appraisal comes up short. If you do cancel, the seller has a right to your security deposit.
Although contingencies seem harmful to the buyer, these are built into escrow as a protection for the seller. It makes sense from the seller's perspective - a buyer can also easily waste a seller's time by canceling.
To get offers accepted over others, we recommend waiving both appraisal and loan contingencies on your offer.
Bold? Yes. Necessary in 2018? Double-yes.
Simply make sure your loan officer submits your loan to the underwriter before you even enter escrow. The underwriter is a fancy term for the person at the bank who processes your mortgage loan. They have the ultimate say whether your mortgage is fully approved.
Next, talk to your loan officer about waiving the appraisal contingency. If they are a direct lender, they likely control who your appraiser will be. It's definitely legal gray-area to pick your appraiser. But you can bet that if you do, they will appraise your home at your purchase price.
Therefore, you can waive your appraisal contingency too! The sellers will essentially be presented with an offer in which the loan is 100% ready to go.
A Quick Word: Need To Qualify for a Higher Purchase Price?
Even someone who makes $2,000 a month - barely above minimum wage - can add around $150,000 in your purchasing power. If they won't be living with you, tell your loan officer to distinguish them as a non-occupant co-borrower so that their rights to your house are limited.
Declare more on your income taxes. This only applies if you're a 1099 or have a job where your income fluctuates. If you’ve already filed your taxes, file an amendment to declare more, which takes around 8 weeks.
Get rid of personal debt. Have car payments? Student loans? Get your friend to take over them, while you just pay your friend under the table.
Repair your credit with a credit repairer.
Increase your Down Payment - This is a huge one. It’s ridiculous, but sellers see a higher down payment as a better offer. Write a higher down payment on the RPA, but make DARN sure that your loan officer can decrease it once in escrow. A skilled one should be able to.
2. Components of a Confident, Aggressive Offer
With your mortgage loan in place, put together a winning offer. This requires some outside research by yourself.
Ask: Besides Price, What is the Seller Looking For?
Competing on price is an arms race you won't enjoy winning. Fight on other terms, like contingency lengths, inclusion/exclusion of appliances, escrow fees, and escrow length. You can win the tie-breaker, or in some cases, beat a higher offer.
It's not always about the dollar amount to the seller. Sometimes, they want to move out as quickly as possible, or may need a longer escrow period.
Ask: Are You Representing Any of the Offers?
Sometimes, the listing agent will be pushing their own client into the house. With both the inside scoop with the seller and the motivation to make double the commission, their buyer has an unfair advantage. Have your Realtor® ask the listing agent this. Although you can't do much about it, it helps to know who you're fighting against.
The Escalation Clause: Pay as Little as Possible While Still Being the Highest
In a multiple counter-offer situation, you must offer your "best and highest". It's a vague place to be, so we present you the Escalation Clause!
It plays out like:
"Offer to be $1,000 over next highest offer, up to maximum of $700,000, contingent on satisfactory visual evidence of said offer."
In this situation, you don't have to overbid up to a ridiculous amount, when there is a possibility the second-highest offer is already $20,000 lower than yours. Genius, right? Never get into a senseless bidding war again.
Ask: How Many Offers Do You Have?
This is a precursor to "How much is the highest offer?" Listing agents are forbidden from sharing the price - for your protection as well as theirs. But it doesn't hurt to get a feel for it!
If your agent asks immediately about the price, they'll surely get rebuffed. Have your agent work slowly through the conversation to get a feel for how high it's gotten. If you follow all the steps in this guide AND secure a solid price, you might get your offer accepted without the seller even bothering to counter others.
3. Attack More Homes Quicker Than Everyone Else
Why is this important? You never forget your first time. Or at least, sellers never forget their first offer. Psychologists call it the primacy effect. If sellers are presented with 10 of the exact same offer, the first one will be the most salient in their minds.
We break down here 6 effective ways to find every last property. Bear in mind, these are in addition to simply searching for homes.
Auto-Email - Your Realtor® should set your criteria on an auto-email system on the MLS. As soon as the proper one comes on the market, you get notified immediately.
Zillow® - Zillow® has several side features that give your search a competitive edge. Coming-soon listings are a trademark. They also have For-Sale-By-Owners, pre-foreclosures, and New Construction search functions. Set these on Zillow's automatic email system too.
Expired, Withdrawn, On-Hold, Canceled Listings - Houses don't sell for an infinite number of reasons. Ask your Realtor® to bring you these.
New Construction - Your Realtor® should have access in their MLS to New Construction homes - but Zillow® has an option for this too.
Coming-Soon & Off-Market in Your Agent's Network - Your Realtor® should have a wide network of other Realtors® and clients whom he/she can ask for listings that are not public.
Advertise to Homes You Like - By mail, by your Realtor® canvassing, and by advertising, get in front of homeowners. Judy, a client of ours, wanted to move into a country club. She hung out there 7 days a week until she found someone who wanted to sell. She put a fair offer on the home without it even hitting the market.
4. Present Your Offer Like It's A Gift from the Heavens
Let's get real. It's a seller's market. Don't even consider offering low on a property unless it's been on the market for more than 30 days. It's not grade school, where you act coy around your crush. Show the seller you want the home. If you don't, you can bet that 5 other buyers will.
Presenting offers is an art. If your Realtor® isn't doing these consistently, ask them too. It's their duty.