Some offers are better than others. Some people think it is all about who makes the highest offer but there are other things to take into consideration.
Here is the hierarchy of offers:
- Cash offer.
- Conventional loan with large down payment.
- Conventional loan with smaller down payment.
- FHA/VA loans. (Because the appraiser for these loan types does a minor assessment of the house. If the condition does not meet minimum standards set out for each loan type, the Seller HAS to do the repairs in order for the Buyer to get their loan.)
- Any loan with down payment assistance where there are two loans that have to go through two different underwriting guidelines.
Then there is the offer amount:
- Offer over list price.
- Offer list price.
- Offer less than list price.
Then there is the home inspection. Three choices there:
- No home inspection at all.
- Buyer does home inspection but won’t ask for repairs. Will either accept the house or walk away.
- Buyer wants to negotiate repairs with Seller.
Then there is the appriasal:
- Buyer will cover any possible gap between sale price and appraised value in cash.
- Buyer won’t cover any possible gap between sale price and appraised value in cash.
Then there is the Buyer’s lender:
- Buyer will use a local lender that every realtor knows does a good job.
- Buyer will use a non-local mortgage company.
- Buyer will use a local lender that every realtor knows preapproves any buyer with a pulse.
- Buyer will use a bank that begins with the letter C that everybody knows will be difficult to work with and that it is unlikely to close on time.
Then there is the closing date and when the buyer can move in the house:
- Buyer’s realtor found out when Sellers want to close and put that date on the offer.
- Buyer’s realtor doesn’t know to ask this and that it can really help make their client’s offer more attractive.
Then there are contingencies:
- Buyer has no contingencies.
- Buyer needs to close their old house first in order to buy the new one.
- Buyer needs to sell their old house first in order to buy the new one, meaning it currently may not be on the market and definitely doesn’t have a contract on it.
Then there are closing costs:
- Buyer will pay their own closing costs.
- Buyer needs Seller to pay some of their closing costs.
- Buyer needs Seller to pay all of their closing costs.
What are your numbers? If you are a 1 in all of these, go out and make your offer. You will probably get the house. If you are a low number in any of these, best of luck. If you are the bottom of any or all of these, then you are wasting your time. Sorry, but you are. You are not going to get a house making an offer less than list price with an FHA loan, wanting to negotiate repairs with the Seller and needing to close or sell your old house.
Now that you know all the things a listing realtor is thinking about when they process all the offers, do what you can to make your offer the best it can possibly be. If you are doing a conventional loan and think you are going up against other cash offers, maybe waive the home inspection and offer to let the seller stay in the house briefly after the closing? If you have to close on your old house to buy, make your offer the highest one they get (realize too that moving twice costs money and it might be cheaper to pay the most for a house verses paying to move twice, live somewhere temporarily and then look for another house which will have gone up in value while you wait.)
When I moved in 2012, I was up against 4 other offers. Two of them were cash. That was unheard of back then but common today. I knew I couldn’t compete with cash so I went a little over the list price, waived the home inspection and offered to let the Sellers rent back from me until they found their new house. This was appealing to them since they had not found their new house yet.