Despite the less than optimal state of the economy, the housing market, particularly for sellers, remains unaffected. The availability of houses for sale remains exceptionally scarce, while the number of potential buyers is high, even though we are past the days of historically low interest rates. As a result, sellers hold a position of advantage and can afford to be selective with the offers they receive, often receiving multiple offers. To enhance the chances of having your offer accepted when purchasing a house in Ann Arbor, let’s explore four effective strategies.
1. Make a Clean Offer (as Much as Possible)
One effective approach to increase the likelihood of your offer being accepted is to ensure it is presented as a clean offer. This entails avoiding any sale contingencies or financial limitations. It is preferable for the offer to refrain from requesting seller concessions, such as the payment of closing costs. Sellers find clean offers more appealing because they carry a reduced risk of the buyer withdrawing from the contract, making them more inclined to accept.
While contingencies serve to safeguard your interests as the buyer, there are alternative methods for protecting yourself even without them. For instance, you could opt to have your mortgage loan fully underwritten before submitting an offer, which involves completing the entire loan process with your lender beforehand. This step mitigates your risk in this aspect.
Nevertheless, submitting an offer with minimal or no contingencies, such as waiving the customary inspection contingency, can be considered somewhat risky. It is advisable to consult your Ann Arbor agent before proceeding with such an offer to obtain professional guidance. To discover more, just call (734) 707-9195.
2. Offer Appraisal Gap Coverage
Another effective strategy to increase the likelihood of having your offer accepted when buying a house in Ann Arbor is to provide appraisal gap coverage.
Due to the prevailing market conditions, bids higher than the home’s asking price are fairly common. Consequently, there is a risk that your offer might exceed the property’s appraised value, and this is where the concept of appraisal gap coverage becomes crucial.
For example, imagine a home is up for sale at $100K, and you agree to buy it for $110K. But the appraisal report only values the property at $105K. In this situation, your options are to make up the $5K difference in cash, renegotiate with the seller to bring the purchase price down to $105K, or abandon the deal. The possibility of a buyer backing out often makes sellers uneasy, and they tend to prefer the assurance that if the bid exceeds the asking price, the buyer is willing to cover the excess amount in case the appraisal falls short.
By offering appraisal gap coverage, you provide a guarantee to sellers that you are ready and financially equipped to cover the gap between the offer price and the appraised value. As such, when all other factors in two offers are equal, but yours includes appraisal gap coverage, it’s likely your offer will be the one the seller accepts.
3. Put Up Larger Earnest Money Deposit
Another strategy to strengthen your chances of having your offer accepted when purchasing a property in Ann Arbor is by offering a larger earnest money deposit than the typical amount. This demonstrates to the seller that you are seriously invested in the transaction, which can make your offer stand out.
As per real estate professionals, the earnest money deposit typically ranges from 1-2% of the purchase price, though this can vary based on the market. However, this isn’t an absolute rule. If you are very keen on securing a particular property, you could increase your earnest money deposit beyond the usual 1-2%, perhaps to 5% or even more.
What’s advantageous about this approach is its inherent risk-free nature. The earnest money deposit is refundable if you decide to withdraw from the deal for a legitimate reason. Moreover, it won’t lead to additional expenses since the earnest money deposit is usually deducted from the down payment or closing costs.
4. Include an Escalation Clause
One more strategy to improve your chances of getting your offer accepted when purchasing a home in Ann Arbor is to include an escalation clause in your proposal. Here’s how it functions:
An escalation clause typically stipulates that you’re willing to outbid any competing offer the seller receives by $1,000, up to a predetermined maximum price. For instance, if you put forth an offer of $100K with an escalation cap of $115K, and the seller gets another bid of $110K, your escalation clause would activate, outmatching the other offer by $1,000 and setting your purchase price at $111K.
However, be mindful that in a multiple-offer situation, an escalation clause could potentially make your proposal appear complex and perplexing to the seller, and as a result, your offer might be relegated to the end of the line. Therefore, it is crucial to consult your Ann Arbor agent to determine if implementing an escalation clause is an appropriate strategy for a specific property. Your NestEgg Properties agent will reach out to the listing agent and see what they like and don’t like to see in an offer. This will help you as the buyer gain a competitive advantage when there are multiple offers on the table.
5. Work With a Ann Arbor Agent to Ensure Your Offer is Accepted
Given the state of the current real estate market, characterized by scarce inventory and numerous buyers, it’s vital to pull out all the stops to ensure your offer stands out. One clever approach is to collaborate with a seasoned local agent who possesses an intimate understanding of what it takes to secure a deal in the local market. Therefore, if you’re truly committed to ensuring the acceptance of your offer when purchasing a home in Ann Arbor, don’t hesitate to contact us today at (734) 707-9195.