How To Make Your Offer More Competitive

In a hot real estate market, where homes are getting multiple offers within a few days of being listed,  you need to know how to make your offer to purchase a home more competitive. The more you want the home, the more competitive you will want to make the offer.
 
Please view my detailed video (50 mins) to learn about our Texas contracts and addendum. You should do this in advance so you are prepared in case we have to write an offer in a hurry. You can download and print the sample docs here: https://www.katyhomesforsaletx.com/freestuff/sample-texas-realestate-contract.pdf (which we go through in the video). Please write down your questions, so we can discuss them.
 
In my video I explain the following items and more.
 
Contract ItemCommentEstimated Cost*
Sales Price

The higher the sales price, the better your offer.

You usually have to offer over list price to win in a multi-offer situation.

 

Termination Option

NOTE: Relocation companies do not allow Termination Options (which are unique to Texas).

Negotiable for 7-10 days and $200-500 fee. Waiving your Termination Option can be a good way to be competitive, and you are still allowed to do inspections. However, you will have little negotiating room for repair requests. In a hot real estate market, most sellers won’t agree to repair requests anyway. (See more about inspections and common issues on homes in this area.)

If you want a Termination Option, but you also want to be competitive, then offer a $1000 fee to show that you are a serious buyer. If you do not “exercise your option to terminate” then your Option fee is applied (credited) to your Sales Price at Closing.

$200-1000
Requested Non-Realty Items

Do not request excluded items if you want to be competitive.

You can ask for appliances, furniture, etc. and offer to pay for them in a Non-Realty Items Addendum.

$10 or more
Title PolicySellers usually pay for the title policy but you should pay for it if you want to be super-competitive. Calculate cost
SurveyBuyers usually pay for a new survey if the sellers do not have an accurate one available.$425 at Closing
Home Warranty

The Seller usually pays for a Home Warranty, but the Buyer  chooses which home warranty company and policy type they want, and the title company orders it and pays for it out of Closing funds.

To be more competitive, pay for the Home Warranty yourself.

$500-800 (with pool)
Closing DateIf the home is vacant, then the sooner the better to Close (for the Seller). Being flexible on a Closing date, to match what the Seller wants, can be a good way to be competitive. Closing time frames are mostly determined by the lender who usually require 5-6 weeks. Cash buyers can usually close in 3-4 weeks as long as their funds are readily available. 
Possession/Temporary Lease BacksIf the home is still occupied by the owner, then offering a Temporary Lease Back to the Seller, so they have time to pack and move after the Closing, can be a good way to be competitive. 
Seller’s Contribution to Closing Costs

If you need help with Closing costs, because you do not have a lot of cash available for the purchase, then your offer will not be very competitive. Asking the Seller to pay for anything extra lowers their “net proceeds” from this transaction. 

Sometimes you can offset “Seller’s Contribution to Closing Costs” with a higher sales price, but not often in a multi-offer situation.

 
Type of Financing

A conventional loan from a reputable local lender will make your offer more competitive. If you have a big bank (such as BofA, Wells Fargo, or Chase) then you will not be as competitive (because listing agents don’t like them due to Closing issues).

FHA loans are not competitive because of the stringent inspection process and reputation for low appraisals.

 
Days for Buyer ApprovalOn the Third Party Financing Addendum, we typically put 21 days for Buyer Approval, but if you have all your paperwork turned into the lender, and your lender says it’s OK, then you may want to put 14 days to shorten this contingency (to be more competitive). 
Appraisal Addendum

If you are bidding high on a house and have concerns that it will not appraise, then you should request an Appraisal Addendum (see my detailed article and video about this). This is especially true if you are a cash-rich buyer. However, this makes your offer less competitive than offers who do not make this request.

If you can afford it, do not request an Appraisal Addendum and be prepared to pay the difference between the sales price and the appraised price (plus down payment and Closing costs).

 
Subdivision InfoYou can usually get the deed restrictions for a neighborhood online. If you want a printed copy, then you may be charged for it and you will have to request it on the HOA addendum. This is very unusual and will make your offer less competitive. 

Cost Varies
$300-500

HOA Transfer FeeThe transfer fee should be listed on the MLS, but it may be inaccurate. The Buyer usually pays the transfer fee. There may be other fees $200-400 approximate) charged by the HOA before Closing…each HOA is different.Cost Varies
$200-400
Foundation FeeJohnson Development who runs Cross Creek Ranch, Sienna Plantation, and Riverstone, requires that Buyers pay an extra fee at Closing, usually equal to one year’s HOA maintenance fee. There may be other neighborhoods/developers that require this as well. Make sure you identify “who pays what” in the contract.Usually equal to HOA fee $1100-1300
Capitalization FeeJohnson Development who runs Cross Creek Ranch, Sienna Plantation, and Riverstone, requires that Sellers pay an extra fee at Closing, usually equal to .25% of sales price. There may be other neighborhoods/developers that require this as well. Make sure you identify “who pays what” in the contract.Cost Varies but usually .25% of sales price
*All of the costs listed are ESTIMATES only.
 

To write an offer to purchase a home, I will need the following information:

Full Legal Names (both people): __________________________  and ______________________________
 
Separate email addresses for each of you: __________________________  and ______________________________
(for e-signature system to be legal, they require separate emails)
 
Sales Price: $____________
 
Down payment: $___________ or ____%
 
Loan Type: Conventional
 
Loan Duration: _____ years
 
Loan Interest Rate: ____%
(The rate should be “worst case” scenario, in case you want to use this as a reason to back out of the deal due to financing issues.)
 
Closing Date: _________________
 
Current Address: _________________________
 
Items to include in Non-Realty Items Addendum: Refrigerator?, W&D? 
 
Special permission to do stucco inspection or hydrostatic testing (very uncommon here)
 

Please share this info with your Friends!

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