There it sits—your dream home. Whether you’re parked in the driveway or viewing a video on your computer, you know it was meant to be yours. You can see your kids walking to the school nearby, your cat snoozing on the sunny porch. And the best news? It’s in your price range! Now, what can you do to make your dream come true?
There are a number of things you can do to increase your chances of having an offer accepted. No matter what the market conditions, bidding wars still break out over desirable properties. You need to let the seller know you’re serious, and you need to act quickly.
Here are eight action steps toward realizing your dream.
Act like a Boy Scout. That is, “be prepared.” Get your mortgage pre-approved. Start by checking all three of your credit reports. You can get your reports free once each year from the three major credit bureaus at annualcreditreport.com. Avoid other sites that say they’ll give you free reports—they will only do so IF you sign up for credit monitoring and other services. If you find errors on your report, even if it’s something as simple as a wrong address, get them corrected. Lenders will look for a credit score of 740 or above to give you the most favorable interest rate. If you can pay off credit cards and other debts, that will improve your score. Then get preapproved by a lender. A preapproval in writing will show sellers that the lender has determined that you can afford payments on a mortgage for a stated amount.
Cash is king. If you can swing it, make a cash offer. A lot of investors are buying homes to flip or rent, and they usually pay cash. Sellers are impressed by all-cash offers because they’re less likely to fall through. If you are going for a mortgage instead of a cash deal, a low appraisal could cause your lender to back out. That would force the seller to put the house back on the market—something every seller wants to avoid.
Give it your best shot. Don’t make a low-ball offer and expect to get a better deal by going back and forth with the seller a few times. Try making your best offer first and having your Realtor explain why; you can just about be assured the seller has never seen an offer like that. Before you make your offer, have your Realtor check on recent sale prices of comparable properties in the neighborhood so that the price you pay will qualify when the property is appraised. If you make a low-ball offer first, you could lose the property to another buyer who comes in at or near market.
Keep it clean. Sellers dislike contingencies, so if your offer includes any, try to offset the negative with a positive or two. If you include a financing contingency in your offer, balance that with a detailed pre-approval and a larger earnest money deposit. Most buyers include a home inspection contingency, so if you do, tell the seller that you’ll be willing to pay for necessary repairs, up to a certain reasonable amount.
Show me the money. Money talks, so kick your earnest money deposit up a notch. This will tell the seller you’re serious. You’re not at much risk, because if something happens in the appraisal process or elsewhere and you have to back out of the deal, you’ll get your money back. Just make sure your contract has the appropriate contingencies.
Pick up the tab. You score a lot of points by acting generous, so plan to pick up the tab for some or all of the “extras” yourself. These might include paying some of the closing costs, prepaying certain items like homeowner association dues, or offering to buy a home warranty.
Timing is everything. A seller who knows he or she has to move is under a lot of stress, so cut them some slack on time. Tell them you’re willing to work with their timetable on a closing date. If the seller can’t move immediately and needs to stay in the home after closing, offer them a “lease back” or rental situation. You will need to make this a legal arrangement, so ask your attorney to work out the details for you.
Tell them how much you love them. Whenever you have an opportunity, let the seller know personally how much you love their property. People feel attached to their homes, even if they want or need to move. Go out of your way to make a connection, even if you haven’t met the owners. Drop them a note or ask your Realtor to forward an email telling them how you feel about the home. If you run into them at an open house, compliment them on their rose bushes or granite countertops. Good manners make a difference!
If it truly is your dream home, remember the immortal words of Walt Disney: “If you can dream it, you can do it.”