Power Offers In a Seller’s Market

Build a power offer to land your dream home!

Fox Valley home buyers take note: multiple offer situations are becoming more probable as this  seller’s market picks up momentum.  Your buyer’s agent may or may not be able to find out if others are submitting offers on the same property.  Why?  The owners may direct their listing agent to not give out that information.  However, if the listing agent for the property says “Bring us your highest and best offer by tonight”, then you’ve got multiple offers inbound.

Breakdown of an offer

Putting in an offer isn’t just about the highest number.  A full price offer with contingencies or financing issues will not trump a lower, all-cash offer.  An offer to buy real estate has 6 main parts: purchase price, earnest money, down payment amounts, type of financing, contingencies and closing date.  The strongest offer a buyer can make is all cash, with proof of funds.  But there is still hope if a buyer is not flush with cash.

Make your offer stand out

Here’s what a seller will look for in a solid financed offer:

  • Purchase price (that is not a low ball starting point)
  • 10% earnest money
  • 20% down payment money
  • Conventional mortgage financing with a well-known, rock solid, documented local lender who is extremely likely to close on time
  • No contingencies (i.e. the buyer is free and clear, is not waiting to sell their own place, ready to close)
  • Closing date: 2-3 months out, but usually when convenient for sellers.

Putting it all together

Starting with a reasonable purchase price is the first stumbling point for a lot of buyers who were accustomed to the buyer’s market in recent years.  It is critical to put in a purchase price that is competitive, to be seen as a serious offer by the sellers.  Generally, sellers will work with a price range, but in this market, they can pass up low ball offers.  Going 10 percent under asking price is risky but negotiable; going 25 percent under will likely be dismissed completely.

Next, as a serious buyer, the earnest money and down payment money is already earmarked and ready to go.  Spending valuable time scrambling to locate funds or pulling them from 10 different accounts is best done before putting in an offer to purchase. Although home sellers would love to see a full 10 percent earnest money, agents suggest a minimum of $1,000.

After getting your cash amounts finalized, the buyer will also finalize their funding options with their lender. Credit is still tight and buyers will have stronger terms with 20 percent down.  The pre approval process should give the lender enough data to figure out the likelihood of a mortgage transaction being underwritten and the buyer can move forward on the terms.  Buyers agents who have seen deals fall apart at the closing table know that having a local lender with a great reputation for closing loans on time is one of the best partners a buyer can have.

Lastly, shore up your offer by having no contingencies and agree to close when the sellers want.  Keep your credit line clear and don’t open any new accounts until you close on the property.

Use all the resources available

On a final note, keep in mind that licensed Buyer’s Agents work with a wide variety of buyers and are an excellent resource for buyers who need help finding lenders and sorting through home buying options.  They can also tell you while cash is best, conventional financing is stronger than FHA financing.  FHA loans are often limited by condo association restrictions.  If a buyer is unable to do all cash, a conventional loan with a chunk of down payment is still highly regarded.  Also, a buyer’s agent can sort a property list on the MLS by restrictions and can save a buyer a lot of time and aggravation in the housing hunt.

Elgin and the Fox Valley area have limited amounts of homes on the market.  Those that are highly desirable are going fast, some in as little as 7 days’ time.  Be sure to have your finances figured out before viewing properties and you’ll be a more confident buyer when the time comes to snap up your dream home.

Are you looking for more information on home buying a home in the Elgin area?  I can help!  With a wide range of experts, Realtors, custom listing specialists, buyer’s agents and local lenders, I can locate a great service provider for you, free of charge and with no obligation. Contact me to find your next home in the Fox Valley area today!

Jennifer Kinzle, e-Pro, Broker
Charles Rutenberg Realty – Fox Valley Area


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