Make ‘clean’ offer in seller’s market

Q: I’m trying to buy a house but the last two offers I’ve made I’ve been beat out by someone with a better offer. How am I supposed to buy a house when there’s so much competition?

A: There is competition for every house that comes on the market in certain parts of the greater Albuquerque area. This is particularly true if it’s in a more affordable price range or has something else about it that makes it highly desirable.

As you find houses you want, it’s important to be prepared for the pitfalls of an increasing seller’s market. If you keep these issues in mind when making your offers you’ll be more likely to be successful. The main areas to consider are the price and terms in the offer, and the appraisal.

Of course, you’re going to compete on price but that’s not the only thing that makes an offer advantageous to a seller. There are other ways to make your offer attractive and the key is making it as “clean” as possible. Ask only for customary closing costs usually paid by the seller or even take some or all of those on yourself. The amount of competition for any given house will determine how much you can expect to pay of those customarily “seller” costs, which include the title insurance, closing fee, some inspections, appraisal, home warranty, survey, among others. I’ve even seen people pay the Realtor’s commissions to be more competitive. This is quite uncommon, but if there’s enough competition and the buyers and seller are afraid the house won’t “appraise” if the purchase price is too high, then this is a good solution to increasing your offer by a lot and still having a mortgage be able to go through. Remember, this would be a part of your closing costs so you need to have that money liquid to bring to closing.

Another issue you’ll need to consider is what happens if you end up with a contract on a house where you’re paying a lot more than they’re asking and the appraisal comes in low. If this takes place and you haven’t already agreed to pay the difference, you’ll first likely go to the seller and find out if they’re willing to lower the price. If they’re not willing to do that, you might be faced with paying the amount between the appraisal value and the purchase price as an increase in your down payment. If you can’t or don’t want to do that, you might have to walk away from the property.

So, get out there and keep searching and making offers on houses that feel right. All you can do is put your best offer out there, keep the potential issues in mind when writing an offer, and see what happens. It might take a few houses, but you’ll find something if you stick with it.