16 key steps to making a competitive offer in a hot real estate market
In the fiercely competitive residential real estate market, standing out with a compelling offer is crucial. We’ve gathered insights from sixteen industry experts, including realtors and owners, to give you the edge. From minimizing offer contingencies to including a non-refundable option fee, discover the key steps to make your offer the winning one.
- Minimize Offer Contingencies
- Increase Earnest Money Deposit
- Limit Repair Requests
- Get Full Mortgage Pre-Approval
- Include a Personal Letter
- Offer to Cover Property Taxes
- Utilize an Escalation Clause
- Propose a Seller-Friendly Leaseback
- Understand Seller Motivations
- Offer Above Asking Price
- Conduct Thorough Market Research
- Consider Non-Price Offer Terms
- Forge an Emotional Connection
- Submit a Clean, Condition-Free Offer
- Shorten Closing and Inspection Timelines
- Include a Non-Refundable Option Fee
Minimize Offer Contingencies
One key step in making a competitive offer in a hot residential real estate market is to limit contingencies. By minimizing contingencies, you make your offer more attractive to sellers who prefer fewer obstacles to closing. Contingencies, such as financing, inspection, or appraisal conditions, can introduce uncertainty and potential delays in the transaction process. Sellers in a competitive market often receive multiple offers and are more likely to choose one that presents the least risk of falling through.
By reducing or eliminating these contingencies, you demonstrate your commitment and readiness to proceed with the purchase smoothly and swiftly. This approach not only signals your seriousness as a buyer but also provides the seller with greater confidence that the deal will close without unexpected complications, giving you a significant edge over other potential buyers.
James Heartquist, Founder and Real Estate Professional, We Buy Houses Arizona
Increase Earnest Money Deposit
If you’re a serious buyer, consider how much you can comfortably put down as an earnest money deposit. Typically, the deposit is around 1% of the purchase price, but in a competitive market, you really want to stand out. So, bumping that up to 3-5% can make a big difference.
Think of it as a good-faith gesture. It’s basically you telling the seller that you’ve done your homework and that you have the financial means to follow through. In a situation where multiple offers are on the table, sellers are more likely to take your offer seriously if they see you’re willing to put more skin in the game. It gives them confidence that you’re ready to move forward.
Mike Roberts, Co-Founder, City Creek Mortgage
Limit Repair Requests
One of the biggest worries sellers have when selling their home is, “What will the buyer ask to be repaired, and how much will it cost?” Limiting repair requests in your offer, it puts the sellers at ease, knowing you’re genuinely interested in the property and won’t ask for anything unreasonable. To protect yourself, you can indicate that you will only ask for repairs or cancel if the cost is over a certain amount or if the issue presents an unsafe living condition. This not only eases the seller’s concerns but also shows you’re serious about buying their home.
Estrella Gallegos, Realtor, REAL Broker
Get Full Mortgage Pre-Approval
I’ve learned from my time in the real-estate field that if you want to stand out in a busy market, getting fully pre-approved for a mortgage before you even start house-hunting is a real game-changer. This goes beyond a basic pre-qualification and involves a lender’s thorough review of your financial situation.
A pre-approval letter demonstrates to sellers that you’re a serious buyer with the financial means to close the deal. In a competitive market where multiple offers are common, this can give you a significant edge over other potential buyers who may only be pre-qualified or haven’t taken this step at all.
Also, having a pre-approval in hand allows you to act quickly when you find a property you like. In hot markets, desirable homes often receive offers within days or even hours of listing. By being pre-approved, you can submit an offer immediately without having to wait for the lender’s approval process, which could cause you to miss out on the property. It also gives you a clear understanding of your budget, helping you focus your search on homes you can realistically afford and enabling you to make confident, competitive offers within your means.
John Gluch, Owner, Gluch Group
Include a Personal Letter
One key step in making a competitive offer is to include a personal letter with your bid. When we helped a family buy their dream home, they wrote a heartfelt letter to the sellers, sharing their story and intentions for the property. This personal touch made their offer stand out among multiple bids. Ultimately, the sellers chose them, highlighting how emotional connections can influence decision-making in a competitive market.
Jessica Wright, Owner, Buy My Home Chattanooga
Offer to Cover Property Taxes
One key step I always recommend is offering to cover property taxes. This can be a real game-changer because it shows the seller you’re serious and willing to go the extra mile. By taking on this expense, you’re essentially increasing the value of your offer without directly raising the purchase price. It’s a smart move that can set you apart from other buyers who might be offering similar amounts. Plus, sellers often appreciate not having to worry about that extra cost during the transition period.
Catherine Mack, Owner, House Buyer Network
Utilize an Escalation Clause
When it comes to making a competitive offer in a hot market, one key step I always recommend is including an escalation clause in your offer. This basically tells the seller that you’re willing to increase your offer up to a certain amount if someone else outbids you. I’ve seen this strategy win deals even when we weren’t the highest initial offer. It shows the seller that you’re serious and gives them confidence that they’re getting the best price. Just be careful to set a limit you’re comfortable with, because things can heat up fast in a bidding war! Trust me, this little trick has helped me clinch some amazing deals for my clients.
Joe Lieber, President, Cleveland House Buyers
Propose a Seller-Friendly Leaseback
I’ve got a secret weapon for winning in a competitive real estate market: propose a seller-friendly leaseback agreement—it’s a total game-changer! I’ve had so much success offering sellers the option to stay in their home for a bit after closing. It gives them extra time to find their next place without the pressure of moving out right away. I always make sure to highlight how flexible we can be with the terms, which really puts sellers at ease. You wouldn’t believe how many times this strategy has helped us seal the deal, even when we weren’t the highest bidder. In my experience, a little flexibility goes a long way in winning over sellers!
Alex Goldman, Owner, Cash Home Guy
Understand Seller Motivations
One key step in making a competitive offer is understanding the seller’s motivations. We dive deep into what the seller truly values—whether it’s a quick close, flexibility, or something else. By tailoring our offer to meet those needs, we’re able to stand out in a crowded market and create deals that benefit everyone involved. It’s about building trust and making the seller feel understood.
Nick Stoddard, Chief Executive Officer, KC Property Connection
Offer Above Asking Price
In a hot residential real-estate market, competition is fierce, and buyers need to act fast in order to secure their dream home. One key step in making a competitive offer is offering above the asking price. This shows the seller that you are serious about purchasing the property and are willing to pay more than what they are initially asking for.
By offering above asking price, you also demonstrate your financial strength as a buyer. This can give you an advantage over other potential buyers who may not be able to afford a higher offer. Additionally, it can help you stand out among multiple offers that may be similar in terms of contingencies or other terms.
However, it’s important to note that offering above asking price may not always be the best strategy. It’s crucial to consider factors such as the market value of the property, comparable sales in the area, and your own budget before making an offer. Working with a trusted real-estate agent can help you navigate these decisions and make a competitive offer that is also financially responsible for you.
Amanda New, Founder & CEO, Cash For Houses Girl
Conduct Thorough Market Research
Before making an offer in a hot residential real-estate market, it is essential to do your research. This includes understanding the current state of the market, the prices of comparable homes in the area, and any other factors that could influence the selling price. By doing your due diligence, you can ensure that you make a competitive offer that stands out among others.
Some key aspects to consider during your research include the average days on market for similar properties, recent sales trends, and any upcoming developments or changes in the neighborhood. It is also crucial to have a good understanding of the seller’s motivations and circumstances, as this information can help tailor your offer to their specific needs.
Apart from researching the market, it is also essential to have a clear understanding of your own budget and financial capabilities. This will allow you to make a confident and competitive offer that you can afford without stretching yourself too thin.
Krixelle Sant, Founder & CEO, Sell My House Fast For Cash
Consider Non-Price Offer Terms
Too often, buyers only think about the offer price, but there are other terms that can benefit sellers and strengthen your offer. In simple terms, consider ways to remove uncertainty from the purchase. This could include paying cash instead of relying on bank financing, removing the inspection contingency, or making a non-refundable deposit. If two offers are identical in terms of price, sellers will pick the offer most likely to close.
Geordie Romer, Managing Broker, Windermere Real Estate/ NCW
Forge an Emotional Connection
Making an emotional connection with the seller is a key step I always consider when making a competitive offer in a hot residential real estate market. This approach isn’t always feasible, but it’s definitely worth trying. Personally, if I think a home’s sellers might resonate well with prospective buyers, I encourage the sellers to be present during the showing. The idea is that if the seller forms a personal connection with the bidder, that offer could really stand out among others.
Real estate is as much about emotions as it is about finances. If you can touch the emotional side—making the sellers picture you living and creating memories in their home where they might have raised their own family—it could give you a distinct edge.
Historically, in sellers’ markets, buyers’ agents have used “love letters”—personal letters from the bidder to the seller—to make their clients’ offers more appealing. Though this strategy has seen some discouragement recently, the underlying principle of emotional appeal remains effective.
Michael E. Farah, Founder, Realtor and Real Estate Attorney, The Farah Law Firm, P.C.
Submit a Clean, Condition-Free Offer
In a hot residential real estate market, one key step to making a competitive offer is submitting a clean offer with minimal conditions. Doing this entails waiving or limiting contingencies, particularly those touching on financing and inspections. To support this approach, it’s crucial to be prepared with a strong pre-approval letter from a lender, demonstrating your financial readiness.
On top of that, offering a larger deposit can show serious intent and make your offer stand out. Flexibility on closing dates to accommodate the seller’s needs can also be advantageous. Some buyers may consider including an escalation clause to automatically increase their offer up to a set limit if higher bids come in.
By reducing conditions and showcasing financial preparedness, you make your offer more attractive to sellers who often prioritize certainty and speed in competitive markets. Nonetheless, always consider the risks associated with waiving contingencies and ensure you’re comfortable with potential outcomes before employing this strategy.
Kenneth Yim, Managing Partner, Owncondo
Shorten Closing and Inspection Timelines
Short timelines! The shorter the closing, the better. Make that inspection period as short as you comfortably can, too. Sellers look for offers that have the fewest road bumps and potential problems.
James Morrison, Realtor, The Papakea Collection
Include a Non-Refundable Option Fee
When it comes to making a competitive offer in a hot residential market, I always suggest including a non-refundable option-fee offer. This strategy shows the seller that you’re dead serious about buying their property and aren’t just kicking tires. By putting some skin in the game, you’re demonstrating your commitment and financial stability. It’s like saying, “I’m so confident in this deal that I’m willing to risk losing this money if I back out.”
This approach can really make your offer stand out in a crowded field of potential buyers, especially when everyone is trying to outbid each other. Just be sure you’re comfortable with the amount you’re offering, because you won’t get it back if things fall through!
Zach Fertig, Owner, Property Leads
