Home buying is a layered and strenuous process, even in the calmest of markets. Finding the right home—and the right loan—takes time and effort.
Once that “shopping” process is complete, however, making an offer on a house can be the most stressful part of the journey. We’re all about reducing stress in the homebuying process at Bison State Bank, which is why we provide personalized loans and advice for people of all walks of life.
With that goal in mind, our home loan experts put together this helpful do’s and don’ts list that should reduce your stress when making an offer on a house.
How to make your offer stand out
Finding the right factors that make your offer stand out from the crowd is difficult, but there’s no need to worry! With this list of tips, you have a great chance of landing your dream home.
Get pre-approved for a loan
A mortgage pre-approval is a preliminary evaluation of your potential buying power. With this information, buyers have a better understanding of what level of house they can afford, and realtors can adjust their showings to better fit your needs.
On top of the added benefit of knowing your purchasing power, a pre-approval is important because it opens the door for your home buying search. Many real estate agents won’t even show a house to a prospective buyer who doesn’t have a pre-approval.
A pre-approval and a good loan officer, like the ones at Bison State Bank, can start your home search on the right foot. When we are involved with the search from the start, it lets us help make sure your home search is going smoothly. With a mortgage pre-approval from Bison State Bank, you’ve already gone through the mortgage application process, so you have everything you need to consummate a transaction.
When an agent knows you’re prepared to buy and your offer is sits on a strong foundation, it helps win deals because the agent knows someone has actually looked at the hard numbers.
Find a trusted real estate agent
It’s crucial to have the right support when making an offer on a house. A qualified and trustworthy realtor should be a key member of your home buying team.
An agent can get your foot in the door in a competitive market through networking with other realtors. As the old saying goes, sometimes it’s not what you know, but who you know. When you submit your offer with a trusted realtor, chances are they have experience with the seller’s realtor as well and can communicate back and forth about your offer.
Even for people with experience buying and selling a home, it’s valuable to find a trusted realtor to represent you. Your realtor is your eyes and ears on the ground, finding the right situation to meet your unique needs. They know the area, the right contractors to get jobs done, and they can help guide you toward the right investment.
Consider contingencies and clauses
When making an offer on a house, there are certain contingencies and clauses you can include in your offer that will make you stand out from the rest. Here’s a look at some of the most common contingencies we’ve seen when making an offer on a house;
Appraisal Gap Clause
After your offer is accepted, part of the next step is having the home appraised. Sometimes the appraisal will come back lower than the offer you made, and that’s where an appraisal gap clause comes into play.
Your lender will only lend you the money that their appraiser says the house is worth. For example, if you offer $250,000 on a house and that offer is accepted, but the appraisal says the house is worth $235,000, then your lender will only cover the appraised amount.
With an appraisal gap clause you guarantee to the seller that you will make up the difference, or gap, in cash. This is an additional safety net for the seller, because it means they will receive a guaranteed amount regardless of the appraisal.
There are also appraisal contingencies, which allow you as the buyer to walk away from the home if the appraisal comes in too low, and appraisal waivers, which allows qualified buyers to skip the in-person appraisal process and instead us an automated underwriting system to determine the value of the home.
An escalation clause is essentially a sliding range of prices you’re willing to pay for the house. With an escalation clause, you guarantee that you will pay over your nearest competing offer. You can choose to limit or cap this clause at a certain amount, or leave it as an unlimited amount that says you will pay over any other competing offer.
Escalation clauses may never be triggered; for them to do so, the seller has to prove there was another offer to out-bid.
After you are under contract with a home, a crucial next step is the home’s inspection. During this process, you will hire a home inspector to (as their title suggests!) inspect the home for any possible issues or fixes.
As you can imagine, home inspections can be stressful for sellers because it may turn up costly issues that need to be addressed. By waiving the home inspection contingency, you guarantee that if there are any issues found during the inspection, you won’t require the seller to foot the bill for the repairs.
This doesn’t mean you can’t have an inspection done, however. It’s still important to hire a qualified inspector to go over the house, so you catch any potential issues and know if they need to be addressed.
💡 The difference between inspections and appraisals
Home inspections and appraisals might seem like similar steps, but their intentions are different.
An inspection is a big part of the research side of house buying that benefits the buyer. It’s intended to make sure there are no glaring issues before you complete the purchase, and point out any issues that need fixing.
An appraisal is all about determining your home’s value. After your inspection, your lender will schedule an appraiser to examine the home. The appraiser creates a report based on their visual inspection, as well as recent sales of similar homes in the area, current market trends, and other aspects of the home (i.e. hardwood floors, pools, sheds, floor plan, square footage).
Each of these steps come with their own fees, ones that can be covered by either the buyer or the seller. Another way to make your offer stand out may be to agree to pay for both the inspection and appraisal as part of your closing costs.
Give your offer a personal touch
Sometimes it’s easy to get caught up in the homebuying process and forget that the seller is another person, just like you. Remembering the human element is a big tip for giving you a leg up when making an offer on a house.
The person on the other end is likely under just as much pressure to sell the home as you are to buy it. They are being pushed by selling agents and could possibly have a deadline to sell if they are moving to another home or town.
That’s why we encourage you to submit a letter along with your offer. Explain your situation, let them know who you are and why you want the house. That little extra step can put your offer ahead of the pack, even if it’s not the biggest offer they receive.
Close on the seller’s time
No two sellers have the same circumstances around selling their home. Some need to get out of their home quickly to move, whether across the city or across the country, while others might not be in a rush to leave.
Knowing the seller’s situation and what they need as far as closing time is a crucial part of making an offer on a house. You can ask your real estate agent to reach out to the seller’s agent and gather some of this information to use when submitting your offer. This is a great way to move your offer to the top of the list—it shows you’re conscious of the seller’s needs.
If you’re in a position to stay in your current residence after buying a house, and the seller needs more time to figure out their residency, a leaseback may be an option.
With a leaseback, you can actually rent the property back to the seller after closing. This method allows the seller to move out on their own time, eliminating any pressure of having to find a new residence immediately.
Be careful with a leaseback, however, because they can be a nightmare if not handled correctly. It’s best to have your real estate agent write all of the terms clearly into the contract or provisional lease agreement.
Bring your home offer questions to Bison State Bank
Making an offer on a house is both a stressful and exciting process, and we understand all of the emotions and details that go into making a strong offer. With the backing of a trusted lender, like Bison State Bank, your offer is sure to stand out from your competition.
We are dedicated to putting you on the first step to a better future. You deserve nothing less than the honesty, integrity, and experience that our incredible loan officers and underwriters provide.
Ready to get started? Let us get to know a little more about you and what you’re looking for, and we will give you a free custom mortgage rate quote.
A special thank you to our junior underwriter, Katie Honas, for providing her expertise on this topic.