How to Win Deals Over Competition
First things first, don’t run away from deals with other buyers, other offers, or even an asking price that feels outside of the range of your “deal zone” (the price at which you’d close the deal).
One thing I’ve observed (and been guilty of myself) post Covid 2020 real estate market: more sellers in this market are greedily trying to “shoot for the moon” when they market their property. Â To be fair, some get lucky and get that high price. Most end up doing price drops and selling at a reasonable market price.
Lesson 1-If that deal catches your eye, make the offer which works for you.
Constructing the Strongest Offer
In the residential world there are 4 main Buyer Types in order of strength as measured by the offers ability to obtain a winning deal from a below ask price offer:
- Cash Buyers
- Hard Money Buyers
- Conventional Mortgage Buyers
- FHA Buyers
I’ve left off “Seller Financing” offers because they are usually difficult offers to get accepted by sellers – especially because we are focusing on offers which are accepted at discount to asking price.
Terms to include if you’re aiming to be the Strongest Offer
–Obviously, a high price would be helpful in every scenario below, so it is left off of the list. Know what you are willing and able to pay & present that amount in your offer.
Strong Cash BuyersÂ
- Large Earnest Money Deposit (EMD). 10% of the Purchase Price or More
- No Inspection Period, No Due Diligence Period, No Attorney Review
- Quick & Flexible Closing.
- This type of offer often gets accepted over higher offers with more risk of re-negotiation or cancellation. No one walks from 10% Earnest Money Deposit
Cash Offers are the Strongest because the Buyer who is supplying the cash to close is the actual decision maker.
*This is how I buy property personally. My offer is rarely going to be the highest, but it is THE MOST CERTAIN offer to ACTUALLY CLOSE.
Strong Hard Money BuyersÂ
- Large Earnest Money Deposit. 10% of the Purchase Price or More
- No Inspection Period, No Due Diligence Period, No Attorney Review
Hard Money loans are risky because the Hard Money lender who is supplying most of the cash is the actual decision maker, NOT the buyer. Large, non refundable EMD can go a long way in providing CERTAINTY of closing to the seller and earning the deal.
Strong Conventional Mortgage Buyers
- Large Earnest Money Deposit. 10% of the Purchase Price or More
- No Inspection Period, No Due Diligence Period, No Attorney Review
- Waive the Appraisal and/or Mortgage Contingency
- Buyer willing to complete any Lender required repairs
Conventional Mortgages are risky because the lender who is supplying most of the cash is the actual decision maker, NOT the buyer.
Large, non-refundable EMD can help strengthen Conventional Mortgage offers.
Sometimes, lenders require repairs to be made prior to closing. Any Buyer aware of this fact & willing to make repairs required by a lender in order to close will gain priority over any other offer NOT willing to do the same.
Conventional Mortgage buyers are viewed favorably when compared to FHA buyers because they are more certain to close. For this reason, Conventional Mortgage offers are often accepted below competing FHA offers.
Strong FHA Buyers
- Make the Highest Price Offer
- Non refundable Earnest Money
- Waive the Appraisal and/or Mortgage Contingency
- Buyer willing to complete any Lender required repairs
Most FHA offers are from buyers with limited financial resources and are at the highest risk of being unable to get a transaction to closing. For this reason, the two terms which carry the most weight are the Highest Offer & the Willingness to complete Lender required repairs.
Here are 39 properties for sale which you can make offers.Â
Some are “Cash Offers Only” & Some welcome Conventional & FHA Offers