Negotiating a Sales Contract

February 23rd, 2015

I recently wrote several blogs about the pros and cons of waiving contingencies to make a more aggressive offer in a sellers market. But there are also other ways to make a more aggressive offer I would like to discuss. Some other ways you can get an offer accepted in a competitive environment are based on price, turn times, your deposit, and more.

The most obvious way to be competitive is to offer a higher price than you had planned. Sometimes you may need to do this in order to offset perceived or real weak points of your financing such as FHA financing, gift money, a long settlement timeline, or a low down payment.

If you are using FHA financing (in which case I’d argue you instead should try for 97% Conventional or 95% Conventional financing) you may need to offer a higher price, because realtors perceive FHA financing as harder to deal with because of more stringent appraising that may require the appraiser to note more defects and repairs. A listing agent will likely advise their seller that the FHA offer will cost them money in additional repairs that an offer with Conventional financing would not, so the FHA offer may have to come with a higher sales price to entice the seller to take it.

If you have some gift money, or maybe your entire down payment is coming from gift money, this may be seen as weaker than other offers where those buyers have their own cash for down payment, so a higher price may be needed to offset the perceived weakness of having gift money.

Another way to appear more competitive is to offer a higher earnest money deposit. If you were thinking of writing a $10,000 earnest money deposit check with your offer, maybe making it $25,000 will make the seller happier.

A buyer can offer a faster settlement date to appear more competitive to a seller. If a seller has other offers with 30 to 40 day closing timelines, but you offer one with a 25 day timeline, your offer will likely be more appealing, as long as its competitive on price as well. Just be prepared to get your lender the completed loan application, the supporting documents and the signed loan disclosures very quickly, to be able to meet the fast settlement times you have promised the seller.

Lastly, one old-fashioned but still useful thing to consider in getting your offer to appear more attractive is to write a heartfelt letter. Sellers are humans, and sometimes doing some or all of the above items, along with a warm letter explaining why you love someone’s home and why you are so excited to make it your home, will help carry the day in a competitive situation.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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