The economy certainly isn’t in its best shape ever, but that hasn’t dampened the housing market – for sellers. Inventory remains extremely low, and buyers are numerous, especially with the current low-interest rates. And that means sellers are in the driver’s seat and can be pretty picky with offers because, most of the time, they get multiple offers. So let’s take a look at 4 ways to ensure your offer is accepted when buying a house in Chicago.
1. Make a Clean Offer (as Much as Possible)
A good way to make sure your offer is accepted is by making it as clean an offer as possible. Primarily, that means an offer without a sale contingency or other financial constraints. Ideally, it would also be an offer that doesn’t ask for any seller concessions such as the seller paying some or all of the closing costs. A clean offer like this is more attractive to sellers because there is far less chance that the buyer will back out of the contract, which means the offer is more likely to be accepted.
The purpose of contingencies is to protect you, the buyer. But even without contingencies, there are other ways to ensure your interests are protected. You could, for example, get your mortgage loan fully underwritten. That means you would complete the whole loan process with your lender before making an offer to mitigate your risk in this regard.
Still, making an offer with no or very few contingencies (for example, foregoing the typical inspection contingency) can be pretty risky. So before making such an offer, it’s always a good idea to consult your Chicago agent. To discover more, just call 773.233.2301.
2. Offer Appraisal Gap Coverage
Another way to ensure your offer is accepted when buying a house in Chicago is to offer appraisal gap coverage.
In the current market, you may have to make an offer over the asking price. When you do, there’s a good chance that it may be more than the appraised value of the home. And that’s what appraisal gap coverage is for.
“Say a home is listed for $100K, and you go under contract on this home for $110K, but the appraisal only comes in at $105K. In this scenario, you would have to either fork over an additional $5K cash to make the deal happen, convince the seller to accept a new purchase price of $105k, or walk away from the deal. Sellers are afraid of the latter option, so they like to see a guarantee that when you make an offer over the asking price you are willing to come up with some money to cover the difference if the appraisal were to come in short.”
Appraisal gap coverage assures the seller that you’re willing and able to pay the amount over the home’s appraised value. So, so if a seller gets two equal offers, and you provide appraisal gap coverage with yours, it will be the one accepted.
3. Put Up Larger Earnest Money Deposit
You can also put up a larger earnest money deposit than other buyers to ensure your offer is accepted when buying a house in Chicago. This will show the seller that you have more skin in the game, which will make your offer more attractive.
“The amount of money you put down as earnest money,” according to industry experts, “differs from market to market but is typically 1-2% of the purchase price. That 1-2% is not a hard and fast rule though. You can increase your earnest money deposit to more than 1-2% – maybe 3% or more – to show you really want a home.”
The good thing about this tactic to make sure your offer is accepted is that it carries no risk. The earnest money deposit is refundable if you have to back out of the contract for some reason. And it doesn’t cost you because the earnest money deposit comes out of the down payment anyway.
4. Include an Escalation Clause
Including an escalation clause is another tactic you can use to ensure your offer is accepted when buying a house in Chicago. Here’s how it works:
“Escalation clauses generally say that you will beat any other offer a seller has by $1,000 up to a certain purchase price.” Suppose you make an offer of “$100K with an escalation up to $115K. If the seller has another offer of $110K, the escalation clause in your offer would be exercised, and you would beat the other offer by $1,000, making your purchase price $111K.”
Keep in mind, though, that when there are multiple offers, “an escalation clause makes your offer confusing and complicated to sellers,” and it “may get moved to the bottom of the pile.” So, again, be sure to consult your Chicago agent to determine whether this would be a good tactic for a particular house.
And Work With a Chicago Agent to Ensure Your Offer is Accepted
In the current housing market, with low inventory and many buyers, you need to do everything you can to make sure your offer is accepted. And one smart move is to work with an experienced local agent who knows exactly what it takes to get an offer accepted in the local market. So if you really want to ensure your offer is accepted when buying a house in Chicago, contact us today at 773.233.2301.