I recently listed a beautiful 4br/4ba home in a desirable neighborhood in Thornton, CO for $399,000. We had a total 39 showings over TWO DAYS.
And we had a total of 6 offers.
Here's how things went:
1 & 2: First two offers were basically full price at $400K, conventional loans, with the minimum 3-5% down, no escalation clauses. No wow factor. Each submitted “Love letters” which were a nice touch, but didn’t really mean much.
It was obvious that there were going to be many more offers coming, and most likely they would be better. So these offers were basically ignored immediately.
3. Then we had one offer at full price offer ($399K), and they added an escalation clause that made it interesting. The escalation clause went up to a max of $415K. The downside of this offer was that they were FHA buyers, which can be tricky if the FHA appraiser calls out issues with the house, such as peeling paint. The sellers didn’t want to have any issues with an FHA appraisal, so this offer wasn’t a real consideration either.
4. Then we had one at $410K, (Conventional loan w/ 20% down) also with an escalation up to $415K. But they also increased the Earnest Money to $7K (instead of $5K). Plus they offered a $3K appraisal gap clause. (For example, if the house only appraised for $412K, the buyers would kick in the extra $3K to get to the $415K price). PLUS they offered to have the buyer paying title closing fees, HOA transfer fees. (These are nominal fees and can either be paid by seller or buyer or split 50/50). These really don't make much difference on the bottom line, but…it was just enough “creativity” that made this well-seasoned Buyer's Agent and her buyers stand out more than the rest.
5. Then we had an offer for $418K, CONV w/ 20% down and included an escalation clause up to $425K, and included a $3K appraisal gap clause. BUT…they have a contingency to sell in Dayton OH. That house was under contract and through inspection, but there are still plenty of things that could go wrong. If they were past appraisal and loan conditions, and only days away from closing, then my folks probably would have chosen that one.
6. Then we had one at $412K (FHA w/ 3.5% down) that was nice but not very “remarkable”. But when they heard how many offers we had, they submitted a revised offer of $420K (still FHA with 3.5% down even though they COULD have gone CONV). In this case the $420K was a nice price but with no appraisal gap clause, and it being FHA, sellers didn’t want to mess around with that.
So there you have it! It's not just about price. Make sure ALL of your dates, terms & conditions are competitive. It's good to have dates that align with the Seller's desired dates. A good, strong pre-approval letter with a good, strong local lender is super helpful. Bonus points for when the lender calls the listing agent to tell me how strong their buyers are. Escalation clauses can be annoying, BUT it gives the sellers & listing an agent an idea of how badly the buyers want the house. Any other "creative" ways that make the offer stand out are also a big bonus.
I hope this helps!
Sally