Boston Homes
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How to make a winning offer on a home
Q: We have made two offers on homes and lost out each time. How can we better improve our chances of buying a home in this market?

A: In a tight, high demand, low inventory housing market like we have now, the best way to improve your chances of making a winning offer for a home is to be fully financially prepared.

Get a preapproval letter from your lender. Don’t just talk to a lender and get “prequalified” for a loan.

Unlike a prequalification, getting preapproved means the lender will pull your credit score, examine your income, pay stubs, tax returns, debt, bank statements and other documents and actually “preapprove” you for a loan of a certain amount.

Unless something unforeseen happens, this pretty much guarantees you will be able to qualify for a mortgage for this amount. A preapproval letter gives considerable credence to your offer.

Even better - buy with cash. Few buyers can pay cash for a home, but if you can a cash deal will further strengthen your offer, enabling you to waive the financing contingency and shorten the time to closing.

You could also put down a larger deposit. This tells the seller you are indeed serious about purchasing the home, but be careful that you meet every deadline in your offer so you don’t lose your deposit.

In a seller’s market, speed is also important. See the home as soon as it becomes available, and make your offer as soon as possible afterwards. Those who hesitate lose.

Consider writing a personal letter to the seller outlining why you want to buy the home. Appeal to emotions and why the home would be perfect for your family.

Find out the seller’s timeline and close when he/she wants, meeting other reasonable requirements.

You could also consider adding an escalation clause to your offer. An escalation clause is an addendum to your offer that allows your agent to increase your offer by a certain amount above the best offer the seller receives. For example, increasing your offer $1,000 above the best offer. Be careful, however, to put breaks on your escalation clause. Make sure your offer will escalate only to a certain amount that you can afford. Do not get caught up in a bidding war.

If your winning offer exceeds your approved mortgage amount, you will need to come up with the extra funds in cash. Make sure you can comfortably afford to go this high.

Linda Goodspeed is a longtime real estate writer and author of “In and out of Darkness.” Email her at: lrgoodspeed@comcast.net.