Let me precursor this advice with the simple fact that what is applicable here in Colorado Springs, may not make sense wherever you are reading this. While this is designed to cover the ideas that will help you win an offer, you or your Realtor will need to understand the nuances of the local market to apply these in the best fashion. 

Now, it is true that sometimes you just CAN'T win when you're competing with crazy cash offers from syndications where $5-10,000 makes no difference to them as they are banking on appreciation and are able to borrow money at exceptionally low rates. But, here are my 5 main negotiation points (not in order of importance) that have helped countless clients get the home they want without having to simply pay more than the other guys:

Number One

Identify the factors that are important to the Seller but of little importance to you. Think, for example, closing timelines/post occupancy agreements. Almost every Seller has a timeline that they want to adhere to, this may be closing in 21 days, 30 days, 45 days, or in some instances longer. Asking the correct questions up front make it easier to identify these items. While post occupancy agreements used to be rare, they have become increasingly common in Colorado, where a Seller wants to close in 30 days and then live in the property you now own while they close on another property, or move out of State etc. etc. Seeing as how you "skip" a mortgage payment the only thing you have to have is a place to stay while you wait to take physical possession of the home. 

Number Two

Keep your contingency deadlines fast, but realistic. In Colorado there are two major contingency options - your Inspection Objection and your New Loan Termination. Both offer a Buyer a subjective right to terminate and get the Earnest Money back. These are the two that the Seller's Agent should pay close attention to. There is absolutely no reason that you can't get full inspections complete on a property in 7 days. If you go into a deal prepared and ready to hire inspectors immediately you can have the whole property combed through in about 4 days. I use 4 days because inspectors may be booked, but also because radon tests take 24-48 hours. Having fast inspection deadlines provide a Seller with two things: firstly, it shows that you as a Buyer are committed to this home, but secondly it allows for the property to get back on market ASAP in the event that you decide the property doesn't fit after inspections. Bare in mind that you normally will have a right to ask for repairs, but Seller's are not obliged to agree. This Resolution period is a rabbit hole itself that I will discuss on a later day. For the right client and property we often advise waiving this objection deadline, or offering to only ask for repairs on major health and safety deadlines. Most Sellers simply do not want to make repairs in this market because they know there is a Buyer out there willing to buy completely AS-IS. 

Now, think about the loan termination deadline. The verbiage in the Contract to Buy and Sell Real Estate, in Colorado, is as follows:

This contract is conditional upon Buyer determining, in Buyer's sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions and cost. This condition is for the sole benefit of the Buyer.

Sheesh ---- This means that a Buyer has a right to terminate, and receive their deposit back, if the loan isn't satisfactory in their subjective opinion and they terminate prior to this deadline. In a 30 day contract we typically write this for 7 days prior to closing. When the market was more balanced we could have this deadline just a few days prior to closing. So, why mention this? If you as a Buyer come in with a loan that is through underwriting, the chances of you terminating for the loan is slim to none - go get through underwriting, and make this deadline as attractive as possible to a Seller. Note: appraisals have termination rights too, incase you were worried and ahead of me.

Number Three

Understand appraisal gaps and why they may be a great long play. While it is still being evaluated and argued most local experts agree that we are set to appreciate between 14-16% this coming year (crazy I know). We've worked with Buyers previously who were set on not overpaying for a property. Their original budget may have been $400,000 in 2020 and they would not offer a penny over asking price. But, had they have bought a home for $420,000 (let's say $20,000 over ask in 2020) that same property would now be worth $480,000+. 

An appraisal gap is the simple idea that you as a Buyer will agree to pay a certain amount of dollars over the current appraised value of a property, in the even that the property does not appraise at the agreed upon purchase price. Let's take a look at this:

You find a home offered at $400,000. You offer $425,000 because we know there are multiple offers on the table. Your Agent writes in that you will agree to pay $5,000 above the appraised value, not to exceed $425,000, in the event the property does not appraise at the agreed upon purchase price of $425,000. Therefore, if the property appraises at $410,000 you pay $415,000. On a conventional loan this may be as simple as changing from 25% LTV to 22% LTV, but for VA or FHA borrowers, this means bringing up to an additional $5000 to the table if you appraise low. Have the discussion with your lender or Agent before this because there are a ton of outcomes in this scenario. Try to get it out of your head that homes are only worth what they appraise for. An appraiser is just another third party trying to evaluate the value of a home. This does not account for the intangibles of home ownership at all, or inflation/appreciation. 

Number Four

Use a local lender. The truth is that people trust local more than the big box firms. Whether it is true or not - there is the stigma that non-local lenders do not close on time, or even fail to properly approve Buyers up front. Remove this Seller objection by going local (any good Agent will have referrals). And if you're worried about running your credit...don't be. The government wants you to shop around for loans because they don't want a repeat of the 2008 fiasco. If you have found a ridiculous deal online for a loan, see if local banks can match it. Many-a-time we have won contracts simply because the Listing Agent knows and trusts our preferred lenders. 

Number Five

The average days on market is low, like super low. Think 4-6 days before an offer is accepted. Here's the tip: have a search set up to only show you homes that have been on market in your price point for longer than 7 days. We often set the search for about $25,000 above the budget of the client and here's why. If the home has been on market for 7 days (or more) one of two things are true: 

1 - The home is overpriced

2 - There is something fundamentally wrong with the property.....or people aren't willing to look past cosmetic repair items

Either way, this is your chance to get in there and see if it fits. Recently we purchased a home (personally) for $280,000, listed at $315,000. We appraised at $330,000. We were the only offer at the time because the home needed new floors, and some other cosmetic love. But, we also knew a comparable home, literally the same house on the same street, was closing at $413,000, but was listed at $375,000 originally. The point - some things are overlooked because people don't know what to look for. 

There We Have It

So, there are some tips for you. We have a million more as every situation is different. The bottom line is to not give up hope if you are struggling in this crazy hot real estate market. It will happen, sometimes you just have to give it time and think outside the box.