Walking You Through the Offer Writing Process

The Portland market can be challenging for buyers. Here’s how to make your offer stand out from the rest.

The Portland real estate market has been historically strong, meaning more often than not it has been a seller’s market. In early 2020, COVID-19 restricted inventory a LOT, resulting in multiple over-list price offers, bidding wars, and general frenzy. And when the market eventually slows down, strategies for crafting a good offer have to change alongside it. Here is a guide to writing strong offers regardless of the market.

Basics

The “offer” you will write uses the Final Agency Acknowledgement form that we will have given you to look over. Essentially, it is one half of a contract that becomes binding once the seller signs it, and tells you they’ve accepted it. Once that happens, you’ve entered into a legally binding contract between yourself and the seller. So, when we are “writing” (as in, mainly filling in the blanks) of this form, there are several ways to strengthen your offer and make it more likely to be accepted. Please keep in mind these strategies are entirely dependent on the property itself; a house that was newly listed two days ago in a hot market will have different strategies than one that has been sitting on the market for several weeks.

Money

• Offer Price

The most enticing and reliable way of getting an offer accepted: give the seller more money. Obviously, we all wish we could afford any house we wanted. Unfortunately, that’s not realistic. So even if you can’t compete with people who have boatloads of cash, there are strategies to make your offer more appealing even if it’s not highest. In a hot market, it is not uncommon for houses to go 10-15% over list price. The biggest and most immediate way of dealing with this problem is to only look at houses 10-15% below your maximum budget. That way, you can be competitive later.

If you prefer not to compete, looking at houses that have been on the market for a few weeks could land you a sweet deal. Depending on why the home was sitting on the market—simply a bad Redfin algorithm, unsightly exterior that turned off buyers, or being overpriced—you can negotiate with the seller to either accept your offer at list price, slightly below, or give you seller concessions (meaning they will cover some of your closing costs and prepaids). In a hot market it is very difficult to get closing costs covered, so having the flexibility to look at homes that need some work may actually work in your favor.

• Earnest Money

In that same vein, there are other money-related negotiables you can use to strengthen your offer. One being earnest money. Your earnest money is an up-front portion of your down payment. Your earnest money is deposited into escrow (neutral third party account) after your offer is accepted to take the house off the market and make the contract legitimate. Basically, it makes it so the buyer also has something to lose. In that way, both buyer and seller should be acting in good faith to make the deal go through. If you back out of the contract at the wrong time, the seller keeps your earnest money. Typically, EM is 1-3% of the sales price, a pre-paid portion of your down payment. To make your offer more enticing, you can increase the amount of earnest money you offer. It is not uncommon for earnest money to be $10,000 or more.

Contingencies

In the offer, you have a few contingencies in place. These contingencies protect your earnest money, meaning you can use the contingencies as opportunities to back out of the contract and get your earnest money refunded to you. Waiving one or more contingencies allows you to be competitive with cash offers, but may jeopardize your earnest money deposit and should only be waived in certain situations. Even without waiving any contingencies, there are some changes you can make to the contract to make your offer more enticing.

• Inspection

The easiest of these to waive is the inspection period. Typically, you have 10 business days to order any inspection you want, and based on what they find you can ask for repairs or walk away from the deal (and get your EM back). You can tighten up this timeline to 6-8 business days, which we recommend in multiple offer situations. Additionally, you can waive your inspection entirely for an extremely strong offer. We do NOT recommend this strategy, since any problems with the house become yours once you buy it, but it is extremely appealing to sellers and can beat higher offers. Another strategy is accepting the house “as-is”, meaning you retain your ability to do inspections but won’t ask for any repairs. Similarly, you can use verbiage such as “will not ask for any single repair under $5k” to show you will not ask the seller to fix minor things, only major health or safety concerns. Both of these strategies allow you to find the problems in the house and back out with your EM refunded while still making a strong offer.

• Appraisal

Another contingency is your appraisal contingency. If you are taking out a loan for the home, the bank will order an appraisal to assess the value of the home to make sure its worth what you’re willing to pay. Often in a competitive market, bidding wars make the offer price go significantly over ask and the sellers can be afraid it won’t appraise for the amount you offered. If that happens, you either pay the difference in appraisal and offer price (because the bank won’t lend any more than the agreed loan-to-value based on the appraisal amount!), have the seller come down in price, or you can use your contingency to back out of the deal (and get your earnest money back). For a strong offer, the buyer can write in a provision that states if the appraisal comes in below offer price, they will cover the difference up to X amount. This can be any number, but typically it’s between $5,000 to $20,000. It is essentially an extra down payment amount that covers any gap between appraisal and offer price. You can also waive the appraisal contingency altogether, but generally this is impractical unless you have a lot of money or your lender waived appraisal for you.

Possession

Typically, after you close and the loan is funded, you get keys and possession of the home. In some situations, the seller may want extra time to “rent-back” the home from you and stay longer after close. If you are open to it, allowing the seller 15-30 days to pack and move on to their next home can make your offer very compelling. And in hot markets, most other offers will allow possession after close anyway. You pre-pay your first month’s mortgage, so your first bill is usually 30+ days after close, so allowing the seller to stay won’t have you paying double rent/mortgage. In addition to your offer, you will sign an Agreement to Occupy After Close document that will outline the parameters of the rent-back, including how much (if anything) the seller will pay you, whether or not to have a security deposit withheld, requirement to have insurance, and move out date. This way, you have a formal contract for the sellers to vacate your house in good repair, and explicit recourse if they don’t leave as they agreed.

This part of the offer only applies typically if the house is occupied by the seller, so offers on vacant homes won’t include this. Even longer rent-back periods (you can give them up to 59 days before you have to occupy) or extending closing also are bargaining chips you can use if that would make your offer more appealing to the sellers.

Personal Letter

The final piece of crafting a strong offer is a personal letter. These can be a thorny ethical issue, as it is potentially an area where the seller can discriminate against the buyer. Even though a personal letter can include photos, we highly discourage it. Basically, the strongest personal letter should include details about what you love about the house and specific examples of how you will be using the home. As a guide, include details about how you “love how the eastern sun gently wakes you up” or you imagine “spending time gardening in the front yard.” Avoid descriptions of protected statuses like familial status, sexuality, race, gender, or age. It’s counterintuitive, but this should be a love letter to the seller about their house you are trying to buy, not a place to open yourself up to potential discrimination. Another good talking point is discussing other houses you’ve seen and compare how much better you think this one is, or describing how hard it’s been in the market trying to find your forever home. No matter what, be open and truthful.

The effectiveness of personal letters is debatable. Sometimes it works and sometimes it doesn't matter at all. To us, any advantage you could possibly have in a competitive market is worth the risk. Selling your house can be an emotional process, so sometimes it helps to appeal to those emotions and reassuring people that you will take care of the house they potentially still really love. If you know the house is vacant or owned by a flipper, an emotional personal letter is probably going to go in the trash. Additionally, as of January 2022, personal letters will be banned from being included in offers to prevent discrimination.