7 Tips for Making Your Offer Stand Out in Denver’s Heated Market
How to Compete in a Market Full of Cash Offers
Scoring a home in Denver means learning how to compete in a market characterized by limited supply, frenzied demand and what seems like an onslaught of cash buyers. But it’s still possible to lock in the dream home. Here’s 7 strategies to consider:
‘Notebook It’
Watching Ryan Gosling repeatedly say, “What do you WANT? What. Do. You. WANT?” can incite a lot of feelings. Am I right?! But assessing what you want and need in a relationship can be very similar to real estate. In fact, you can probably get more out of a home ($, security, opportunity), than a partner. So really think about what you’re looking for.
Do you have Noah’s vision to take something ‘meh’ and make it beautiful? A house that needs updating will likely garner less interest and be easier to secure than a home that’s newly renovated.
If that’s not you, then ask yourself “what are my must-haves” when it comes to size/square footage, beds/bath, layout, location, etc.? It’s important to remember not everything on your checklist will be attainable in this market, but prioritizing your needs can help streamline the process and get you a little closer to your goal.
2. Optimize Your Pricing
Before you do ANYTHING, ask your real estate agent, friends or other trusted individuals for lender recommendations. Once you’ve shopped lenders, find out what you qualify for in terms of a house price, and see what you need to do to get the best rate and financing possible. You may need to pay off or consolidate debt, build or repair credit and/or put more money down. Lenders can also walk you through other options to help you save on your monthly payment, including 5-7 year adjustable rate mortgages (ARMs), different loan programs or buying down your interest rate, depending on your goals.
3. Get Pre-Approved or More
Pre-approvals and pre-approval letters matter and are a must have in this market. That’s because it signals to the seller that you, the buyer, have already had your financial data verified and can indeed afford this house. You can also take this a step further by finding a lender that does most of the loan underwriting upfront to emphasize you have a strong financial backing and are ready to move quickly. In other words, ask if your lender can provide “a conditional approval”. This comes after your initial approval and involves a deeper dive or a strict documentation review before your loan is approved.
4. Use Creative Financing Options Like Cash
If you’ve been competing in this market, you know cash offers are four times more likely to get accepted, even if they’re not the highest bid. That’s because they’re quick to close, less likely to run into issues and unlike loans, they don’t need an appraisal to justify the value.
Luckily, there are creative financing programs that operate like cash offers. Some of these programs, especially more reputable ones, require realtors to be certified in order to submit clients for consideration. In other words, you can submit cash offers without having the cash. How it works is pretty straightforward:
A certified realtor submits you/helps you access the program.
A specialty lender vets, qualifies you, and ensures you have the financial backing.
They purchase the home on your behalf, in cash.
They resell it to you at the same price once your loan closes.
Some conditions may apply, like getting fully approved beforehand and paying a deposit.
The good news is this can give you a pretty big competitive edge, and could be a great alternative if you need to sell your current home in order to purchase the next, or are considering a contingent offer, which can be tricky to get past the cutting room floor.
5. Submit ‘Clean’ Offers
If you are not crazy about going the creative financing (or cash offer) route, and are dealing with a multiple bid situation, make your offer easy to accept. Waiving contingencies such as an inspection or offering 100% appraisal gap coverage can be one of the ways to do it. Be warned: it can be risky. For instance, a full appraisal gap, means you won’t be able to renegotiate if the appraisal comes in low. It can also mean you, the buyer, may need to come to the closing table with additional funds – outside of closing costs and your original down payment – to bridge the gap between the appraised value and value you agreed on with the seller. In short, these strategies can be a costly decision, and there’s a lot of considerations at play, so it’s always best to consult with your realtor to help mitigate risks before making such an offer.
6. Consider an Increased Earnest Deposit
An earnest deposit is a good faith deposit to the seller, reserving your right to buy their home. If you back out of your contract without reason, the seller gets to keep it. In some cases, when a buyer really wants to stand out, they’ll increase their earnest deposit. It shows the seller you’re serious about buying their house, and you’re willing to stake your hard earned money on it. Some buyers who really want a house may even take it a step further and offer portions of their earnest deposit as non-refundable to signal to the seller just how serious they are.
7. Be a Back-Up
Here’s the thing: many buyers are being rushed to submit offers at terms they later can't stomach (what we call buyer's remorse), and a recent study by the National Association of REALTORS® (NAR) found that in July 2021, 5% of all purchase agreements fell through. Other sources have estimated that number to be much higher, and while I can only speak to this anecdotally, I’ve seen time and time again contracts fall out of escrow and sellers accept a backup offer instead. There’s a lot of reasons why a seller might not want to re-list, but this is especially relevant if they’re on a rushed timeline and need to sell in order to close on another property. Point being: never hurts to be a back-up. Chances are you might get lucky.
