Writing a Winning Offer in a Strong Seller’s Market

Orlando’s Sellers’ Market

We have been in a strong sellers’ market in the Orlando real estate market since April 2011 when inventory fell below five months of sales. (A balanced market is considered five to seven months of inventory). As of March 31, 2021, there was three weeks of inventory. As you can imagine or may well know, it’s the strongest sellers’ market on record.

The Power of the MLS

The best odds of winning start right at the beginning, knowing when a home like the one you’re looking for comes on the market. If you’re checking Zillow or Realtor.com, then contacting the listing agent or agent on the site to see the home, you are already far behind your competition, the other home buyers, and at a disadvantage.

When you are working with us, we will ask what you are looking for and enter those criteria in the MLS with your email address. You will get an email immediately when a listing agent moves a home to ACT (Active) status in the MLS. Then call or text us that you’d like to see it and we will get you in, most often within a half of a business day.

Multiple Offers

In a market like this, homes that are priced well and in good condition get multiple offers. Sometimes a dozen or more. If you are a home seller, that’s great! For buyers, it’s tough to have to compete. When you have an agent who understand this market and knows how to write a winning offer, you have a big edge on the competition.

Jean Scott and our team have been doing this since 2007 and closed close to 1,100 real estate transactions. Hundreds of them have been multiple offer situations on both the seller and buyer sides. We know what it takes to get your offer accepted. We may have to take a few swings (write offers on a few homes) to get it done. That’s OK. We will keep working until you get the house you’re looking for.

Your Offer Price

If the home is on the market one or two weekends, your offer should be full list price to be even considered. By the third weekend, if the home is still on the market, it’s likely overpriced, in poor condition, or a combination of both. The seller would be more open to an offer at this point.

Worried About Overpaying?

In the current market, it’s OK to go some above list and appraised value as I wrote in Central Florida Homes Are Significantly Undervalued.

There are other strategies that include an Appraisal Contingency (FR/BAR Rider F) and an Escalatory Addendum that help win the offer without paying more than necessary.

We can go over all these strategies and more with you, answer all your questions, and get you into the home you’re looking for! Call us today at 407-564-2758 to speak to one of our Realtors.

We always appreciate the opportunity to help and earn your business.

What Are Other Important Terms of the Contact?

Other terms in the contract that are important to sellers are: 

• Earnest Money Deposit: We recommend minimum 1% of the purchase price or the seller will not consider your offer serious. The more you put here, the more you are telling the seller that you are committing to your contract with them. 
• Time for Acceptance: Is it fair and reasonable to the seller? Asking for less than one business day is likely going to be an annoyance to the seller. Give them at least 24 hours to review and discuss your offer. Up to 36 hours is good. Exception: The seller has indicated a day and time that all offers will be considered. It’s important to at least consider respecting that until your offers is so juicy, it would be hard to pass up. 
• Financing, Mortgage Loan or Cash: Cash is always best as it reduces the number of contingencies. However, there isn’t much if any discount for paying cash. It’s all cash to the seller at closing. 
• Types of Mortgage Loans: A conventional loan with 20% or more down is best. It’s unfortunate that FHA and VA loans go to the back of the line. They add extra contingencies to the contract, obligations to the buyer, and have a solid, built-in appraisal contingency. 
• Inspection Period: Seven to ten days is the typical inspection period. Asking for more is just asking for your offer to removed from contention.
• Closing Date: Does that coincide with their needs?
• Additional Conditions: Adding extra conditions like a seller paid home warrantee, buyer closing costs paid for by the seller, or “home must appraise” are red flags to sellers. Offers without these add-ons will more likely be accepted. 

What is the Appraisal Contingency for VA Loan Buyers?
Category: Writing a Winning Offer

Rider E of the Florida REALTORS / Florida BAR contract for VA buyers reads:

It is expressly agreed that notwithstanding any other provisions of this Contract, the Purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase of the Property described herein, if this Contract purchase price or cost exceeds the reasonable value of the Property as established by the U.S. Department of Veterans Affairs.

What is the Appraisal Contingency for FHA Loan Buyers?

Rider E of the Florida REALTORS / Florida BAR contract for VA buyers reads:

It is expressly agreed that notwithstanding any other provisions of this Contract, the Purchaser shall not be obligated to complete the purchase of the Property described herein or to incur any penalty by forfeiture of earnest money deposits or otherwise unless the Purchaser has been given in accordance with HUD/FHA or VA requirements a written statement by the Federal Housing Commissioner, Veterans Administration, or a Direct Endorsement lender setting forth the appraised value of the Property of not less than $ (Purchase Price)… The appraised valuation is arrived at to determine the maximum mortgage the Department of Housing and Urban Development will insure.

In this case, when an appraisal comes in below the purchase price, FHA will insure the loan only up to 97.5%. (minimum FHA down payment is 3.5%) of the appraised value. Either the seller would have to lower the purchase price to appraised value, the buyer would have to bring the extra cash to cover the shortfall, or a combination thereof. In the event there is no agreement, the buyer may cancel the contract. 

What is an Escalatory Addendum?

The escalatory addendum is an addition to the contract that states the Buyer is willing to pay a certain amount over the highest offer the seller has received, up to a certain amount. 

For example, $400,000 list price, offer is at $400,000 and the seller has multiple offers. Your escalatory addendum could read that you are willing to pay $1,750 above the highest offer, up to $410,000. If the highest offer was $405,000, your offer becomes $406,750. If the highest offer was $415,000, your offer would go only as high as $410,000

Should I Include an Appraisal Contingency?

In our current market, there are many buyers waiving or agreeing to pay a certain amount above appraised value. We recommend including an appraisal addendum with your offer to protect you from overpaying. FHA and VA buyers have an appraisal contingency built in to the FHA / VA addendum. 

If you are offering above list price and competing with other buyers, you should be willing to pay a some amount above appraised value and include that with your offer. For example, “Buyer agrees to pay up to $10,000 above appraised value or purchase price, whichever is less”