What can a lender do to make your home offer more competitive and to win the house that I want in this tough seller’s market. That’s what we’re gonna talk about. My name is Eric Sztanyo from Keller Williams Realty and team Sztanyo.com, where we are helping you find your home and strengthen your family. I’m here with Geoff Bostick of guaranteed rate. He is a lender that we refer to a lot of our clients. He does a great job. His team’s amazing. You don’t have to use him, but you can because he’s pretty cool and he does a good job. So here’s where we’re at. The market is crazy. It’s boners. It’s really tough for buyers because there are a lot of you out there. There are a lot of buyers and there are very few houses to buy. And so you’ve got strong buyer demand. You’ve got low seller inventory. And so that can create very, very competitive situations. You may see a house that you love, would be perfect for your family. You wanna buy it, but unfortunately, 30 other people also to buy it or more. So, what we wanna talk about is what you need to know to make your home offer more competitive?? Are there any tricks of the trade? So Geoff, tell us how and what can we do to make your offer more competitive and help our buyers when they’re trying to win that house?
How an Agent and Lender Help You Make Your Home Offer More Competitive
Geoff:
Lots of tricks here. And I don’t wanna call ’em tricks. We’re providing a service. But not everybody’s doing that. And so we want to make your home offer more competitive and that’s how we all win. So the first thing I recommend is One – work with somebody local. If a listing agent or a seller’s reviewing 10 offers, and they’ve got three.com preapprovals. They might not have an experience with them or a favorable experience. And so working with somebody local has a reputation in the market, a reputation that is going to have great communication is gonna close on time, is going to deliver a personal service and that people just trust.
Eric:
Yeah. I’ll speak to this from the agent standpoint, not the buyer side, but the listing side, and I’ve got two identical offers. All things considered, but one is rocket mortgage or whatever, or Quicken. And it’s like, if you need to get ahold of that lender, you’re going through 20 levels of customer service. It’s just challenging. Now they could still get it done. I’ve closed with deals like that. But versus somebody like Geoff, who I’ve worked with before or someone, another local lender is – I know – they got their stuff together. They communicate great. And they’re gonna get it done. It’s a big deal. And when I’m presenting that to my seller, I’ll put that in more. It’s not that I’m trying to scratch your back or anything like that. It’s just like, I know this will be an easier process than this. So really, working with a local lender is a real thing.
Geoff:
So the second thing I would say and this is more new in this market because it’s so competitive so before you find a house, we are doing fully underwritten loan commitment. So that means we just take that preapproval a step further. When we do a preapproval, as a lender and as a loan officer, I review your income, I review your credit. And I run something called an automated underwriting system AUS. That’ll tell me, do you fit within whatever program it is taking it? A step further means an underwriter actually reviews all those documents. They put their stamp of approval on it, which is really how we get a loan approved in.
Eric:
And normally that process is once you’re under contract.
Geoff:
Normally it’s after your under contract, then there is a loan commitment date written to the contract. These days, we will do that before you find a house. That way we can tell a seller, “Hey, this buyer is absolutely ready to go.” They are approved. All we’re gonna need is appraisal and title work most of the time, and we can close this and sometimes we can close it super quick. If that is an incentive for that seller and you want a 15 or 20 day close, we can make that happen on these.
Eric:
That that’s awesome. Here’s why this matters again to the sellers. Now, if you’re working with a buyer’s agent, what they should be doing is calling the listing agent saying what terms matter to your seller? Because they’re not always the same, but you’re having that conversation. But usually those besides getting the most amount of money, you also want the cleanest offer. You wanna know that the person who you’re gonna sell the house to is gonna close. There’s not gonna be any hassles. And having this fully underwritten loan commitment is like one step of where, you know, they’re stronger buyer. And so, you know, next to cash, which is really the only thing that could kind of beat that, this person is basically all the way approved and it’s gonna be smooth sailing. And anything to help you rise from the other offers and it have, it helps. It all does matter.
Geoff:
So property inspection waivers are appraisal waivers are something new within the past couple years. what that is Fannie Mae or Freddie Mac looking at the overall care characteristics of the data they have on a specific property and saying, do we need an appraisal or do we not need an appraisal? And that’s important right now, because if you can bypass the appraisal process, especially as house prices have increased. The last thing we want after we get an accepted offer, you go through all the hoops. You beat out, you know, 10 or 15 other offers is that appraisal to come in low. And now that seller has to sit there and go through, do we want to accept this lower offer? Or do we want it? So there’s some ways around that, but we can find out if you’re gonna put 20% down. And that is the kicker. You do have to put 20% down payment to qualify for an appraisal waiver. But if you’re gonna put 20% down, we can find out if that will qualify before you write your offer so that when you’re writing it, as long as you’re gonna write an offer, we will run it through the system, find out if it qualifies and that way you can, including your offer.
Eric :
That’s very cool. So, generally speaking, you have a few contingencies when you’re writing an offer in the Cincinnati Northern Kentucky area, there’s an inspection contingency, there’s a financing contingency and there’s an appraisal contingency. And what you’re saying is you could get an inspection or an appraisal waiver. Again, what you’re doing is to the seller, this thing’s, it’s gonna close. You don’t need to worry about it. We are strong and it’s gonna be easy for you.
Geoff :
Absolutely. And I get the question a lot. Is there a benefit from a buyer to waive the appraisal? And I say, yes, one, we make sure offers strong, but two, the appraisals done for the bank. It’s not done for the buyers done for us as a collateral standpoint. And in at least where we’re at an appraiser sees the contract. So at this point it becomes a target of, can I hit the contract price? It does happen more than 90% of the time, at least on my purchases, as we ran through the numbers, they hit the contract price or higher. So being able to bypass that, it just saves you time and money and will make your home offer more competitive.
Eric:
Let’s talk about appraisal gaps a little bit and what is happening with appraisals? And so if you guys are following and tracking with us on this, because of the low inventory, because of the high buyer demand, and if you can picture yourself and maybe you’re one of these people who have gone out there and you’ve offered on one house and you lost and you offered on another house and you lost and you offer on third house or fourth or fifth, you start getting desperate. You’re like, you show up to your agent and have these wild eyes and you’re like, “we’re gonna go $75,000 over”, you know. But that’s legit happening out there. But now you have a problem because the bank wants to underwrite the loan for what the house is worth, not what the contract price says. And so, let’s say the house is under contract for $350 or $450 or whatever it is. Let’s say $450, but the appraisal comes back at $425 or something like that. So what is something that can happen with an appraisal gap here?
Geoff :
Yeah. So a couple different options there. You don’t always just have to pay the gap. You don’t have to pay the $25,000 out of pocket. So depending on how we structure that offer based on your cash, how much equity you had, maybe you’re selling a property, but if you were putting 10% down on $450, you were putting $45,000 down. If it appraises at $425, now we use the lesser of the appraised value or sale price when we’re determining a loan amount. But I can still do a 5% download option likely at $425. And in your cash out of pocket, maybe the difference might be nominal or it might be actually the same. And so I’ve had that happen. And you could write a $25,000 appraisal gap in there to help incentivize that seller to want to accept your offer if you’re willing to cover a short appraisal.
This can be hard for even industry people to kind of wrap your head around and understand. When we’re doing a loan or when we’re structuring a mortgage, it’s based on a percentage of your down payment, that’s five or 10 or 15 or 20% down. Now, the more you put down, generally the terms improve. Not always but generally the terms improve. But if I need to restructure at a lesser down payment off of the low appraise value, it might not necessarily mean more out of pocket to you. Some things might change might be higher PMI or some other things. Maybe your payment goes up slightly, but you won the deal. And terms are still gonna be favorable right now. PMI has gotten incredibly, like there’s other things that are in your favor as a buyer in this market right now.
Eric:
So that’s worth a conversation. If you’re really trying to go on hot and heavy and strong. And when you offer an appraisal gap to the seller, you’re saying even if this appraisal is short of what the contract price is, I’m gonna cover it. And so the sellers are like “Great! I don’t have any risk here” In fact, some listing agents and sellers have gotten so bold and brazen, I feel like they’re asking for that. They’re like “Hey, give us the appraisal gap.” And you mentioned before we started recording here, you know, for appraisals, they’re looking at history. It doesn’t mean that the house isn’t worth that. But they’re looking at past sales.
Geoff:
Yeah. So in a rising market, or as far as in an appreciating market. It’s because of the demand, but it’s also the houses tend to appreciate anyway, but the demand’s just speeding it up right now. As sales occur, that creates new data. If the last sale was 400 and the next sale is 420, now there’s new data. But if all the prior sales were at 350, they just haven’t caught up yet. So then we need another sale at 425 and then in other, at 430. And as this data points start to hit, now we have a new sale price and we typically need three comparable sales to justify a value. So after three to four sales occur, now we know it’s established. And then that market might continue to push. And we start to see market adjustments. If the house sold 12 months ago, there’s gonna be some. But data happens as more sales occur. And so as the market shift and more data, you’ll see the values start to maybe level out or at least more data to justify it.
Eric:
So if you’re thinking of doing something like the appraisal gap, that’s certainly a conversation to have with your agent, with your loan officer. Because there is a line that’s too far that you don’t want to be upside down, you don’t wanna put yourself in a bad financial situation. So it depends on how you feel about that neighborhood. There’s a lot of factors in that. It’s a conversation worth having and it’s something that could help you win the deal.
Geoff:
Absolutely. And I think the longer time you think you’re gonna be in a house, the less risk you have, right? If this is a short term two to three year house, you might not want to go too high. But if this is 5 – 10 year house, values will catch up.
Eric:
That’s a good point! Any other thoughts here that might help win the deal?
Geoff:
Making sure your offers non contingent, I think is a big one right now. And when I say non contingent, there are contingencies written into offers, but the biggest one being, do you have a house to sell? And while houses are selling like hot cakes like that, they’re going outta style. If you have that contingency, if something blows up in that, that is a red flag.
Eric:
Let me step back and explain what that means. If you own a house right now, and the only way you can qualify and get pre-approved for the next house is you have to sell your current house. And then you go to try to offer on a new house without having sold yet, your pre-approval letter says it’s contingent on the sale of your current home. And so that just in terms of like stacking, all those offers, we talked about below. That just puts you like down at the bottom of the deck, basically. Because like Geoff said, even though houses are selling. There’s a good chance that they’re gonna sell, there’s more complicated factors in that, something to go wrong with the inspection, it could delay things. Maybe the home you wanna buy needs to be closed by a certain date so that they can buy their next house. And so it makes everything more complicated and it makes sellers wanna be like “Nah, I don’t want that. So you’re saying there’s something they can do to make it not contingent?
Geoff:
Yeah. That’s the one thing, whether you’re working with us or another lender, let’s explore that. And sometimes you need the down payment outta your house in order to put on the new house. It’s not about affording the payments. And another little trick I like to say is a lot of people say “I don’t wanna make two payments.” Well, good news. When you buy a house, let’s say, we’re gonna close next month. Next month is March your first payments not until May. So there is a little bit of gap. So you might not need to make two payments, but sometimes it’s not about qualifying for ’em both. Sometimes you need the equity and if you need the equity, we have options for that. And so we can talk through that. Sometimes there might an option to borrow from a 401k short term, right? There’s always options. If we ask the right questions to kind of lead you down, that it’s not always, “I need to sell my house so I can buy the next one.” And if you’re trying to win an offer right now, we want to explore every option to make you not contingent on the sale of this house so that you can buy the next one.
Eric:
Yeah. That’s great. So as you guys can see, there’s a lot of different possibilities, a lot of different options that can help you stand out from the crowd. Absolutely. And that’s what we’re trying to do when it is really competitive, like this and there’s other tips that kind of the realtors have of like, yeah, write the letter, like put a picture of your smiling kids on it. Like do all the things. Maybe those things don’t help, but maybe they do. And maybe tug on the heartstrings of the sellers. “We love this home. We wanna raise our family here.” throw it all out there. Maybe something will stick because this happened to me the other day. I had a house that I was actually selling personally. And there was one that was more money. And there was one where there was a really good letter that pulled like emotionally pulled at me. I was like, it impacted me. Right? So these tips we’re talking about here are just ways to kind of help you stand out, help you win that deal, help you buy that home.
Geoff:
Absolutely. Yeah. We just wanna put your best foot forward.
Help in Buying The Home That You Want
Eric:
Okay. So you guys know how to get a hold of me. If you wanna work with Team Sztanyo to help you buy or sell house in a Northern Kentucky area, it’s Eric.sztanyo@kw.com. You can email me directly. Geoff, how can we get ahold of you?
Geoff:
Yeah. Call or text that {513} 633-0504, or visit my website and you can get started there. And that is rate.com/GeoffBostick.
Eric:
Guys in this market, you need a strong team. So who has some experience and can help you win the deal. So we’d love for you to reach out. Thank you so much. Hope this was helpful for you. Be sure to like and subscribe if you haven’t already and we’ll see you in the next one.