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Tips for making that winning offer

Ask the Expert Buying Fall House Hunt
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Historically low inventory and years of pent-up demand in Greater Boston have combined to create a market that favors sellers and pits home buyers against one another. Buyers who know what sellers want can craft a winning offer in a crowded field without putting themselves at risk.

Price is important, but it’s only the beginning of the offer, according to Jim Nemetz, manager and senior vice president of Hammond Residential Real Estate in Brookline and Newton. In this market it’s impossible to know how high other people are willing to go, Nemetz said, so buyers have to make bids with which they’re comfortable.

“It can be subjective and emotional,’’ he said. “Offering anything more than the comps support is an emotional purchase. It comes down to [this]: Put in an offer that if you get the property, you’ll be happy, and if someone offers to pay more and beats you, you say, ‘God, bless them.’ ’’

A somewhat controversial offer strategy is the “escalation clause.’’ That’s when the buyer agrees to beat any competing offer by a certain amount up to a certain amount. Joselin Malkhasian of Waltham-based Lamacchia Realty said she likes escalation clauses for certain competitive situations, but uses them judiciously. “I recommend them to clients who want to put together a strong offer, and they are willing to go way over asking — over $50,000, for example,’’ Malkhasian said.

To some agents and sellers, an escalation clause is a turnoff.

“There have been situations when the listing agent will come back and say the seller won’t accept an escalation clause, [so] please come back with your best and final,’’ Malkhasian said. “I think that’s a mistake, but it happens.’’

And there are many more ways to strengthen an offer beyond the price. Nemetz said some people include a $1,000 deposit with their offer, but in today’s market, that’s just not enough, he said. “You can’t hold a car for $1,000. That number goes back 40-50 years. If I’m in a competitive bid, I’d put at least 1 percent down. You want to come across as someone who is serious about buying this property.’’

Waiving contingencies

Most offers come with contingencies (a home inspection, for example), but the pressure to waive them in this seller’s market is mounting. Agents recommend buyers include as few as possible — without exposing themselves to unnecessary risk.

Good agents start talking about these issues before they look at a single house, said Sam Schneiderman, president of the Greater Boston Home Team realty firm and vice president of the Massachusetts Association of Buyer Agents.

The home sale contingency

“If I have a buyer who needs to sell their home before they can purchase another one, I try hard to get them to sell their house first and find temporary housing,’’ Schneiderman said. “Getting an offer accepted with a contingency to sell a house is almost impossible in this market.’’

Financing

A financing contingency would make the sale contingent on the purchaser obtaining a mortgage.

“If you need a mortgage to buy a house, your offer should probably include a mortgage contingency,’’ Nemetz said. “Many buyers are competing with people who can make cash offers. Very often people waive the contingency if they have financial backing from their family. None of my agents will recommend that their buyers waive the mortgage contingency. If a buyer can’t waive it, maybe a family member can help bolster the down payment. The smaller the mortgage amount, the stronger the offer.’’

Home inspection

The home inspection contingency allows buyers to withdraw from the deal and recover their deposit if there is something wrong with the house. Waiving the contingency strengthens the offer, but leaves the buyer unprotected. There are clever ways to mitigate that risk, however.

Smart listing agents let people do home inspections prior to making an offer, so there’s no need for a contingency, Nemetz said. “Second best to that would be including language in the offer that says the buyer won’t try to renegotiate on defects uncovered by the inspection below a certain dollar amount. It depends on the property, but I’ve seen them from $10,000 to $100,000. It shows a buyer is serious and still affords them some protection.’’

The appraisal

Occasionally, lenders will waive the appraisal contingency. Some buyers will write into the offer that if the house appraises for significantly less than the agreed-upon sale price, the buyer will increase their down payment to satisfy the lender and keep the deal together.

“I might suggest this to a buyer who agreed to buy a property for way over the asking price,’’ Schneiderman said.

Minimize other risks

Relatively few buyers have their offers reviewed by an attorney, but Scott Kriss of Kriss Law/Atlantic Closing & Escrow in Boston said the offer sets the timeline of the transaction and is very difficult to change once it’s been signed by both parties. It’s worth waiting a few extra hours to let your attorney review your bid before submitting it to avoid problems later on, Kriss said.

“Desperation leads to bad choices,’’ he said. “Talk to your realtor and your attorney. You’ll also want to make sure your lender can accommodate the closing date you agree to.’’

Nemetz said buyers are best-served by working with a good agent who is well established in the area in which they are looking.

“A good agent probably already knows the listing agent, which is a very good thing,’’ Nemetz said. “They can ask: When does your seller want to close? What is the most important thing they’re looking for? Do they want an early, late, or flexible closing date? It’s due diligence. Accommodating the sellers’ preference for closing dates might mean more to them than a higher offer.’’

Nemetz said including a short letter about why the buyer loves the house may also strengthen an offer.

“We see a lot of people write these letters … with varying degrees of success,’’ Kriss said.

But even very strong offers get rejected in this market. Agents say they are constantly managing buyer expectations.

“Ninety percent of brokerage is setting expectations that are realistic for everybody,’’ Schneiderman said. “We spend a lot of time getting to know our buyers and what they’re looking for. We let people know they might make a half-dozen offers before they find something. We try to teach them what they need to know in a market that’s constantly moving. It’s exhausting, but it’s a great thing when you find the right house.’’

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