Published Date 5/27/2022

It’s always interesting when a personal finance expert jumps into the home buying game and lives to write about it. BusinessInsider’s Laura Grace Tarpley recently described how she “won” the bidding contest on a home after she and her husband had seen more than 30 houses in two months, bidding on six. The story of her journey is compelling, offering anyone in her shoes some valuable ideas and insight.

“Each rejected offer was more emotionally draining than the last, but each one also taught me how to make my next offer better,” she says. “Turns out, number six was the charm.” She shares the five lessons she learned along the way that helped her win the bidding battles.

The first was to purposely look only for homes that were well under their budget. Even though their mortgage lender offered Tarpley an impressive pre-approval sales price, she and her spouse agreed that just because they could borrow that much didn’t mean they wanted to. “Once we settled on our maximum budget, we still didn’t search for houses listed for anywhere near that amount,” she says. “We knew how competitive this market was and that we’d probably have to offer significantly over an asking price to be considered.” She goes on to describe how one property they made an offer on was a two-bedroom, one-bathroom house along with 21 other offers. It went for around $100,000 over asking. But on the house they finally ended up buying, they offered 15.3% over the listed price — which put them smack at their maximum budget.

The second tactic they used was to request pre-offer inspections. This sounds unusual, but before making an offer, it makes sense if you can make the investment. “In our market, you typically have to waive an inspection for your offer to be competitive,” she says. “By waiving an inspection, there’s less of a chance that you’ll back out of your contract should something be wrong with the house.”

Tarpley says their objective was to be aware of all of the problems with a house they might buy. “A pre-offer inspection is similar to an inspection, except it takes place before you make an offer instead of after. This way, you can decide if it’s worth making an offer on a house,” she explains.

Another interesting/unusual element Tarpley and her husband brought to the offer table was extra money in case the appraisal did not meet the sales price. Unless you’re paying cash, it’s all about the lender approving a mortgage for the number on the appraisal. So if the home appraises for less than the buyer offers, everyone is in a tough spot. “In the offer letter for the house we bought, we said we could bring $35,000 extra toward a low appraisal, “ says Tarpley. “This means that if the house appraised for up to $35,000 under what we offered, we would make up the difference.”

By the same token, if the house appraised even lower, the seller had the option to either accept a lower price from Tarpley or simply pass on them and choose another buyer. “Having low appraisal money in the double digits definitely gave us a leg up,” she says. “It did mean we were very on edge during the 10 days we were waiting on our appraisal report — we really didn’t want to drain our retirement savings to pay for this house!” As it turned out, the house appraised for just over what they offered, so those funds remained in reserve.

As for contingencies, they waived nearly all of them, including the one for inspections (well, they paid for their own ahead of time before they made their offer anyway), the one for clean title, the verification period, and the right of rescission based on the seller disclosure agreement.

“Fewer contingencies meant there were fewer reasons that we would back out of the contract and the seller would have to re-list the property,” she says. “Basically, we tried to make our offer compelling by making everything as easy as possible for the seller. One they did not waive, however, was the financing contingency, which states that even if we are not approved for a mortgage, we can still provide the money. Nope. No way,” says the personal finance expert.

Earnest money? They made theirs non-refundable, risking $10,000 to be forfeited no matter what transpired with their offer. “Normally, we would receive our earnest money back if we didn’t go through with the sale due to something going wrong, like with the inspection. But since we already waived so many contingencies, we knew there were slim chances we’d get our earnest money back, anyway.”

Tarpley describes how going the extra mile may have been appealing to the seller. “They knew they could spend our $10,000 right away — there was no way we were getting it back. It also meant that if the appraisal came back so low that our extra $35,000 couldn’t make up the difference, the seller could void the contract and still keep our earnest money,” she adds. “The listing agent told our Realtor that the non-refundable earnest money was one of the main reasons the sellers chose our offer. It would have been devastating to lose that $10,000, but we were willing to take the risk.”

BusinessInsider/TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

Not all borrowers qualify for all programs, must meet underwriting guidelines and are subject to credit review and approval. This does not constitute a commitment to lend. JC Financial Solutions, Inc is an Equal Housing Lender. NMLS 365033, CABRE 01445232