• Larger EMD = Offer Accepted!

  • We are seeing a number of Pre-Approved buyers who placed offers losing out to competition. Here are the some of the tactics that buyers and agents were considering when placing an offer.

    1) Conventional Loans are more appealing than FHA ► This is not the case. The house is either in good shape or it is not, and sellers are more concerned with the cash needed to close.

    2) Large down payments must be an advantage ► This may be percived to be true, but a 20% down payment from a buyer only offering to put $100 up for the Earnest Money Deposit (EMD) smells funny to me.

    3) Pre-Approval detailing they can qualify for more than the offer price ► This also is not advantageous considering it only takes about 5 minutes to get a pre-approval letter from a loan officer.

    Offer price is the most important piece to the seller and listing agent. The buyer’s credibility and seriousness can be clearly stated by the EMD they put up with the offer.

    For example, let us look at two offers on a home.

    1) $180,000 offer with a conventional loan, 5% down payment and $1,000 EMD.
    2) $180,000 offer with a FHA loan, 3.5% down payment and $6000 EMD.

    Offer 2 indicates a much more serious buyer with the higher EMD and cash needed to close will be less of a concern.

    We’d love to hear your thoughts on this so PLEASE comment below!

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    • Sheila Bhirdo

      What about the possibility of both offers asking for some concessions, maybe one higher than the other? Does the EMD or % down make a difference at that point?

      • Ken Turkington

        Great question. I would think the larger down payment would be preferred as the buyer could always put less down and still close in the event there was an appraisal concern. Your thoughts?

    • Jeff Packer

      Hey guys, good video but might I suggest something I am seeing a lot of. The appraisal is still the biggest concern and per your example, the PERCEPTION in the industry is that a conventional appraisal is less restrictive than a FHA appraisal and so again most LISTING agents are going to push a conventional with a lower EMD than a FHA with higher EMD. My suggestion to most buyer’s in a H&B situation is to show a willingness to pay a certain percentage or $ amount above the appraised value if that is a concern, which it is most the time. This by far has helped more buyers get their contract accepted over others. I hope this helps!

      • Ken Turkington

        Thanks for the comments Jeff.
        How do we change the perception that FHA Appraisals are more restrictive?
        FHA currently has better rates than conventional loans and the “Debt to Income” ratios allowed are MUCH more flexible…these are two huge benefits to proposed buyers.
        We have not witnessed a buyer “put in writing” they will pay more than appraised value in a very long time…is that really happening?
        Interested in your comments!

        • Jeff Packer

          I am not sure the answer to your first questions. I think only time and education will help with that. I think most agents feel that loans with little down payment have tougher guideline restrictions that appraisers must justify value under.

          As for your other question, yes, I can give you at least 15 deals over the past 2 years I have seen buyers put in writing that they are willing to pay above appraisal price if need be. I have one just recently that is pending that has that agreement. All three offers made on the property offered something above appraised value.

          • Ken Turkington

            Great insight…thanks for sharing the info.