How to Secure an Offer and Avoid Losing Money? - Real Estate Investing Guide

Are you worried that your real estate offer won’t hold through? Not sure if you have what it takes to beat the competition? I’m not going to lie, getting an offer accepted on just the right property is a big challenge, especially if there are multiple people bidding for the same pot of gold. So, what can you do about it? Here’s a quick lesson on how to secure an offer and land that property you’ve had your eyes on for months!

Negotiate the Right Deal

First and foremost, avoid getting emotionally attached to any property or deal. I know it can be disappointing to have your offer declined when you think you’ve found the right property. However, it doesn’t mean you should accept the unacceptable just to be able to close the deal. Always put your realistic requirements first - does the purchase fit in the budget, did you get the lowest price you could possibly ask for, and does the potential ROI meet your financial goals for this investment? 

Unless you were able to negotiate your way to the best possible deal, don’t get too attached to the idea of getting your offer accepted. This is one mistake I see people making all the time - they are willing to let go of certain requirements and look past certain issues with the property just so they could close the deal and say that they’ve done it. This is not the way you want to go about this. Always make sure your requirements are met and, if they’re not, learn to say no and start looking elsewhere. 

Prepare the Earnest Money Deposit

Now, let’s get to the main question here - how do you secure your real estate offer? The answer: earnest money deposits. If you’re not familiar with the term, earnest money is money that you give to the seller as a way of showing them that you’re serious about the purchase. Sellers are always looking for security when negotiating with potential buyers. In busy markets, sellers usually have multiple buyers competing for their property. So, the way they decide which one gets the deal is by determining which buyer is most serious about making the purchase.

By offering to deposit a hefty earnest money amount, you will show the buyer that you have clear intentions of closing the deal. However, here’s what you need to know about earnest money - once you deposit it, you can’t get it back. This might seem risky because you will lose the money if you don’t follow through with the deal. That’s why you previously ensured that all your requirements were met so you don’t have any reason to back out of the deal now. Once you have that kind of confidence in the purchase, you can easily deposit more earnest money than the competitors are offering and secure the deal in no time. 

There is no rule as to how much money should be deposited so you can offer as much as you’re comfortable with. Generally, earnest money deposits tend to move around 1% to 2% of the purchase price. Now, you may be asking yourself where does that money go? In the best case scenario, you will go through with the deal and the earnest money will become part of the cash that you’re required to bring to closing. That way, you’re not really spending any extra money, you’re just providing some of it upfront. 

Keep in mind that the buyer never gives the earnest money directly to the seller. In most cases, there is a third party who holds the money until the deal goes through (the title company or the lawyer). That way, both parties are protected and all earnest money rules can be met in order. Speaking of the rules, the game is quite simple: in the best case scenario, you will close the deal and the money will go toward the purchase. If the sale doesn’t go through and you have no legal reason to back out of it, the seller will keep the deposit (not a good situation for you). However, if you do have a legal reason to back out of the deal, the deposit will be returned to you.