If you haven’t been through the disappointment of making an offer on a house and getting beat out by other offers, I don’t recommend it. If this has happened to you, maybe more than once, it can be discouraging to say the least. Sometimes this happens for good reasons. But frequently it could be avoided by being better prepared.
Here’s some tips that might help you win out the next time.
When a seller is looking a multiple offers they’re going to pick the one that offers them the greatest return with the least chance of failure to close on time. It’s not always about the price. Sometimes it’s about who submitted the best crafted offer.
There are five basic considerations in a real estate contract.
Price. Closing date. Financing terms. What items stay or leave the property. And contingencies or the “What If’s.” Let’s take them in order.
While it’s not always just about price, price is always an important factor. Properties that attract more than one offer usually will sell for more than the asking price. It’s simple supply-and-demand economics. The more buyers that want the house, the more valuable it becomes. If you want your offer to be in the mix, consider offering more than the asking price. How much more depends on what you can afford and how much you want the house. For example. If you’re looking at a $250,000 asking price and you make an offer that’s $10,000 over asking. Your monthly payment would increase by around $54 a month. Can you do that? Do you want to do that? You won’t have much time to decide.
Tip: Know your limits and make your best offer your first offer. You probably won’t get a second chance.
Sellers have plans too. And that usually means that they want to use the proceeds from the sale to apply to their next home purchase. I’ve closed numerous deals simply because I called the seller’s agent and asked if the seller had an ideal closing date. It’s frequently the deal maker.
Tip: If you as a buyer can accommodate the seller with the right timing of the closing, do it!
Are you getting a loan? Or are you paying cash? In either situation have the necessary documentation to demonstrate that you can perform. A pre-approval letter from a lender (preferably someone local) or proof-of-funds necessary to close is critical. A seller won’t wait for this after the offer has been submitted. Your offer will sift its way to the bottom of the pile.
Tip: Don’t leave any scrap of doubt about your ability to financially preform on your offer.
What stays or what leaves the property.
This is usually items that are not attached to the house. Thing like appliances, patio furniture, car in the garage, etc. The seller will state in the disclosure what items they are taking or leaving. These are items that the lender will not consider of value when deciding to make the loan because they can be removed from the property and therefore not a fixture. The appraiser (hired by the lender and paid by the buyer) will not consider personal property when determining property value.
Tip: Take what the seller is willing to leave behind. Appliances aren’t worth arguing about. Don’t get attached to someone else’s stuff. Let them take it.
Contingencies, or the “What If’s.”
I could write a book on this topic. In my experience the most challenging contingency is property condition. Or the “What happens if the roof is shot” contingency. The way this is designed to work is the buyer has the right to do inspections and make requests for deficient items to be corrected by the seller. The seller has the right to, essentially say yes or no to the buyer’s requests. If the seller agrees to the requests, the buyer moves forward to the closing. If the seller says no to all or some of the requests the buyer may go forward or cancel the contract and get their earnest money back. It sounds cut-and-dried. But it isn’t. The reason being that the seller wants to sell, and the buyer wants to buy despite the deficiencies. For more information on inspections, go to my web site at www.buysellhomeslawrence.com and read my blog about how inspections work.
The most frequent reason for contract cancellation is the inability of buyers. Sellers. And agents to resolve issues over the condition of the property. Buyers want everything in tip-top shape. They may have paid full price or more for the house. And paid hundreds of dollars for inspections. Sellers don’t want to spend money at this point on a house they’re leaving.
Tips: Whether you’re buying or selling, here’s where you want an agent with experience, wisdom, knowledge, negotiation skill and backbone. If you’re a buyer, when you get the inspection reports sit down and prioritize your concerns. Make sure you get the big things addressed. Don’t sweat the small stuff, even if you paid over the asking price. If you’re a seller, and there are issues, fix them. Property inspections are considered material facts about the property and must be disclosed. So, if this buyer cancels and go back on the market you must disclose the findings of the inspections. Long story short. You’re going to fix it regardless. Do it when you have a buyer under contract.
A host of other contingencies are likely already covered in the contract by the attorneys that either wrote or reviewed it. Things like default by the parties, property maintenance between contract and closing, property damage before closing, and issues regarding title and transfer of ownership have specific guidelines for resolution.
If you’ve considered the five essentials and addressed them in your offer, you will have done your best to eliminate any road blocks from the seller to accepting your offer over the others.