Trying to buy a house? Stop writing stupid offers!
Everyone knows that in the Bay Area you may have to write 12 offers only for one to get accepted! Imagine finding a baby sitter for the weekend, rushing to see homes, finding the right one, figuring out how your furniture will fit, dreaming about enjoying that Master Bedroom with the large closet, reading the disclosures till the early hours of the morning to make sure that there are no serious problems with the house, getting away from an important work meeting to finalize and sign the paperwork, only for the offer to be rejected by the sellers. And then starting the process all over again.
That should not be you! Understanding the process and your available options, setting the right expectations and working with experienced professionals will save you from most pitfalls.
When we represent sellers, we always look for the STRONGEST offer, not just the highest PRICE offer. What would set an offer apart from others and make it the STRONGEST? It is the combination of the PRICE, yes, the PRICE, and the TERMS.
The TERMS of the contract are as important as the price and the highest offer does not always win! A short while ago we had a house on the market in a very desirable area. It generated 7 offers, but the highest offer had a very unusual contingency. The buyer wanted one day for additional investigation of the condition of the house even though they had plenty of time to review the disclosures that were provided well in advance of the offer date.
This buyer wanted their contract to be accepted, forcing us to let the other 6 to walk away. This would open the sellers up to the possibility of new price negotiations at the time of the removal of contingencies, despite an already accepted and ratified contract. They were trying to trick the seller into ignoring all other buyers, buyers like you, who brought legitimate offers and were negotiating in good faith.
Even when you are the only buyer submitting an offer, the PRICE and the TERMS must align to make your offer attractive to sellers and make it easy for them to say YES!
Let us check the most commonly used contract in our area and look at all the TERMS that we can change to make it stronger. The first page is all about the money and we have to get it right to make the best first impression.
- Initial Deposit – it is typically 3%. There is a good reason why it is, but it is a subject for a different video. The default language in the contract asks the buyer to deliver this money into escrow within 3 working days. How fast you can get your deposit delivered helps your offer compete. Make sure you are performing at, or exceeding, the seller’s expectations that depend on the area and change with time.
- The Loan - if you are paying cash, you should be able to close in less than a week time. But if you need a loan, your lender will define how much time it will take to originate and fund it. This will be the CLOSE OF ESCROW time in the contract, and we typically define it in days after acceptance. The ability of your lending partner to close faster and deliver the loan on-time will help with a smooth closing and a stress-free transaction. Who you work with matters!
- The Down Payment – a higher amount shows you as a stronger buyer who will be sure to close the sale. Someone putting 45% of the purchase price down will have a better chance of getting their offer accepted if the competition puts down 10%, or even 20%. Talk to us about leveraging your cash holdings to make your offer stronger.
- Loan Contingency - it is another variable in the contract that can make your offer stronger or weaker. We need to evaluate your situation, let our lending partners do their work and come to a decision about the needs of your loan contingency and how long it should be.
- Appraisal Contingency. Do you remember when we were talking about down payments? A higher down payment will ensure that you will be able to close, even if the house does not appraise. It does not mean that you are overpaying – homes often under-appraise on the rising market and over-appraise on the declining market because appraisers look back at recently closed sales of similar homes.
- Property Condition Contingency. It is customary here in the Bay Are for sellers to pay for home inspections and termite inspections before putting the house on the market, and to provide them to all potential buyers. The typical disclosures packet will include these two inspection reports as well as seller questionnaires and other required documents related to the condition of the property. The buyers and their agents, I mean us, need to read through the whole package and decide if there is a need for additional investigations or you can accept the home in its current condition.
- Expiration of the offer. All real estate offers have an expiration time. It means that you will be giving the sellers some time to make their decision about accepting your offer. The time can range from a few hours to a few days. You need to give the sellers enough time to respond but not too much so they will start shopping your offer around. Note that after the expiration time you will be under no obligations to accept seller’s reply and will be free to make offers on other homes.
- Offer Timing. When you submit your offer can make the difference between being successful or being rejected or ignored. Whether the property was on the market for one day or three months, your offer should arrive at the time when the seller is ready to make a deal. It is your agent’s job to find out as much as possible about the seller’s needs and advise you on the best strategy.
Structuring and delivering a winning offer is as much an art as it is a science, it is like playing a game of chess. You need an experienced coach who can anticipate all possible moves and help you win that dream house that you will make your home for years to come.
We work with only a small number of buyers at a time to be able to provide our best 5-star service. Let’s have a 10-minute phone call or a half an hour Zoom conference to figure out how we can write a successful home buying story together.