Archive for the ‘Real Estate Offer and P&S’ Category

Top 3 Ways to Turn a Seller Off – A Reprint

This reprint comes from Trulia.com.  It is right on when it comes to buyers. 

Buying and selling a home is a very personal and very emotional time – both from the perspective of the buyer and the seller.   Buyers – you really want to buy this house – make the best possible deal, get the most for your money.  Sellers – you want to seell this house –  make the most profit, get the most you can for all you have invested both financially and emotionally.  And keep in mind there is a market out there of similar homes that help both sides determine what is a fair price – Ultimately the price of each home sold in a neighborhood affects the market value price of the rest of the homes.  This is why foreclosures and short sales have an effect on other home values around them. 

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Buyers, if you want a home’s seller to play ball, best practice is to avoid these 3 pitfalls:

1. Unjustified, extreme lowball offers: It’s no secret that buyers have the upper hand in many markets right now. (To be clear, I said ‘many’ – not ‘every’ – your agent can help you understand what the dynamics are in your market.) But let’s be realistic, here. No seller can afford to give away their home at a price far below what it’s worth on today’s market. Lowballing a seller at a price far below the recent sales prices of similar homes in the neighborhood on the ‘let’s-take-a-stab’ plan, is highly likely to turn them off.  And that, in turn, will cause the seller to view your offer – and you – as disrespectful and wasteful of their time. Not only will they turn down your offer, but they may not even bother with a counteroffer, rendering your efforts at securing that particular home dead in the water. Buyers: Review the recent sale prices of similar homes in the neighborhood (aka “comps”) with your agent before you make your offer. Also, ask them to help you factor in other market data, like the average list price-to-sale price ratio and the average number of days neighborhood homes stay on the market. It’s all right to come in lower than asking, if the market data supports such an offer; just be sure your offer is based on reality – and not your fantastical hallucination about scoring the bargain of the millennium.

2. Buyer-side mortgage fails: Plenty of employed buyers with decent credit and cash in the bank have been turned down for a mortgage these past few years. That means buyers can’t assume (a) that they’ll be approved for the amount of loan they need to buy the house they want, or (b) that they’ll be approved for a loan at all. Your inability to get approved for a home loan can create all sorts of problems not just for you, but also for your home’s seller. The average seller’s  worst case scenario is that  they accept your offer only to find out a few weeks, or months, later that you can’t get the loan you need to close the deal. Buyers: It’s not overkill to start working with a mortgage professional as far as six months or a year in advance of starting your house hunt to get pre-approved for a loan. Make sure you get a clear understanding of the amount you qualify for, then work with your real estate agent from there to determine the price range you should house hunt in. And whatever you do – don’t buy a new car, open new credit cards or even change your line of work before your escrow closes, unless you consult closely with your mortgage professional before you make that move. Tip for Sellers: Work with your agent to vet buyers before you sign a contract. Factor in their down payment and earnest money deposit, and feel free to counteroffer these items, not just the offer price. It’s not overkill to have your agent contact the buyer’s mortgage broker to see how reliable the buyer’s pre-approval really is.

3. Bashing the seller’s home: Home bashing happens when buyers start bad-mouthing (aka “trash talking”) the place and/or the neighborhood in hopes of getting a lower asking price. Examples: pointing out all the foreclosures in the area, saying the house down the street just sold for much lower than the asking price on this house, saying you’ll need to rip out the entire kitchen before you even consider moving in – saying any of these things to a seller who happens to be at home during the showing or the inspection is probably one of the fastest ways to turn them all the way off. Buyers: Bad-mouthing a house or neighborhood won’t work to get you a lower price. Instead, it only serves to irritate the seller and motivate them to come up with all sorts of reasons why they shouldn’t sell their home to you! Remember: homes hold incredible emotional experiences for owners. Make an offer you’re comfortable with and keep the negative comments to yourself. If there are legitimate, factual reasons underlying your decision to make an offer at a price the seller might see as a lowball, ask your agent to respectfully communicate those facts to the seller’s agent.

A Realtor will help you not make these mistakes.  Listen to their advice. 

What you should know about backup real estate offers – A Reprint

The following is a reprint of an article on Inman News.

Sellers should think twice before accepting additional bids

By Dian Hymer
Inman News™

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Buyers who lose out in a multiple-offer competition or who make an offer a little too late may be offered the opportunity to be in a backup position. A backup offer is one that’s accepted subject to the collapse of an already accepted offer.

The seller can accept multiple backup offers, in which case they are ranked: backup offer No. 1, backup offer No. 2, and so forth. It’s rare in the current market for there to be more than one backup offer.

If you’re offered backup position, should you accept it? Buyers are often reluctant to accept a backup offer because they feel it will strengthen the resolve of the buyers in primary position to move forward with the deal if they hit a rough patch, such as a previously unknown inspection issue. And, in fact, this can happen.

Recently, buyers went into contract to buy a home in Oakland, Calif. The sellers provided many reports and disclosures on the condition of the property. However, someone inspecting for the buyers had a different opinion about the condition of the roof, gutters and downspouts, and said it would cost an extra $13,000 to fix.

Two days after the first contract was accepted, another buyer made an offer that was accepted in backup position. The backup offer was for a higher price than the primary offer. Rather than lose the house to the backup buyers, the first buyers removed their inspection contingency despite the new information they received about the condition of the roof.

Some buyers fear that if they accept backup position they will halt their search effort until they know for sure that they can’t have the home they want. This is a factor you can control. If you accept backup position, don’t slow down your quest to find a home to buy.

HOUSE HUNTING TIP: Make sure there is a provision in the backup position clause in the contract that says the buyers can withdraw at any time up until they are notified that the primary offer has collapsed and their offer has been elevated to the primary position.

It’s usually worthwhile to accept a backup position because there is a high fallout rate in the current market. Just don’t sit around waiting for the first deal to fall apart.

From the sellers’ perspective, it’s usually a good idea to counter an offer for backup position if there is more than one offer. Keep in mind that most buyers would rather be in primary position. Some won’t accept backup for the reasons mentioned above, or they may have another house in mind if they don’t get yours.

To entice a buyer to accept backup position, you may have to accept an offer with a lower price than the primary offer. Don’t expect a buyer to accept a counteroffer from you for backup position that also includes a price increase. Make sure you tidy up the offer as if it were a primary offer. There won’t be a chance to change the terms if the primary deal falls apart.

Don’t accept any offer just to have a backup offer. If you have a backup offer and the first contract fails, your home goes to the backup buyer without going back on the market. This can be a benefit to both buyers and sellers. The backup buyer doesn’t have to face multiple offers again, and the sellers don’t have to go through the hassle of finding another buyer.

Sellers who don’t like a potential backup offer because of a very low price might be better off not countering the offer for backup position.

THE CLOSING: Sellers should feel comfortable with a prospective backup offer; they may have to live with it.

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