Tips for writing a successful offer
By: Joshua DeLong Broker/Owner
In today’s real estate market we are inundated with information from so many sources. We hear stories of people buying houses at rock bottom prices from our neighbors; the local news tells us the market is oversaturated with foreclosures and then we also hear that the market is picking back up and prices are on the rise. With so much contradictory information how do we know what’s really going on? And most importantly how do we know what to offer on a home?
The first step would be to call your lender and get qualified for a mortgage or if you’re a cash buyer determine what your comfortable spending. Once you have your preapproval in hand you’re ready to start looking for homes. Your realtor will be able to find homes for you to view that are eligible for your approved financing because all loans don’t qualify for all properties. Many buyers are disappointed once they find the home they want to purchase is not financeable by their lender. Avoid disappointment and only look at home your qualified to purchase.
Once you have found that home you are ready to write an offer. The next question is how much do we offer? This is where your Realtors extensive knowledge of the market will be your strongest ally in getting a great deal. They will be able to do a competitive market analysis (CMA) of all the comparable homes on the market that have recently sold and that are still actively marketed. This analysis will show you what the current market value of the home is and also shows you what the sellers competition. Now that you have the facts in hand you are best prepared to begin negotiations.
Ask yourself the following questions:
1. Where is the home priced in relation to the market value determined by your Realtors CMA?
2. How long as the home been on the market?
3. Are there any repairs that need to be completed?
4. What is the reason the home is being sold and how motivated are the sellers?
5. What are you willing to pay for the home?
6. Would you be devastated if you didn’t end up getting the home?
It shows you’re a savvy buyer when you write an offer with all the facts in hand. If you determine that the home is listed well below the current market value and has just hit the market you can assume that there will be many buyers interested in the home. After all we are all looking for a great deal and in the day and age of instant information we are all able to find that deal in the blink of an eye. Write a strong offer and submit it as quickly as possible.
Determine how long the home has been on the market compared to the typical marketing time in the area. Why isn’t the home selling? Is it overpriced? Does it need repairs? Is it close to a landfill or farming operation? Homes that are on the market for excessive times become stale and can often be negotiated for a better deal.
If you decide to write an offer below list price also send your justifications for doing so. Highlight the repairs that need to be completed and the cost to do so. Send over comparable properties that support your offering price. If there external factors that detract from the home’s value such as: railroad tracks, airports, vacant homes on the block or farming operations note that in your offer. This will show that you have done your research and you aren’t just writing uninformed low ball offers. This also reduces the risk of insulting and disrespecting the seller. Our purpose should be always to support our offer not just to write below asking price.
There are two myths that have been spread so widely that many believe they are facts!
1. “I am a cash buyer therefore the seller will accept a lower offer”. This isn’t necessarily true especially if the home will qualify for traditional financing. The bottom line is at the closing table the seller is getting the same amount of money whether a cash deal or financed deal. Cash buyers do have some advantages especially in deals where the home needs major repairs and is not financeable. Also cash buyers do not have loan contingencies, appraisals, underwriting, etc. Cash deals typically close much faster than traditional lending. Whether a cash buyer or obtaining a mortgage still do your research and support your offer with facts.
2. “This is a bank owned home and therefore I can offer much less.” This is one of the biggest myths perpetuated in the real estate market. Bank owned sellers are very educated on local real estate conditions. From the day a loan goes default it triggers the banks to have local real estate experts complete a drive by Broker Price Opinion or BPO. This is where a Broker will take exterior photos and provide an in depth CMA of the property and determine a fair market value for the home. They will complete these every 6 months until the home is vacant and the foreclosure is finished. At that point they will have 2 brokers do an interior CMA highlighting all of the subject’s features, repairs needed, and most importantly a competitive listing price for the home. They also hire a State licensed appraiser complete a valuation. After reviewing all these reports they determine a marketing plan. So as you can see it is very difficult to submit a low ball offer when they have 3 reputable sources showing them what the current market value is. Banks do want to sell homes and also want to do it in a timely fashion. If the home doesn’t sell in 30-60 days they will typically reduce the home in increments until it does sell. This eliminates the risk of them selling the property way below market value and unfortunately breaks the myth of, “it’s bank owned…let’s low ball it!”
In conclusion it is a great time to be a buyer and a great time to buy. Become an educated buyer. Learn the market. Work with a reputable Realtor who can help you make informed decisions and write great offers. Be mindful. View homes. If you find a home that is a great buy write a great offer. Don’t fall victim to the myth that you should write way below every list price because it is a “buyers market.” Many who have done this have ended up losing the dream home and a great deal. Be educated, be prepared and good luck on the home buying process!