Once I’ve helped you find a great home you can really see yourself in, it’s time to make an offer. Deciding what dollar amount to put on that piece of paper is one of the hardest decisions to make – offer too little and you stand to lose the house (particularly in a seller’s market). On the other hand, nobody wants to pay more for something than it’s worth.
I will help you determine what market value is by showing you what comparable houses nearby are selling for, expertly assessing the condition of the house, and judging the type of competition you may face. I will give you a range of what price to go in at, which gives you the best chance of winning the bid without outbidding other people by too much! Once we’ve decided on the price you’re prepared to offer, and any conditions that may need to go in the offer, I will draft this legal document and go over all the details with you.
When I present the offer to the Seller’s agent on your behalf, I’ll use all my (considerable) skills and experience as a negotiator to make sure you get the best possible deal!
In the kind of seller’s market we’ve seen in recent years, multiple offers (where a single property has more than one registered offer) were par for the course. Though they are less so, now that we’ve entered a more balanced/buyer’s market, they can still occur, especially if the property is in a great location, well priced, renovated and advertised. In this situation a ’holdback’ date is often used by the Sellers to create a sense of urgency while giving their property time to be seen by lots of buyers: the MLS listing will say ‘no offers until xxxdate’. I’ll let you know when this date is and ask you the all-important question: keeping your ideal scenario and all your other options in mind, is this really your ideal home? If the answer is YES, then it’s essential to be ready to submit your offer and go as high as you can go to prevent regrets. I’ve seen it happen too many times where buyers have lost the home of their dreams by only a couple thousand dollars (pennies a week in the context of their mortgage).
How else can you be prepared to win out in a multiple offer situation? Most Sellers would rather accept a firm deal over one that has conditions. So definitely make sure your financing is in place with a pre-approval from a lender, before submitting your offer! Other deciding factors, all things being equal in purchase price, include a larger deposit and a closing date that matches the Sellers’ needs. Another thing I’ve found very helpful, that most agents don’t seem to do, is to appeal to the Sellers’ emotions with a letter that can accompany your offer. This is even more of an amazing tool when offers are being accepted by fax, which means the Sellers will never have the chance to meet me or you personally. The letter gives us a chance to tell the Seller about you, your plans and goals for the property, and highlight the positive aspects of your offer.
If the Seller gets several offers all within a close range, the Seller’s representative may instruct the various buyers to go back and improve their offers, so you might have a second or even a third chance to offer more $ but this may not happen, so it’s important to go in with your best offer first!
Sometimes, despite a holdback date on the listing, a buyer’s representative can submit what’s known as a ’bully’ offer: an offer to purchase submitted before the holdback date. ‘Jumping the queue’ can be an effective strategy if your offer is strong enough that you feel the Sellers will accept it even before their holdback date. Tell me about your real bottom line for the house and ask me how to best handle this situation – whether it’s worth presenting an advance bid. On the other hand, if you’re interested in a home and you want to wait till the stated holdback date to put in your offer, rest assured I’ll be in contact with the Seller’s agent to find out who’s interested in the house and whether anyone else is trying to jump the queue. That’ll give you the chance to follow suit if you wish.
If there’s only one offer on a property and it’s yours, one of the worst things you can do is offend the seller with a lowball offer. I’m talking about an offer significantly lower than the price the Seller is asking for (in the current market, for a $500,000 home, anything less than $475,000 would be considered a low-ball offer) In the case of a low-enough offer, the seller will often be insulted by your offer and could prefer to give the house to almost anyone else, even if you deliver a slightly higher offer later.
Once the Seller has looked at your offer, they can choose to accept it, reject it, or sign it back (counter offer). If they sign it back, for instance if you have offered $500,000 and they return it with a new price written in of $525,000, or they make other changes to your stipulations, there will be an irrevocable date on the offer: the date by which you must counter-offer or the deal will be null and void. Together we’ll look at the signback, keeping your goals uppermost in mind while I negotiate with the Seller’s agent to reach a win-win outcome for all parties.
Offers can be firm or conditional. A firm offer is usually considered to be stronger than a conditional one because it’s ‘a bird in the hand’ for most Sellers. It means you’re prepared to buy the home as-is with no conditions. A conditional offer means you have placed one or more conditions on the purchase, meaning that the home is not actually sold until all the conditions are satisfied or waived.
When I draft the legal purchase documents, there are five main elements to keep in mind:
- Price – this does not have to be the same as the seller’s asking price but it usually helps, unless there’s more than one offer, in which case you should be bidding higher than the asking price!
- Deposit – shows your good faith and will be applied against the purchase of the home when the sale closes. Should be at least 5% of the home’s purchase price.
- Conditions. Standard conditions can include subject to home inspection, subject to you obtaining financing, or subject to you selling your existing property. A condition can be anything however. Sellers obviously don’t like to have their homes effectively ‘off the market’ while they wait for conditions to firm up, so the shorter the conditional period (i.e. 3-5 business days) the better chance the Seller will accept your conditional offer.
- Inclusions/Exclusions – Your offer may be contingent on including certain items in the sale, such as appliances, fixtures, and decorative items.
- Closing date – The Seller will often specify the date or date range they’d like to close on the property and your offer should closely match this. The closing date is the day the title of the property is legally transferred to you and the funds go to the Seller.