Making an Offer
Bargaining
You found a house that seems perfect and you really love it--the chemistry is there--and the price is right. If you are like many buyers, you start off by asking the Realtor if the sellers will take less than they are asking.
A Realtor doesn't know what the seller’s bottom price is. The sellers often don't know themselves until they get an offer. In many cases, the price is negotiable, but the only way to test it is to make the sellers a written offer to accept or counter. Attractive, well-priced homes usually sell quickly in any market. If you get involved in offers and counter offers, another buyer could come in with a better offer while you are negotiating back and forth. If you cannot qualify for financing at the asking price and you are willing to risk losing the house, you can make a lower offer. But if it will break your heart to lose a home in the Overland Park area you really love that you can afford--it may be worth paying the asking price.
Buying Fast!
You have only been looking for two weekends and have found a house that looks perfect! You want to buy it, but you are reluctant to make an offer without having looked some more.
Whether you are in a buyer's or seller's market, the best homes usually get snapped up quickly. When you find a great home that is well-priced, you may not have much time to think it over. But it is difficult to make such an enormous purchasing decision without at least "sleeping on it". If you hesitate, you could lose the house to another buyer. If you go rushing forward, you may spend some time nursing a case of "Buyer's Remorse". Working with a professional Realtor can make your decision much easier. Your agent can provide information about recent sales of homes in the area and answer any questions you may have. Keep in mind that a Realtor's job is to find you a property that you want to buy, not to show you a lot of houses that won't interest you!
Creative Offers
Putting together an offer on a home is easy if the buyer has a lot of money, a terrific job and impeccable credit. Many buyers are not in that situation, however. And while sellers like to get their asking price, good listing agents prepare them for the possibility of receiving offers that involve some compromises.
Successful Realtors know how to put together creative offers and do whatever it takes to make a transaction work. If a buyer is low on cash, the agent may structure an offer that shifts closing costs to the seller, minimizing the amount of cash that the buyer needs to close. A variation of a lease purchase arrangement might be in order if a buyer has recently changed jobs or is self-employed. Owner-financing for part of the loan can make a difference in some cases. If your agent brings you a complex offer designed to get a buyer into your home, don't say "no" until you understand the offer.
Good-Faith Deposits
After many months of searching, you have found your ideal house. You are a little older and a little wiser now, so you want to give the impression that you are serious without appearing to be too eager. What should you do? In the marketplace, "money talks."
There is no absolute rule about how much "good-faith" deposit you should put down--but it is a tool to make your point with the seller. The typical $1,000 will hold many homes for you, except in larger-home markets where it may be critical for you to show that you are a serious and able buyer quickly. You don't want to make a deposit that is too large in case there is a problem getting your money back, but if your offer is substantially below the asking price, a larger deposit--$5,000 or $10,000--might influence the seller.
If you make a low deposit with your offer, be sure to provide for an increased deposit when the offer is accepted or upon removal of the contingencies.
How Much To Offer
When you make an offer on a house in the Overland Park area, your biggest decision is how much to offer. You don't want to pay more than you have to, and sometimes it is hard to predict how much is "enough" for the sellers.
Some sellers price their homes at their bottom line and may be unwilling to negotiate, unless the house has been on the market for a long time. Others build in a little room for negotiation. Some sellers are more motivated than others to get their homes sold. Whatever your situation, it is hard to know what sellers will do until they are presented with an offer. If your offer is very low, your finances look shaky, and you ask the sellers to pick up closing costs, they may just say "no". If your original proposal is unacceptable, the seller will usually make a counter offer. While sellers like to get their asking prices, good listing agents prepare them for the possibility of receiving offers that involve some compromises.
Keeping Your Earnest Money Safe
When you make an offer on a house, it is accompanied by an earnest money check. Earnest money is intended to demonstrate that you are "in earnest" about purchasing the property. The earnest money check is made out to the listing company. What happens to this check?
The party holding the check acts as an escrow agent until you go into closing. At that time you will receive credit for the amount of your check against the down payment and closing costs. Real estate brokers are required by law to keep escrow funds in a special account. These funds cannot be used to pay office expenses, for example. If you don't complete the transaction, the purchase contract determines the disposition of your earnest money funds. Be sure to review this part of your contract with the Realtor.
If you are in default on your agreement, the funds may go to the sellers, so be sure that you understand the deadlines in order to avoid breach of contract and forfeiture of your deposit. If you have any questions, be sure to ask!
Low Offers
Your dining room table is the scene of high drama. Your home has been listed for sale for six weeks, and finally an offer has come in. You are meeting with the agents, and the offer sounds terrific until you get to the price--it is a lot less than you expected.
Before you feel offended, however, remember that the first offer is often just the beginning of a negotiating process. Your agent can help you weigh the good and bad points, and sometimes an offer with a low price can look quite attractive once you understand all of the terms. If you are willing to make some compromises, the buyers may accept a counter offer that will give you more money. A lower price from highly qualified buyers may be better than one from people who may have difficulties with financing. Keep in mind that your first negotiated price is often your best price!
Low Offers
You have found the perfect house with everything you wanted--and then some--but the price is more than you want to pay. You decide to go for it anyway, and ask the agent to submit what Realtors call a "low ball" offer.
Low ball offers sometimes work. If the market is fluctuating and the sellers are anxious, they may just go for it. If the house is listed at a higher price than it should be, the sellers will probably be willing to negotiate. Most sellers are reasonable and open to offers, but they won't give their house away, especially if the asking price is in line with recent sales of similar homes.
What do you have to lose by making a low offer? If the seller yells and screams, the agent and not you, will be the focus of his wrath--and we don't take it personally. If you really want the house, however, a very low initial offer may irritate the seller to the point that he won't consider a better offer, if you decide to submit one. Design your strategy on the basis of how badly you want the house.
Making An Offer
You have found the perfect house and are thinking about making an offer. Even though you trust your Realtor, you are feeling some pressure just when you feel that you need time to consider the matter. The agent tells you that another party is thinking about making an offer, so you shouldn't waste time if you really want the house. What should you do? Trust your agent!
It is natural to feel some pressure from even the most easy-going Realtor--and some uncertainty about making an offer. If you really like a house, there is always the possibility that someone else will share your same enthusiasm for it. Sometimes you can "sleep on it" and it won't matter. Whether the market is good or sluggish, it is a good idea to assume that another offer is likely to come in, and move as quickly as possible to minimizes the possibility of another buyer materializing.
Making Your Offer
When you find the right home in the Overland Park area, what can you do to maximize your chances of actually getting it? The first step you should take is to make a prompt offer.
Whether you are in a buyers' or sellers' market, taking too much time to initiate an offer can cost you money, especially if you are planning to offer less than the asking price or will be asking for special terms. If your offer is the only one on the table, the sellers will consider it, and if they don't accept it, they may make a good counter offer. While you are "sleeping on it", however, you risk the possibility of another offer coming in. If another buyer appears on the scene, you lose an important advantage if you and the sellers are going back and forth with offers and counter offers. If you really want that special house, make the best offer you can--as quickly as possible.
Negotiating Factors
It is easy to be offended by someone who is making an offer on your property. Even if the buyers love your house, they are trying to negotiate the best possible price and terms. They probably will not let you know how much they want your home until they have a purchase and sales agreement.
Buyers almost never write offers that please the sellers entirely. Offers and counter offers may be traded back and forth over a few days or even weeks. When there is finally a meeting of the minds, both sides may feel worn down by the whole process. One of a Realtor's most important jobs is to act as the intermediary during such negotiations. With our knowledge of financing, negotiation procedures, and the tax laws affecting real estate sales, we come up with creative solutions to the challenges that may arise.
Negotiations
The beginning of negotiations is usually the end of many months of hard work for the buyer or seller. The work ahead requires skill in order to maintain a strong position.
Sellers can lose their advantage if they do not counter an offer that a buyer has made. Even if the opening offer is beneath what the seller feels is reasonable, it is advisable for the seller to respond with a slight reduction from the asking price. The most important component in negotiating is good communication.
The best way to handle a low offer is to counter it with definite terms that are favorable to the seller. A counter offer has two advantages: 1) it keeps the buyer interested, and 2) it moves the negotiation forward and gives the buyer the opportunity to submit another offer that the seller is more likely to prefer.
Negotiations Part 2
Last week's column talked about negotiating to attempt to bring the buyers and sellers together. If you are buyer, you should be prepared with the proper components to submit an offer. An offer is not simply the price.
The Realtor will act as the conveyor of information. There are a few things to look out for in such negotiations: 1) include a finance contingency, even if you have loan pre-approval, 2) insist on an engineer's, termite and radon inspection contingencies, 3) itemize the personal property you want included, such as chandeliers or drapes, and 4) submit the closing date you prefer.
Buyers should be prepared to make their best offer first, but if that offer is not acceptable to the seller, they should expect to go through a round of counter-offers.
Offers and Counter Offers
Many of the offers we submit for prospective buyers aren't exactly what the sellers want; the price may be lower than they are asking or there might be terms that will require negotiation. What happens after the offer is submitted?
The seller's Realtor will present the offer to the sellers, along with the buyer's qualifications. If the sellers accept the offer, then you have a purchase agreement. If the sellers counter the offer, the next action would be initiated by the buyers. If you want to buy a particular house, your chances of succeeding are greater if your offer is as close to the asking price as possible. You could save money by engaging in lengthy negotiations, but you run the risk of losing the home if another offer comes in or you risk offending the seller.
Purchase Negotiations
When your Realtor calls to say there is an offer on your home, you get excited. Then you hear the offer and get an adrenaline rush. Whether the offer is good or bad, you should just remain calm--and discuss a counter-offer with your Realtor. The negotiations of a purchase begin with the buyer's ideal terms and a counter offer of the seller's ideal terms.
A good agent will look beyond the price when evaluating an offer. If the buyers' financial qualifications are shaky or the offer has subtle terms or conditions, your Realtor should be there to minimize any risk to you and to address these items in your counter-offer. Your agent's job is not to make a decision for you, but to be sure that you understand fully what the offer includes and what is expected of you.
Submitting Offers
Many of the offers we submit for prospective buyers aren't exactly what the sellers want; the price may be lower than they are asking or there might be terms that will require negotiation. What happens after the offer is submitted?
The seller's Realtor will present the offer to the sellers, along with the buyer's qualifications. If the sellers accept the offer, then you have a purchase agreement. If the sellers counter the offer, the next action would be initiated by the buyers. If you want to buy a particular house, your chances of succeeding are greater if your offer is as close to the asking price as possible. You could save money by engaging in lengthy negotiations, but you run the risk of losing the home if another offer comes in or you risk offending the seller.
