Making an Offer on a House
In most areas, you will not be presenting your offer directly to the seller in person. So your goal when your agent presents your offer is to give the sellers few reasons to say no and many to say yes.
One effective technique, called “loading,” is to include with your offer a separate statement that does two things. First, it concisely recaps information gleaned from your CMA. This lets the sellers know that you know their home is not the only fish in the sea. Second, it gives the sellers all the reasons they should promptly say yes to your offer as written. Accepting a lower offer is emotionally unpleasant, and your letter should ease them through that process.
Sample Letter to Seller
Further Information for the Seller
Dear Mr. and Mrs. Barnes,
Your property is listed for $189,000. To arrive at our offer of $178,500 we performed the following analysis.
The five homes below are comparable properties that have sold within the past six months. Since no two homes are identical, we have noted the unique amenities each offers.
[Addresses of five comps, each with its sales price and two or three amenities, such as a renovated kitchen, walk-in closets, a pool, a cabana, professional landscaping, new paint, new carpet, a three-car garage. Sale prices of most of the comps cluster around the buyer’s lower offer price; the one or two properties whose sale price is at or near the seller’s higher asking price each has several of the more expensive amenities.]
The following five homes are also comparable to yours and are currently for sale in your area. Again, we have noted the amenties of each home:
[Addresses of five active listings and their asking prices, again with two or three amenities that the seller’s home does not have. Similar clustering of prices around the buyer’s offer price.]
Among all these choices, we have decided that we wish very much to make your property our new home, and we are willing to pay a fair price for it. We are also committed to seeing that the closing process goes smoothly and quickly. To that end:
- We have a pre-approval certificate from our mortgage lender.
- We have no contingencies involving the sale of another property.
- We have not asked you to make any major changes or improvements.
- We are willing to coordinate closing on this sale with the closing schedule of the new property you are purchasing.
Thank you for your consideration and we are hopeful you will accept our offer.
Bill and Barbara Wilson
Why should you need such a letter? To make sure the seller has all the facts. When your agent presents your offer to the seller’s agent, he or she may or may not review the CMA with the seller’s agent to bolster the case that your offer is a fair price. The seller’s agent in turn may or may not present that analysis to the seller. In short, there’s a high likelihood the seller never hears the supporting case for your offer.
However, both agents are required to convey all written documents to the seller, so putting it in writing and attaching it to the written offer ensures the information gets through.
If your offer is substantially below the asking price, a larger earnest money deposit may tip the scales in your favor. Or you could add a provision to increase the deposit to 5 percent of the purchase price upon removal of the mortgage financing or home inspection contingencies.
The other critical piece of presenting your offer is to give the sellers a limited time to respond. In this day of cell phones and fax machines, there is very little reason sellers shouldn’t be able to make a decision within 24 hours, even if, for example, one spouse is out of town. The more time the sellers have to respond to your offer, the more opportunity for other offers to be presented.
And don’t underestimate the power of a message to the seller that appeals to their emotional attachment to the house. Sometimes they will take a lower price just to be sure the house is going to someone who will treat it well.
To Waive or Not to Waive?
Because each contingency in your purchase offer represents a chance for the deal to fall apart, sellers may be leery of offers with a number of contingencies. This is especially true in a market where several buyers are competing for the same house.
Buyers who have lost a couple of bids may be tempted to waive all contingencies. If you find yourself considering this step, think long and hard. Most real estate professionals counsel strongly against it.
One solution in this situation is to retain the necessary contingencies but shorten the compliance time. Rather than 15 days to respond to the seller’s disclosure form, for example, you might specify giving your response in four days. Or you might specify having the home inspection performed within a week instead of 10 to 14 days.
By reducing the amount of time needed to work through all the contingencies, you are demonstrating your commitment to the purchase. This strategy also acknowledges the seller’s desire not to have his property tied up overly long by a contract that might fall through.
In a perfect world, your offer price will be based on facts, so that even if it’s significantly lower than the seller’s asking price, he or she should be rational and recognize its validity. However, some things you can control, others you can’t, and the seller’s response falls into the latter category.
If you and your agent have given the purchase offer your best thinking, then the ball is now in the seller’s court. What they do with it is up to them, and if they reject your offer without making a counteroffer, all you can do is move on.
However, if you hear via the phone from your agent or the seller’s agent that the seller has accepted or has countered with a purchase price you’re willing accept, keep your elation in check. Don’t do anything drastic like give notice to your landlord. Sellers have been known to tell their agent one thing on the phone and change their minds later. Remember: Nothing is enforceable until you see it in writing and you respond in writing.
Next article: Real Estate Purchase Contract Essentials
Previous article: Home Inspection Guide
- Real Estate Purchase Contract Essentials
- Buying a Home Negotiation Strategies
- Entertaining Purchase Offers
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