Purchasing a home involves an agreement between buyer and seller, and it all starts with an offer. Many prospective home buyers are uncomfortable with talking directly to sellers when they present an offer, but there’s really nothing to worry about because your real estate agent can represent you during the offer.
An offer for a home purchase usually comes after the buyer learns about the property, talks to the seller or real estate agent for inquiries about the home, and evaluates the purchase price and the buyer’s budget. It’s natural for some buyers to find the seller’s asking price too high or for the seller to decline your requests. Your offer tells the seller what you want to include in the purchase and how much you can afford to pay.
Some buyers use a method called “loading” to convince sellers to grant their desired purchase price. This technique involves an offer statement based on comparative market analysis (CMA) to delineate the reasons why you are asking for a particular price. This could be helpful if your offer is lower than the seller’s asking price, and it appeases the seller to accept the lower offer. Here is a sample letter that demonstrates the technique:
Sample Letter to Seller
Dear Mr. and Mrs. Smith,
Your property is listed for $245,000. To arrive at our offer of $238,500 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 the sale price and two or three amenities, such as a renovated kitchen, walk-in closets, a pool, a cabana, professional landscaping, new paint, new carpet or a three-car garage. Sale prices of most of the comps cluster around the buyers’ lower offer price; the one or two properties whose sale price is at or near the sellers’ 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 amenities of each home:
[Addresses of five active listings and their asking prices, again with two or three amenities that the sellers’ home does not have. Similar clustering of prices around the buyers’ 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.
John and Jane Williams
The statement allows the seller to get all the facts that formed the basis for your offer. It’s possible that the seller wasn’t able to learn about the details of the CMA from his / her agent, and so the letter becomes a good source of information for the seller. Take note that your agent and the seller’s are required by law to present all written documents involved in the purchase to the seller. Writing this letter ensures you that the information reaches the seller.
You have the option to supplement the lower price offer with a higher deposit amount, either as earnest money or a conditional increase once the mortgage financing or contingencies in home inspection are removed.
Once the offer has been forwarded, give the seller some time to assess and think about your offer. Most sellers can read the offer statement within a day, so be patient. However, it might be best to follow up with the seller for a response, because a longer time frame of waiting may allow other offers to come in and jeopardize the chances of your offer from getting accepted by the seller.
Another good technique to boost the attractiveness of your offer is emotional investment. Don’t hesitate to assure the seller that you’re going to take care of the home and treat it properly. Many of the sellers are emotionally attached to the home, so giving them this kind of assurance bodes well to your offer.
The balancing act of contingencies
A standard purchase offer comes with many contingency clauses to give you an opportunity to back out of the contract should any of the stipulations become unacceptable. Unfortunately, sellers are apprehensive in dealing with buyers who put too many contingencies in the offer, especially if the home is in a seller’s market or has too many interested buyers. On the flip side, though, you need these contingencies to help you get out of a purchase agreement in case it gets messy later on.
So the question now is this: Should you remove or waive all contingencies?
Most experts in the real estate industry advise against it, saying that this removes the protection from buyers. Instead, they recommend retaining the contingency clauses but reducing the time to comply with specific tasks. For instance, instead of making the buyer’s response to a seller’s disclosure form run for 15 days, shorten it to four or five days. The same goes for home inspection, which typically goes for two weeks but can be reduced to one. The reduction in compliance time creates a sense of urgency and commitment on your part. It tells the seller that you are serious in buying the home and that you understand how precious the seller’s time is.
Keep your emotions in check
Acting on your emotions will probably not give you the best deal in terms of purchasing a home. You have no control over everything that happens within a home purchase, especially not the seller’s decision. If the seller refuses your offer and does not give a counter-offer, don’t linger on the property. Move on and look for other options.
Likewise, if you receive a “yes” or a counter-offer from the seller, don’t celebrate all out just yet. You might find yourself deciding too haphazardly, like telling your current landlord that you’re already going to move out. Always remind yourself that nothing is set or final until it is stated in writing. In the same way, all of your responses and requests must be written for them to be declared final.
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