Make Them An Offer They Can't Refuse!!

Let's move on to step 5 of buying a home or investment property. You found the right property... so let's "make them an offer they can't refuse!!" Plus let's talk about once they do accept, what happens next? There's a lot to talk about in this step, so let's first examine making an offer that is realistic.

Notice I said making an offer that is realistic...and justified. I realize we are all looking for a great deal, but to make an offer that is significantly lower than asking price can spell disaster. Remember just because you make an initial offer, others may have as well. In addition that may not be the only offer you ever make. The seller could counteroffer which keeps the negotiation moving. But if you make a low ball offer that may be deemed as insulting, the seller may balk or worse, walk away, never giving you another chance to counteroffer.

This is a subject I know all too well. In one instance, I closed with a client in Pittsburgh who finally got a lovely home... but only after the 4th try! We missed a couple lovely homes by doing just that--lowballing--trying to "steal a deal". I couldn't talk them out of making such a low offer and since I must adhere to my client's request, I went ahead and submitted those very low offers. Yes, they're happy now, but it took a year and a lot of sorrowful days after their offers were flatly rejected. They learned the hard way but eventually they learned their lesson. If you want it, bid fairly!

First bids are crucial to keep all parties in the game. So with that in mind, how do you evaluate what would be a good offer? Not easy, but with the help of your Realtor, look at things such as comparables, how long the house has been on the market, the motivation of the seller, contingencies and a host of other variables. What we want first and foremost is engagement: get the Seller in the game and keep him/her/them interested. For Home Buyers, I often suggest writing a personal letter to the seller stating why you love that house. Real estate transactions can often be influenced by a personal match of buyers to sellers. A common interest, if you will. While a Realtor cannot say "here is what you should offer" they also are not privy to what has been offered by others. They can, however, advise you so you can make a strong offer. But word to the wise: please listen to them and consider their advice when making that offer. They know the business very well being that they do this every single day. A good Realtor will be a Master at the Art of Negotiation. And by the way, don't think that just because you're considering an investment property that this doesn't work here too. I learned many many years ago in sales: People buy from People! Keeping it somewhat personal, without taking it personally, can go a long way to winning.

Yes, the letter works. A couple years ago my client was looking at a property that was part of an estate and represented by children of the deceased. They grew up in that house and continued to love it. Our letter showed them how much the couple wanted to raise their family there just as had been done previously. And when the multiple offers were compared, guess who won out?!

Your offer may be accepted...rejected ...or countered. Our goal, as Realtors, is to bring the parties together, generally somewhere in the middle. Any successful deal allows both parties to feel they won. Again, here's where consulting a Realtor with experience can help you to negotiate. It's not their "first time at the rodeo", they do this daily, so allow them to help. If there are multiple offers, a seller will compare and choose the strongest. There are many variables to a seller's decision and there is no playbook or crystal ball to tell what they will accept. But the stronger the offer the better. At this time you will need hand (earnest) money, typically about 10% of the purchase offer price. The earnest money is deposited into an escrow account which is held by a real estate brokerage. This money is a commitment on your part. Your Realtor will explain how the earnest money is handled during the transaction.

So...Hooray! Your offer is accepted! You are on your way towards settlement (aka closing), but there is still a lot of work to do and here's what comes next. Once signed, your agreement defines the terms under which the transaction will complete. Apply for your mortgage. The property gets appraised (Yep, you'll most likely pay for it.). Consider the appraisal as a process that has two goals: protecting you for the true value versus your sales price, and ensuring the lender has sufficient collateral to lend against. If an appraisal comes in lower than the sales prices, this presents new challenges to the mortgage process. We want the property to appraise and move forward! (Now of course, if you are an all cash buyer, an appraisal is your option.)

Next comes the inspection and you, the buyer, pays for that as well. Ultimately who you choose is solely your decision. An inspection determines the present condition of the property/ home's major systems based upon a visual and functional review plus it's condition overall. The goal here is to identify things that may be deficient or potentially unsafe. An inspection is not a guarantee that things won't break in the future, but it acts as an independent, professional opinion of the condition of the property. Bottom line is your inspector will identify current issues and recommend items to watch in the future. It is highly recommended that, for your protection, you get a property inspection!

Ok, so the property has appraised and the inspection results resolved. What's next? Your Realtor will guide you through connecting with an attorney and/or settlement company that will manage the remaining steps to prepare you and the Seller for settlement. Now get packing or be prepared to rent and/or move into your investment property, as before you know it, you will be closing.

In the next and final step of our series, I will explain the process of closing. What happens a couple of weeks prior to, a couple of days prior to and what you will need to bring to closing. We are almost there folks, so stay tuned!