You and your agent have found the perfect home and you are ready to make an offer. You have spoken to a reputable lender at great length and answered all their questions and provided all the requested documents. Your lender has provided you with a great pre-approval letter and you’ve been waiting for the right home to come along.
It is so important when you are putting together your offer with your agent to spend a little time in your mind to think like the seller. Yes, it’s true that you and the seller are attempting to maximize the best possible terms for yourselves. But so often it’s forgotten that you also share the most important core goal: you want the transaction to succeed. As a buyer, spending a little time in your head walking a mile or two in the seller’s shoes can be enlightening and provide some valuable insights that will help you, as buyer, succeed.
When evaluating an offer as a seller, or constructing an offer as a buyer, at first glance most people think that the dollar amount is the most important, if not the only important element. This couldn’t be more false. Let’s look at some examples.
A buyer is putting together an offer in a competitive environment and decides to offer full asking price. However, they have decided to add a contingency that calls for the sale of their existing home before they are required to close on the home they hope to buy. The buyer’s home isn’t yet on the market but feels confident it won’t be a problem to sell it. In fact, their lender has explained that they don’t actually need to sell the home in order to qualify for the new loan. But buyer thinks that since they are offering full price, the home sale contingency should not be a big deal for seller.
At the same time, our seller receives two other offers, neither of them for asking price but pretty close, and neither of them containing home sale contingencies. In the seller’s mind, they are concerned about the chances of the first buyer who offered full price to actually sell their home. It’s a huge risk if, for some reason the home is overpriced and lingers on the market for six months, or at worst, has no buyers at all! In the end, the seller works with one of the other offers that doesn’t contain this huge contingency, even though they were for a little less money.
In this example, we used the home sale contingency. But there are so many other terms contained in an offer, and any of them, or any combination of them, can yield the same result. It is so much more effective for a buyer to put forth the best offer they can in terms of financing, inspection contingency terms, closing dates, and other special requests a buyer makes of seller, and consider offer price as just one of them, not necessarily the most important of them all. Spend time empathizing with your adversary to understand their motivations and constraints, and construct the best offer you can up front, not only in terms of monetary amounts, but all the other terms that make an offer for real estate real.