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Making an Offer

How you make an offer depends a lot on a number of variables, including but not limited to the seller, the market time (including any recent past listings of the same home), the property condition, & otherwise.

One of the best ways that I like to present making an offer is by providing a multiple offer situation. Here that is (click for access directly to the spreadsheet:

competing offer.jpg


Offering Low or High:

An investor might consider more of a machine gun approach, whereas most owner-occupants consider more of a sniper approach. With an investor, you try to take your own preferences and emotions out of the equation to a substantial degree and have more flexibility to make lowball offers. There are some owner-occupants who are heavily focused on savings over personal preferences, and opt for low ball offers as a result for more of the machine gun approach in which a property that isn't a good enough deal means onto the next possible home. With an owner occupant though, many want the house that is a good fit for their family specifically and don't want to have a situation where the seller not only rejects their offer but says that they don't want them to make another offer (which is rare but does happen). If you low ball a property that you really want, and another buyer gives them an offer which is not a lowball within a few days, the seller is more likely to want to go back and forth with the other buyer, and back and forth negotiations can often occur with just 1 buyer at a time even in a multiple offer scenario. I have gotten under contract before on property with this exact scenario. The lower the market time or the time after a 5% or more price reduction, the higher the likelihood of that happening. It is also important as a prospective buyer's agent to inquire about if there are any active offers, not only to get an idea of what to offer but also to expedite your offer timeline accordingly if there is one or the sellers have been notified of one coming soon.


A Strong Offer:

Sellers generally like 30 days (or less if vacant) to close, 1% or more for an earnest money deposit (although $500 is sometimes acceptable), & cash. Among financing options, sellers generally like cash the most, then hard money loans, then conventional loans, then FHA, then VA. Of course they like the asking price or higher with no closing cost assistance as well, although in this market, closing costs are often being given to buyers if the buyer is offering full asking price or more. In cases where a seller won't and the buyer needs the closing costs, you might consider raising the offering price, protected in part by the appraisal (see below).


Repairs Visible Prior to Offer:

If there are any repairs/modifications/updates that you want the seller to perform that you notice prior to making an offer, it is usually best to include those in an offer. There are times when a seller has said that they would not do certain things that came up in the home inspection because the seller states that they should have been obvious prior to the home inspection prior to making the offer. 


Start with a Verbal Offer:

It is a best practice to start by giving a verbal offer in many scenarios, excluding multiple offer situations, short sales, estate sales, and foreclosures. Doing that is a non-committal approach that can save you time, especially if you are making a number of low ball offers. Some sellers will go back and forth with a verbal and some won't. It often depends on the agent's preferences, and sometimes listing agents can get the laws mixed up about how a listing agent must present all offers (whether verbal or not) but that a contract for real estate can only be formed in writing.



In some cases, you only get one chance to make an offer, such as many cases with HUD owned properties during the owner occupant only period before that period runs out. Sometimes a seller will get 2 offers and decide to just accept one over the other without ever issuing a counter or stimulating a bidding war. I remember one occasion where a buyer had a solid offer that was given to an individual seller, but with the terms they presented being nearly the same as another buyer, the seller accepted the one who presented the first offer. On another occasion, with 2 offers presented with one being better than the other, rather than creating a bidding war again, the better of the 2 offers was accepted. In the majority of cases though, the seller may counter or reject your offer if they don't accept it before it is ever sold to someone else, giving you an opportunity for a second offer. In some cases, a bidding war is stimulated where the highest offerer may present 3 or more total offers as the price goes up, and I have seen this happen where it goes even higher than 50% above asking price.



The buyer is protected to some degree in the cases of all loans and all cash offers contingent on appraisal. If the buyer makes an offer for $300k, and the appraiser says it is worth $295k, a buyer with a loan can sometimes provide their own funds to split the difference, or can sometimes get the seller to come down. Sometimes they meet in the middle. With a VA loan, if the appraisal comes underneath the contract price, the seller should know that anyone with a VA loan will be impacted by that one appraisal for months. In the case of a conventional loan, on the other hand, the seller has more recourse to put the property back on the market for another buyer and hope that someone gets it and that the appraiser is more forgiving of the sales price. While I wish that this wasn't the case, the appraiser sees the listing price, and is often biased to make the appraised value equal to or greater than that amount in order to not ruffle any feathers. Agents, buyers, and sellers alike can get quite heated on the issue. 

Escalation Clauses:

I routinely use escalation clauses to help my buyers win. With an escalation clause, you make an offer at one price, then state the max that you are willing to go that is triggered by other offers, with you having an opportunity to receive a copy of the other offer prior to increasing your offer to reflect the escalation clause terms. I typically recommend 1% above the next highest offer, but it highly depends on the terms of the offer. A cash non-contingent buyer might be able to get away with $1k, while a home sale contingent VA buyer might be better off with 3% above the next highest offer. While escalation clauses are prohibited for some properties (i.e. HUD homes), typically they're allowed to be used. Here's more on that.

Letters to the Seller:

These are often used to help buyers win, and I've seen where monetarily worse buyers I represented won, with the letter to the seller being the primary stated reason why. That said, it's also very easy to be illegal without knowing it, and likely the majority of letters to the seller include illegal elements. Here is more on that. 

Atypical Elements:

There are a number of ways that I like to help my buyers get further along that are not usually included in offers, like an email template that I've developed over time to make things easier on the listing agent (& doing things helpful to the listing agent can help give them a positive impression). I've been told by a competing agent that my offer presentation is excellent. If a buyer has a high volume of cash or is providing an above appraisal guarantee I like to include proof of funds to back that up to show that the buyer is in a strong position. If the buyer has a strong credit score, I like to share it, and if the buyer has a copy of the lender pulled credit score and has strong credit, I like to include it in the documents. 

Home Inspections:

Typically buyers acquire a home inspection following contract ratification. Some buyers perform a home inspection before presenting an offer. Other buyers don't do a home inspection. If choosing the latter route, I recommend that buyers/agents check all system ages, check the roof of a home with a tall ladder or drone, and go into the crawlspace and attic as far as they can. Most buyer's agents won't do that & don't have the equipment (i.e. most don't carry a ladder, long pole w/ borescope camera, or drone & you need to be certified to fly a drone commercially) to even if they wanted to, but I can if you give me advanced notice (i.e. for having clothing for a crawlspace, requesting permission for my drone, and acquiring FAA authorization in base locations where LAANC instant approval isn't possible).

Seller Possession Agreements: These can sometimes edge over the competition to win offers. Here are more details. 

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