My clients had finally settled on a house. They had been previewing homes on the Internet for four months and in the last three weeks we previewed 30-plus homes scattered from El Dorado Hills to Camino. During this time we had seen some very nice homes and homes that met every specification my clients had told me they wanted. Still they postponed making a decision. At last, after previewing a modestly priced pool home in El Dorado Hills they told me this was the home they had waited for. Their search and thankfully mine was finally over.
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Before writing an offer it’s always a good idea to check the current listing status and establish a dialog with the other agent that hopefully you’ll be working with. Prior to drafting the purchase contract, I called the listing agent to make a cursory check on the property’s availability or any recent changes to the listing.
“Hi Marlene, I have some clients thinking about writing an offer on your listing in Serrano. Just checking for an update.”
“E-mail it over,” she said. “I will put it with the other offers I already have for the seller to review.”
At any given time there are always a number of buyers seeking the exceptionally best-priced listing, in the most popular locations and in the best condition. Most listings are in average condition, in OK locations and priced at or slightly above their market value. When an exceptional property becomes available, buyers and their agents quickly recognize it.
An agent’s strategy instantly changes when preparing an offer for their clients when there is already one or more offers on the property. Without any other offers in the running, buyers have more flexibility in their negotiations. They may structure the offer at less than listed price or ask the seller to pay the majority of the closing costs. After all, what can it hurt to make an offer for less? The seller can always counter.
When there are other offers under consideration, buyers may only have one chance to catch the seller’s attention and end up with the property. Creating an offer that will stand out in a crowd of multiple offers is a challenge. Here are a few pointers.
Sellers make their decision to sell based on the bottom line and price is the single largest factor affecting their net proceeds. Although the offering price is important to the buyer, there are other subjective considerations that can increase the home’s value for some buyers. To paraphrase a statement by Plato: “Beauty is in the eye of the beholder.”
If acquiring the property at the lowest price is the single most important factor for the buyer, they should back off and not waste their time in a multiple offer situation. Multiple offers happen for a reason. A sincere buyer’s goal must be to acquire the property at a reasonable value. A home that is listed for $300,000 may actually be valued to some buyers well above the listing price. If a buyer isn’t prepared to bid at or above the listed price they shouldn’t bother.
An offer cluttered with excessive contingencies, conditions and seller concessions will be less attractive to a seller. Buyers normally have 17 days to inspect a property and 30 days should be sufficient to satisfy an appraisal contingency. Asking for additional time indicates that the buyer may not be confident in their decision or not qualified.
Without any offers on a property I might suggest a $3,000 earnest money deposit on a $300,000 selling price. When in competition with other offers I will double that. Most buyers mistakenly believe their earnest money deposit is subject to forfeiture if anything goes wrong. It’s highly unusual for a buyer to forfeit their deposit. Standards of practice and case law favor buyers when the status of their deposit is in question. Many sellers, however, mistakenly equate the amount of the deposit to a buyer’s qualification and commitment.
After discovering the seller is considering more than one offer, a second phone call to the listing agent may provide a competitive edge.
“Hi Marlene, this is Ken again. My clients really like your listing and I know that you have other offers. Besides price, what is really important to your clients? Perhaps I can save us both time and structure a contract that will work for all parties.”
The listing agent may share with me valuable information regarding the seller’s preferences that I may be able to incorporate into my initial offer. I am often pleasantly surprised when asking the question, “What will it take to have my client’s offer accepted?”
The more comfortable the listing agent and seller feel about the buyer being able to close escrow, the better the odds of getting an acceptance. Although the purchase contract calls for the buyer to provide a pre-approval letter within seven days of a seller’s acceptance, that’s too late in the game when competing against other offers. Pre-approval letters and other documentation attesting to the buyer’s qualifications or interest should always be submitted along with the offer.
With half the number of homes for sale this year over last, multiple offers are the new standard. Homebuyers will need prepare for tough competition when making offers. They should not be intimidated. They will need to examine their motivation and aggressively move forward if they want to own an exceptionally good property.
Ken Calhoon is a real estate broker in El Dorado County. He can be reached through his Website at kencalhoon.com.