Andrew Wetzel's Musings

May 27, 2017

How to be a SERIOUS Buyer! Part 7 (of 7)

Filed under: Uncategorized — awetzel @ 4:07 PM

You have done all of the planning and the hard work and found a house that you really like.  So, what do you do now???  The answer is “it depends”.  For this post I am assuming that you are buying a residential property that you will actually live in.  If you are an investor, your process will most likely be different.  Disclaimer:  if you are represented by an agent, please discuss what to do with them as this post is just my humble opinion.

How the residential Buyer proceeds will depend upon several factors.  For example, is this the first house you have seen?  Most Buyers do not buy the first one but maybe you got lucky.  Are you really comfortable with the location?  Is this house really the “ONE” that you cannot live without or is it something you think you can get at a “good price”?  Are you a risk taker and willing to “gamble” on hard negotiating?  Depending on how the Seller perceives the market, this could lead to “unintended consequences” if you bid really low and make further negotiating awkward.  This is a pivotal moment:  you and your agent really need to discuss a strategy you can live with.  There may not be a “do over”.

Here is a “peek” inside my mind.

First, I work for my clients and have a fiduciary responsibility to “protect and promote their best interests” (Article One of our Realtor Code of Ethics).  If they ask me to write an offer I will BUT, if I think they are in a panic OR considering buying a home that is substantially different from what they have told me they want or need, I try to make them really think about it.  This is a big decision and mistakes are costly.  One of my favorite stories involves my NOT writing an offer for Buyers (with three small children) leaving for an out-of-state wedding who were concerned that their house was settling in 6 weeks and they had no place to go.  We discussed a game plan and they thanked me for stopping them from making a really bad mistake.

Second, we need to sit down and do “the paperwork”.  There are forms that a Buyer needs to complete and there is work that I need to do.  Some of this can be done ahead of time but many Buyers find the “right house” unexpectedly.  This part involves three aspects.  One:  I need to provide Buyers with an estimate of their closing costs based on what they intend to offer (the lender should have done so already and theirs will probably be more accurate than mine at least in terms of the lender’s fees).  If they are not sure what they will offer, I can use “full price” to show them the “worst-case scenario”.  In a Sellers’ Market offers may come in “over asking price” so I have to plan accordingly.  One thing to understand is that what a Buyer offers is like CASH to the Seller but mostly just an addition to their “projected” monthly payment.  I do not want to minimize it but a few thousand dollars could be the difference between getting a house or not and the monthly cost for every extra thousand dollars offered is a few dollars (I usually estimate that it costs about $5 per month for every extra $1000 offered).  Two:  I research the property itself (how long has it been on the market, have there been any price reductions, when was it last sold, etc.).  This will give my client some information to think about as they determine their “bid strategy”.  You would be amazed at how many agents do NOT know that a listing has been on the market before the current marketing effort!  Three:  I do a CMA (a Competitive or Comparative Market Analysis).  This will tell us what similar houses have sold for (the “range” of values), what any seller concessions may have been, etc.  Ideally, I will have given the Buyer a blank Agreement of Sale and we would have discussed it, especially the inspection clauses.

Third, we discuss a “strategy”.  What a Buyer chooses to do is up to them; my role is to provide guidance and answer their questions.  For example, in a competitive market the Buyer might want to consider that they may get to make only ONE OFFER.  Even in this market there are some houses that sell quickly for full price or more:  Real Estate is truly “local” and “values’ can change block by block.  In a competitive situation there are a number of ways to “elevate” your offer (they include the price, seller concessions, the earnest money deposit, mortgage amount, inspections, settlement date, etc.).  A winning strategy involves proper planning and presentation.  The Buyer’s agent has much to do with whether an offer gets accepted or not.  A strong agent may help a “weak” offer to some extent and a weak agent can hurt any offer.

The final part of this strategy involves discussing what happens next.  I tell Buyers to think about how high they would be willing to go.  I want them to think about the process and have something in mind if and when I call them back with the Seller’s “counter-offer”.  The Buyer and their agent must be available to each other.  Some processes evolve quickly (for better or worse) while others drag on (especially “short sales and foreclosures).  Listing agents are different:  some are easier to work with while others will try your patience.  Focus on the goal and do your best.  This can be a very frustrating process as most people do not like to wait or have others make decisions for them.

An unsuccessful offer restarts the process with another house.  While frustrating, a prepared Buyer just needs to re-commit to what they already started and, perhaps, learn from this situation.

A successful offer presumably ends the “marketing” of the house (depending on “contingencies” and Seller’s instructions to their agent) and starts the “inspection” phase and finalizing the mortgage for the Buyer.  This phase is best discussed between a Buyer and their agent.

Remember:  it is not over until the Buyer has the keys to the house and the Seller has the Buyer’s money.

Happy house hunting!

HIRE WISELY!

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