A. My strategy for winning offers has the following pieces, in some form, every time, with every buyer. It is dependent upon a trust-based relationship with the REALTOR® representing you, and getting all of your “ducks in a row” before making an offer.
1.Start with a pre-approval (not pre-qualification) from TWO lenders: the one who you have been using all along, and a second lender. The first pre-approval is obtained prior to beginning the property search, and is used to pinpoint how much you can afford to spend on your purchase. The second lender should be EITHER the bank/seller on an REO property, or an INSTITUTIONAL LENDER (such as B of A or Wells) on a retail sale. Its purpose ids to satisfy the seller/ bank that you are legitimate in their eyes, or to show the retail seller that you are solid gold. Be sure each pre-approval letter lists your name, the property address, and the purchase dollar amount. Update the information with each offer/ counter offer, as it changes.
2.On an REO property, ask the listing agent if a internal bank appraisal has been done on the property, and if so, do they know the value.
3.On either type of property, I always prepare a thorough Market Evaluation (CMA) with all of the most recent comparable sales, and help my buyers set a value on the property, both so they will know what they will bid, and so they will have a good sense of what the property will appraise for when they obtain their new loan.
4.BEFORE beginning negotiations, set a maximum that you will pay for the property. Beyond that value, be prepared to walk away, without looking back. Some properties are not meant to be, and a buyer needs to feel in control of the process. There may always be someone willing to pay more, but that should not affect your decision. This is, after all, a business transaction, and it should make good business sense for your family. The moment it doesn’t, WALK AWAY. Another property will come along.
5. Buyers should always write a letter to the home seller. Your real estate agent should always write a separate letter to the listing agent highlighting your purchase offer.
6. Write your cleanest and best offer (or counter offer). Your pre-approval told you how much you can afford. Your CMA told you how much the property is worth in today’s market. You have set the maximum value you are willing to pay. Now select terms that protect you, but are as attractive to a would-be seller as well. You can never compete with an all cash buyer or investor, so realizing that frees you up to write YOUR best offer.
7. Never, ever use round numbers in your price. Everyone else does. It makes your offer more mysterious to the seller when they see an uneven number, and banks assume you have some formula for assessing value. When it comes to counters, you may win by that extra $1682 you tacked on at the end!
8. If someone else gets the property, the hardest part, as I mentioned above, is to walk away without looking back. Know that you did your best. You and your agent made a strategy that was appropriate for you, and someone else got the property. Take comfort in the planning you did, and the knowledge you have about your situation, and know that something else will come along. Count this one as preparation for the next offer, a rehearsal of sorts, that will season you and make you a more savvy purchaser.
Q. Why should I invest my money on inspections when I buy a short sale? It’s an as-is sale, with no repairs, and I don’t know if it will be approved.
Using the term “invest” instead of “spend” is a good choice of words.
The point isn’t whether to get an appraisal or inspection….the point is WHEN you do it. Buyers usually do not start their inspection period or loan/appraisal contingency until after the short sale has been approved by the lender(s). I never allow/advise my buyers to incur any costs until we know that the bank will accept our offer price and terms. At that point we will have plenty of time to do our due diligence.
The physical inspection, along with the loan/ appraisal contingency, are the two most important protections you have in the contract. Information about the condition of the property, as disclosed by the seller and as discovered through inspections, is what lets you know WHAT you are buying, and IF you want to but it. That’s why the legislature has enacted so many protections for the buyer in this regard, and why physical condition of the property is THE SINGLE MOST FREQUENTLY LITIGATED portion of a real estate transaction.
No matter how much you trust your agent, DO NOT have them choose your inspector. Ask for recommendations, yes. But as agents, it is stepping beyond the bounds of our agency to choose your inspector, lender, whoever. (This is not to say that agents don’t do it all the time.) Just as you would choose your own lender, you should choose your own inspector.
How? Ask them the following questions:
1. How long will your inspection generally last? Should I be present for the entire inspection? They should tell you that an inspection will take x amount of time, more with a single family than a condo, and it should be based on beds and baths and square footage. They should ENCOURAGE you and your agent to be present, and the inspector should be pointing things out to you AND YOUR AGENT, to make sure that what the inspector finds matches all property disclosures.
2. How much will it cost? What type of report do you provide? Cost is self explanatory, but this point may be worth stating: This is not the time to cut costs. Don’t go bargain hunting; you usually get what you pay for. As for the report, it should, at a bare minimum, describe the property system by system and room by room, noting all systems inspected and the condition of each. The best reports include photos and/ or video, and recommendations as to what is satisfactory, and what needs repair and/or more investigation. Most good quality reports are 20-40 pages, with a separate summary report.
3. Are you licensed/ boded/ insured? How long have you been in business? How are your inspectors trained? References? Any lawsuits?
Talk to AT LEAST 5 inspectors before choosing. CHECK their references. Then, when you have selected an inspector, have your agent coordinate an appointment through the listing agent. The standard is to pay by check at the time of inspection.
One final note: If you are IN ANY WAY unsatisfied with the inspection, call the firm IMMEDIATELY to schedule a new inspection with a different inspector. Your inspection report is the single most important piece of information, should you discover a defect once you are in the property. If something was not discovered by the inspector, they may have liability.
The Bremner Group at Coldwell Banker
ABR, CDPE, eAgent, CSP, SFR, HRC, CRE
(O) 310-571-1364 DIRECT
(D) (310) 800-2954
Accredited Buyer Representative | Certified Distressed Property Expert | Pre-Foreclosure Specialist Certified
I want you to know that I appreciate any referrals from friends and associates who may be in the market to buy or sell real estate. You can count on me giving them the same high-quality service I provide to all of my clients.