Real Estate Blog - NEGOTIATING REAL ESTATE PURCHASE CONTRACTS - GET YOUR DUCKS IN A ROW BEFORE YOU WRITE, THEN WRITE IT.

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NEGOTIATING REAL ESTATE PURCHASE CONTRACTS - GET YOUR DUCKS IN A ROW BEFORE YOU WRITE, THEN WRITE IT.

OPPORTUNITIES ARE EVERYWHERE FOR SAVVY HOME BUYERS. GET YOUR DUCKS IN A ROW AND GO FOR IT. THE SELLER JUST MAY BE WAITING FOR YOUR OFFER.

MAKE AN OFFER - HOMES ON THE MARKET FOR MORE THAN 90 DAYS OFTEN JUST NEED AN OFFER.
Owners are reluctant to disclose their bottom line in the MLS. At the same time, buyers are often reluctant to
go through the process of making a written offer when the amount they would pay for a home is significantly lower than the asking price. DON'T BE AFRAID TO MAKE OFFERS.

If you find a home that is listed for sale that is a tad out of your price range, look at the following:

* How long has the home been on the market?
* What have similar homes in the area sold for in the past 3-4 months?
* Has the price been lowered during the recent listing period?
* What are your qualifications that make you a very attractive home buyer?

If the home has been on the market for more than 90-120 days and the price has not been lowered, there are a few dynamics at work. Look at homes sold in one market area in the month of May, 2007.

OrigListPrice   ClosePrice       Days On The Market
$449,900.00     $420,000         118
$479,000.00     $435,000         322
$489,900.00     $442,000         328
$484,950.00     $460,000         253
$569,900.00     $450,000         256
$559,000.00     $499,900         109
$614,900.00     $480,000         374

Clearly, homes that have been on the market for months are good prospects for making offers. We wouldn't expect that there would be much in the way of negotiation room when a home is newly listed. But, if the home you like is unusual, has unique features that appeal to you, GO FOR IT. You may be pleasantly surprised by the reaction when an offer is made and the seller comes back with a CONTRACT ACCEPTANCE or a COUNTER OFFER that is within your comfort range.

Consider also, the market conditions for the area of your search.  What was the average LIST TO SOLD PERCENTAGE?   If the average LIST to SOLD price for all homes sold in May 2007 was 95.05%, many of those homes sold for considerably less than 95%. That clearly gives you, the home buyer, a $25,000 window on a home listed for $450,000. If the home has been on the market for more than 120 days, it is not unusual for the "window" for negotiation to be as much as 10%.

FACTORS THAT WILL HELP YOU NEGOTIATE A GOOD PRICE

"GET YOUR DUCKS IN A ROW"

PRE-APPROVAL OR PRE-QUALIFICATION FOR FINANCING
Make sure you have your financing in place. You MUST have a strong lenders letter to accompany your offer. The lender's letter should be on the lender's letterhead and signed by the loan office or manager. The letter should state, at a minimum, the following:

* Your lender has review your credit report and you are credit approved for the loan type included in your written offer.
* Your lender has verified your employment for qualification purposes.
* Your lender has verified that you have money in place, savings or bank deposits to close.

REASONABLE TERMS AND CONDITIONS
If the listing states that the seller cannot vacate until their new home is ready in 3 months from the time you make your offer, you are not likely to negotiate much if you make a low offer and ask for 20 day settlement/occupancy.

KEEP THE OFFER CLEAN.
Don't ask for personal property. You may need a tractor to cut the grass, but if you're making a low offer, don't muddy the waters by asking for personal property. If the seller want to convey the tractor, or the living room drapes or the pool table, it would have been written in the listing.

MAKE SURE ALL OF YOUR CONTRACT ADDENDA ARE INCLUDED
Don't give the seller an opportunity to receive another offer while considering yours. Make sure that your buyer's agent includes all necessary documents and addenda required for a complete contract. If disclosures are required, make sure you get them, review them and include them in your offer. Don't leave a window of opportunity for another offer to come in while the seller is considering yours.

USE SMART NEGOTIATING TECHNIQUES AND THIS COULD BE YOURS This home was listed for $825,000 and the contract offer was $700,000. Final price was $715,000.

Courtesy: Homefinders.com

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 06/16/2007 05:03 PM

Comments (13)

homefinders, lenn harley, realtor, maryland, virginia, homes for sale, real estate, mls, search listings, negotiating offers on real estate

13 Comments on NEGOTIATING REAL ESTATE PURCHASE CONTRACTS - GET YOUR DUCKS IN A ROW BEFORE YOU WRITE, THEN WRITE IT.

JUN

2007

That is some drop in prices! I agree with you Lenn...buyers should not be afraid to make an offer. Very nicely written!!!

Useful insight Lenn. Gorgeous home in the bottom right BTW.

Monika. Thanks. I'm not afraid of making offers as long as they are reasonable and they make sense considering all of the factors necessary. I'm not interested in spending time with folks who are more interesting in negotiating than buying a good property. We know what will work and what won't.

Jason. Thanks. I just sold that house two weeks ago.

I really like this post Lenn. Thanks! I notice the prices that you quoted here are mostly what I consider in the realm of reason. Some may seem very large when you look at the gap, but as a percentage of the list price they seem to stay within that 10% mark. That could mean a problem selecting the list price. When I seem to have issues, it is with a buyer that thinks someone is going to give them a home for 20% under list. Any recommendations for buyers with unrealistic pricing expectations. I typically ask them if they would take that offer as a seller.

A flawless explanation to home buyers- clear, concise, frank. Thanks, Lenn

Excellent advice Lenn for buyers and their agents. Do your homework. Pull comps and make good offers. In my market the list price means nothing these days. There are so many overpriced properties. But it certainly doesn't mean the seller won't come down if presented with a complete offer from a strong buyer.

Lenn - Exactly what homebuyers need to hear! If they keep it reasonable and clean, there is often a deal in the making! thanks!

Great post. Also remember that the listing agent may have already told the sellers that their price is out of line with the market. "But our home is so much nicer, let's 'try' to see if we can get our price." A reasonable offer from a strong buyer may be just the proof they need to make an attitude adjustment.

Lenn, very thorough. And very timely. I wrote an offer today to a Realtor who listed a property 3 hours away from where he lives...that's a whole blog in itself. In our previous market this would not be good advice since properties were selling like hot cakes but in today's market, the normal market, good sound advice. Nothing ventured, nothing gained. I think you pretty much covered all the aspects.

And, as I'm dinking around searching for a way to offer a comment with thought (and struggling) I'm wondering why on earth a post like THIS isn't featured. I printed this out.

You are so right Lenn... Now if I could just convince my buyers that it's OK to make a low ball offer on homes that have been on the market for 90+ days..

JUN

2007

Thanks for commenting folks. I greatly appreciate it. I'll remember you all.

Bruce. One thing I didn't cover in this post was recognizing the "buyers" who are more interested in negotiating than in getting a good home. They usually have to make a couple of offers before they come down to earth. I have dropped a few buyer clients because they wanted to continue making 60-70% offers that never went anywhere. They weren't investment buyers either, just people who thought that the sellers needed them more than they wanted a good home. I don't waste my time with unrealistic buyers. That's why I wrote this. There is a threshhold whereby the buyer becomes rediculous. But, I have a lot of agents who say that they are embarrassed to make low, even 10% low offers. They are the agents who need to learn the stats. I've also often heard from agents that they were concerned about what the other agent would think of them when bringing a low offer. I ask them what they think of the agent who had a home listed at an unrealistic price that isn't selling??

Laurie. I don't get featured often.

Bryant. Do the homework is the key. If an agent knows their market and the stats, they will be on much firmer ground when making offers. I don't know many who really study the stats although they can be a very powerful tool.

Paula. Thanks and exactly what a lot of agents need to hear too.

Gregory. A strong buyer is often the key. When the buyer is strong, their offer will often be selected over higher offers. I've experienced that many times.

Gena. I wrote this article for buyers, but it really is addressed to agents. Since it's going in Localism and since I rarely get featured, I figured I'd just address buyers directly through Localism.

Kaye. We have homes on the market for 6-9 months that have had no offers. Agents just don't encourage low offers. I'm not even talking about VERY low offers.

I agree. I cannot work with no offer. But, if I have an offer, it is a starting place and we can try an make it work. Who knows it is an easy way to save your favorite home.

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