Recently MarketWatch published an article titled "6 Low-ball Offer Errors Home Buyers Make" by Amy Hoak. While all real estate is local, the tips offered by MarketWatch are applicable to Oahu Real Estate.
1. Not Understanding the Market
Before submitting an offer, your real-estate agent should do a full comparative market analysis of the property to determine what its fair market value is, Carlisle said, a Chief Market Analyst in San Francisco.
For instance, it’s still a buyer’s market in the Richmond, Va., area, where Susan Stynes works as a real-estate agent. Stynes said she wouldn’t hesitate to encourage a client to make an aggressive offer, after considering the time the property has been on the market and neighborhood comparables.
But in other markets, like Oahu, a low offer won’t get you far. Sellers today on Oahu see that inventories are down, interest rates are historically low, and there is a pretty large appetite, particularly in the international community, to purchase a piece of paradsie right now. For the most part, but not always, sellers are getting closer to their asking price.
2. Not Picking the Right Real Estate Agent
Some real-estate agents caution buyers against making an offer that is so low it could offend the seller and halt the negotiation process. To begin make sure you are working for an agent with your best interest in mind and not one who has tunbnel vision on the commission at the end of the transdaction.
3. Not Backing Up Your Price
There’s an art to presenting an offer that’s substantially under the asking price. A low offer could start negotiations off on the wrong and you might not even get a response or counter-offer if you are too low. The key is for you or your agent to explain the offer when presented. Make sure your agent includes a cover letter or fax cover sheet with a detailed explanation of why you want to purchase the property and be certain to justify your offer price with market facts. It is truely sad how many offers we see that don't include any explanations or justification, Theresa Harden claims, a Principal Broker for EXIT Realty on Oahu.
4. Not Knowing What You’re Willing to Pay
Buyers these days have a strong motivation to get the best possible price on a property, especially if they believe that home values will fall even more, said Jay Butler, professor emeritus of real estate at the W. P. Carey School of Business at Arizona State University. Their biggest worry is often that people will say they overpaid, he said.
But sellers have limits, too, most often dictated by the amount of home equity they have, Butler said.
Before negotiations begin, it’s important for a buyer to decide what his walk-away price is, Carlisle said. “At some price point, the deal is no longer worth doing, no matter how great the property.”
5. Not Making a Clean and Easy Offer
When you make a low bid, you want other elements of the offer to be attractive to the seller. And a deal that can close quickly often will have appeal. A good Realtor should do a little research and investigation to determine the circumstances that has motivated the seller to list their property.
Back up your offer with your financials. If you are claiming to make a cash offer include the documentation that shows you indeed have the cash to close the transaction. Not making a cash offer then get a lender pre-approval letter. These steps will show the seller that you are serious about purchasing their property.
6. Assuming Cash will Always Get You the Best Deal
Cash is king, but in the end, a seller often wants the most money for his home — regardless of if the buyer needs a mortgage or not. So don’t think making an all-cash bid will automatically mean an accepted offer. In the end, the seller ends up with the cash regardless of whether the purchase is financed or made with all cash. Now if you are purchasing a short sale or foreclosure or purchasing from a bank, cash can have an appeal.
Bottom line is that an offer is only the beginning when purchasing a property. Without an accepted offer the rest of the steps to successfully completing the transaction don't really matter. First you must secure the purchase opportunity with an accepted contract.
If you are fishing with low-ball offers, especially in Hawaii's real estate makret, you may find yourself spending several weeks or even months to find a willing seller. With that said, it certainly doesn't hurt to try. Have a conversation with a knowledgable Realtor who knows and livies in the local market.
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