Making an Offer in the Bay Area's Competitive Market

Making and offer in the bay area's competitive market can be very intimidating to even the most savy buyers. It is important that you work with a realtor who can help guide you through the process and get you an accepted offer. 

First off, congratulations on identifying a property you are ready to make an offer on! No property is "perfect" however, this means you have found a property in which the good outweighs the negitive. In a competitive market, such as the bay area, often it is the buyer's motivation that will get an offer accepted. At this time, homes are selling with multiple offers, often a significant amount over the list price. When you find the right property, it is important that you make your highest and best offer. We have seen sellers accepting offers without giving buyers a second shot at raising their offer price in a counter offer situation. On occsasion, the seller may counter the top two or three offers only. Before you write your offer, there are a few considerations that should be made ahead of time.

What price should I offer?

Comparable sales are an excellent way of determining current and potential property value. Appraisors use comparable sales from the last 4-6 months to determine value. However, market conditions must be taken into consideration when determining value. In a slower market, typically a home will bring in a couple offers, and homes will sell close to the list price +/- a few thousand. In the bay area's competitive market, list prices can be seen as a benchmark from where bids are to be made. For monthly sold reports showing the list price and sales prices of homes in your area, please visit my website www.rewardrealty.org.

When do I need to finalize the lender that I choose to purchase with?

Buyers often make the mistake of thinking that they will receive the rate quoted to them when shopping around, or receiving the pre-approval. Your interest rate cannot be locked in until the bank has a ratified purchase contract, signed by both the buyer and seller. Service is the #1 thing you should be shopping for. A good lender will help you make a competitive offer by minimizing your financial and appraisal contingencies. It is also important that you work with an expert who can meet these deadlines on time. I have a couple of lenders that I work with and refer to all of my clients. To make it easy, I have provided their contact information and a link to their online application.

What happens if the home I am purchasing does not appraise at the sales price?

If you are acuiring financing to purchase your home, the back will order an appraisal on the property to ensure they are not lending more than the home is worth. If the appraisal comes in at anything less than the purchase price, the bank will not fund the loan. In these cases, you have a few options as to how you would like to proceed. 

1. If you have an appraisal contingency, you may pull out of the transaction and receive your deposit back with no questions asked. The same goes for a financing contingency if all else fails. 
2. You may order a second appraisal to be done. If the second appraisal is successful, then you will be able to move forward with the transaction as planned. 
3. In a worst case scario, you have the option to pay the "gap" amount between the appraised price and the purchase price. This would be paid out of pocket, in addition to the down payment. 

What does it mean to make a non contingent offer?

A non contingent offer is one where the buyer is liable for going through with the purchase, and leaves your deposit at risk if you need to pull out of a transaction for any reason. Although non contingent offers are very attractive to sellers, please do not consider making one unless you can afford to lose your deposit if you cannot receive financing or choose not to move forward with the purchase.