Price Is Not King
No matter where you live, the first thing that comes to everyone's mind when an offer is received is the price. Price is one of the most important items in an offer. There is just no way around that. However, there are many other things that can make your offer stand out and move you up the ladder of preferred offers.
Closing and Funding
In every transaction the name of the game is to close and fund. If you cannot close and fund, the offer means nothing. If it cannot close and fund with the seller's requirements it also means nothing. The more information you can learn about what is important to the seller, the easier it is to craft your strongest offer. Using a good agent can help you obtain more of this information faster and more reliably than most other methods.
Five Points to Tilt The Scales in Your Favor
Items to focus on when creating an offer (in no particular order:)
- Price - to find out what the home is worth you should do a CMA. This will give you an idea of what homes are selling for in the local market. This may not determine your offer but it give you a starting point. The home is worth whatever someone is willing to pay for it. Finding out the price of your offer is determining what you are willing to pay for it. Careful about your emotions.
- Finance - no where else can you better see the proof that cash is king than in a real estate transaction. Why is Cash King? There are no contingencies. If you want the house you can buy it without financing contingency or appraisal issues. If there are no cash offers then the higher down payment comes in second as that increases the chances of financing being approved. Who your lender is can also play a factor. For me, big commercial banks, which typically outsource their underwriting and appraising, are less strong than a lender who does everything in house.
- Closing date and time - does the closing date match up with when my sellers need to be out of their home. The quicker the close the more likely the close. We all know how things can change rapidly from day to day. The less amount of time to close, the less chance of things going wrong.
- Option money versus earnest money - the more option money, the more serious the buyer. Earnest money does not increase the strength of the offer in my opinion. Also the shorter the option time the stronger the offer. This all goes back to figuring out how to minimize the things that may distract the transaction from closing.
- Make things easier for the Seller - this is a catch all area. Their are some traditional items that a buyer and seller pay for with regards to closing. Paying for these or simply not asking for these items make it easier for the seller. For example, in Frisco, quite often the seller pays for the title insurance, the HOA transfer fees, a residential services contract, allowing for a leaseback, etc... Any of these items removed from the seller side increases their net proceeds. You may go for the higher offer amount or you can focus on reducing the seller's closing costs. Both increase the seller's net proceeds, but may make you stand out.
This list is certainly not even close to being exhaustive or strategic. The next time you decide to buy a home, please keep these things in mind. Think about the offer from the seller's perspective. Take time to review the contract you are about to submit as an offer. Engage with your Realtor®. Make sure your voice is heard and you also listen to what your realtor is telling you.
If you are thinking about making an offer on a home in Frisco or the DFW Metroplex, find out what my other clients know, Your Success is My Focus.