The amount of thought and consideration that goes into the structure of a purchase contract before it is written will make the difference between acceptance and rejection (or countless counter offers). That’s a bold but true statement.
It is crucially important for your Realtor* to KNOW several things not the least of which is the Sellers true motivation and timing for selling. Sales are constructed of more than just price, although price IS a huge factor. Net cash in the Seller’s pocket; Ease of transaction; Moving terms or rent back; timing or closing flexibility are all things to carefully consider.
Net cash to the Seller-
*An over asking price offer;
*Terms of escrow costs – who pays what including transfer taxes or even property taxes.
*Net cash would also include potential inspection costs which in this market most Buyers pay.
Ease of transaction-
*Cash- is one of the easiest especially if the appraisal is waived (Could be a show stopper if buying over list price). When I represent my Seller, the appraisal waiver is a requirement.
*Pre-approved loan. This is where lending knowledge helps. There are many types of pre approvals that are issued. Not all are what I would consider valid. Highest on my list, when scrutinizing the approval prior to presenting an offer to my Sellers is an actually underwritten pre approval. That is where credit, income, and assets have been actually reviewed by a physical underwriter and only the property still requires adding for a final underwriting to close. This type of pre-approval is a REAL approval and nearly as good as cash. (If you are my Buyer, this is the pre-approval I will ask your lender to provide.)
Other types of “pre-approvals” that come across my desk with offers are;
*Automated approvals. Here the credit is viewed and income and assets may or may not have been reviewed by the loan officer. Some have only the stated information from the loan application and the approval is based on those values. -This is the weakest kind of pre-approval and typically come from bank loan centers. A stronger automated pre-approval without actual physical underwriting is one where a seasoned loan officer has gathered the supporting documents for income and assets including pay stubs and especially tax returns. In these cases, the whole package Buyer and property information go to underwriting at the same time.
*Occasionally, I still see a Pre-Qualification disguised as a pre-approval. These are weak and unacceptable. It is crucial that listing Realtors review and call it out for what it is… Nothing of value and risky.
Moving terms or rent back; timing or closing flexibility-
Here the amount of communication between the listing agent and your Realtor is most important. These terms can make or break the best offer, especially when there may be more than one. If it is assumed that a fast close will give one the advantage- you could lose to a contract that specifies a longer escrow with a cash deposit release to the Seller within 30 days and a 90-day close. This may be most attractive to Sellers who have resided in the property for over 30 years, having lots of things to move and decisions to make about rentals or storage or new purchase ALL based on this sale. The release of deposit can also help the Sellers offset their costs for the pre-COE move. There are many Seller motivations for sale and timing. That’s why it is crucial that the Buyer’s Realtor communicate well with the listing Realtor to ferret out what a Seller’s true “hot buttons” could be.
Perhaps, a quick close is the best approach- but with a Seller rent back allowing the seller more time to move. The rent back could be as short as a few days or as long a few months. The amount of the rent is also a consideration and can have a favorable impact on the “net proceeds” mentioned above. Free rent for those few days or even up to a month. Typically, the rent backs are prorated based on the Buyers new and actual PITI payment.
I hope this helps you get a better picture of the crafting and some of the items that could go into a “winning” purchase contract. For more information or help with an upcoming sale or purchase please contact, me Ingrid Pierson at HomeTown Realtors 916-709-5626 or through my email email@example.com .