This is the fifth part of the series Buying a Los Angeles home.
In this post I will address making an offer once you have found THE home.
The actual negotiation of the offer is addressed in Part 6.
You have looked at several homes and are focused on one on which you would like to make an offer. Backing up a little from here, don’t be afraid to make an offer on the first one you see. You don’t have to visit every home on the market. If you like it make the offer, because it is quite possible when you come back to it it may be gone, even if it has been sitting on the market for a while. I can’t tell you how many times a client makes an offer on one of those homes only to find someone else popping up to make an offer.
Your strategy will be somewhat different depending on whether it is a sellers’ or a buyers’ market.
In a sellers’ market new inventory is low and when something good comes on the market in a good area chances are you are not going to be the only person making an offer. Assuming that you are ready to go with your pre-approval letter from a lender, how do you make sure yours is the winning one? Here is where your Realtor® will help you. For the examples below we are going to assume that all the competing offers are from buyers requiring a loan. It is often difficult to compete with all-cash buyers, however sometimes cash buyers’ offers are lower and their terms may not be as favorable as yours. You will know that others are involved in negotiations by the counter-offer you received which divulges that fact:
- Your agent will know how well the home is priced by having compared it with recent sales in the immediate area.
- If it is overpriced you will probably not be in a multiple offer situation and you are going to be negotiating a reasonable price for the home, especially if you are getting a loan. The property has to appraise in order for you to get that loan. Listen to your agent’s advice on where to start your offer. Too low an offer and you may not encourage a counter-offer. You want to keep negotiating until you reach an agreement with the Seller where you are both happy.
- If the property is well-priced and you are competing with others, you most definitely do not want to be starting your offer below the asking price. If so, others may receive a counter-offer and you may be left out. You might even consider offering a little above the asking price, but giving yourself some room to go higher should you receive a counter-offer.
- Another scenario is where the home is obviously way under-priced. This is often a strategy in a sellers’ market to encourage a bidding war among buyers. This is a tricky situation. What do you offer? Your agent will have an idea of were to start your offer, again based on recent sales in the area. In this case the home is most probably going to sell way over the asking price, and at some stage you may not be able to remain in the bidding process.
- There are other ways you can make your offer stand out:
- Lower the contingency period on your inspection. The standard period on the contract is 17 days. You can easily lower that to 7 days. All that means is you have to complete all your inspections during that time-period. If there are problems and you ask for repairs, the clock stops.
- Don’t ask for things over and above what are already on the contract, or options on it (termite clearance, home warranty, etc.), i.e. keep the offer as clean as possible.
- Don’t be offended by a counter-offer. You should be pleased that you received one because it means that the Seller is taking you seriously. Look at the terms being requested and consider them carefully. The Seller may require a longer escrow period; they may want you to shorten the appraisal contingency period, etc. but probably they will be asking you to meet a specific price, or for your “best and final” offer.
The last bullet point is where you need to go all out with the help of your agent. Decide how much you want the home and then pull out all the stops. Generally the conditions are going to involve money, so you need to know your limit and possibly meet it. We will assume that the increased price will still meet the appraiser’s price. These are some options if it does not meet the price.
In any event, your agentis going to help you navigate through this stage so that you end up with the accepted offer. Bottom line, this is not personal, it is business, and if you can put your ego aside. You may be surprised at the outcome.
Buying a Los Angeles Home – The Series:
Step 1: Getting ready to buy
Step 2: Why use a Realtor?
Step 3: Define your criteria
Step 4: Start your search
Step 5: Make your offer (about the purchase contract)
Step 6: Be prepared to negotiate
Step 7: Go through the escrow process
Step 8: Taking Title
Step 10: Prepare for your new home
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