Consider Buyers’ Motivations When Making an Offer

Put yourself in a position of strength in multiple offer situations.
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Sold Sign

By: Kris Berg

When the time comes to write an offer to purchase a home, buyers are typically focused only on the motivation of the seller. In this market, it is equally important to consider the motivations of the other buyers with whom you might be competing. True, housing markets in most areas of the country currently favor the buyer, but with declining prices and a rising number of distress property sales (short sales and foreclosures), we are seeing more and more homes in multiple offer situations.

Unless your goal is to accumulate a scrap book of rejected offers you will one day share with your grandchildren, it is critical to seat yourself in a position of strength at the negotiating table. The chair you select will be dependent to some extent on the circumstances of the home in which you are interested.

Lender-controlled sales

Lender-controlled sales are sales in which the lender will ultimately be approving the offer. These include both short-sales, where the seller's debt exceeds the projected proceeds, and bank-owned properties (foreclosures). Lenders are busy, busy people today. They have mile-high piles of hardship files to review, and their response times to purchase offers do not exactly shock and awe.

Lender-controlled sales tend to attract the deal-seekers, and the "low ball" offer is common on these homes. Yet, it may take a month or two or more from receipt of the first offer for a lender to respond. In the meantime, other buyers are submitting offers, each with knowledge of all who came before. Therefore, successfully negotiating a purchase contract on a distress property often comes down to simple luck of timing; the last one in the door has the best chance of success.

Traditional sales

When a seller has equity and is calling the shots, your approach to writing a purchase offer will be different. The more attractively priced and staged homes frequently enjoy multiple offers, even today. In these cases, it is critical to remember that you are offering to purchase a home. A home, unlike a share of stock or a gallon of milk, is inherently emotional -- if not to you, then to the seller. A strong offer price will certainly be compelling, but there are other things you can do to help your offer stand out.

  • Personally introduce yourself in a letter to the seller, and use this as an opportunity to be complimentary of his home. Few sellers want to think that the next owner is going to begin redecorating their source of pride with a blow torch the minute the deed transfers.
  • Be prepared to negotiate. "Take it or leave it" offers are rarely met with high-fives and bear-hugs from the seller, regardless of the price. In negotiations, everyone wants to feel like they were in control and that they prevailed.
  • Don't be unreasonable. There is value, and then there is crazy-talk. If you are prepared to pay 10 percent less than the asking price, do not offer 50 percent less and then ask the seller to throw in his bedroom furniture and a pony.
  • Offer something of value which costs you nothing. Be prepared with a strong pre-approval letter, and offer terms most attractive to the seller. Maybe they want a fast close or a long rent-back. Consider strengthening your earnest money deposit or even shortening your investigation period. Convey that you are serious. Your offer is only as good as your ability to close.

Today's real estate market is teeming with opportunities for the buyer. Great values, values relative to prices a year or two or more ago, are plentiful. But, market value will always be determined by what a buyer is willing to pay. This buyer might be you, but if you are unprepared, it will probably be someone else.

Kris Berg is a broker associate with Prudential California Realty in San Diego, Calif. Visit her Web site at www.SanDiegoCastles.com and read her blog at www.SanDiegoHomeBlog.com.

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