When following the steps for making an offer, avoid to upset the seller if you want to negotiate your price offer successfully. What is the agent’s role and how can you use the agent’s enthusiasm to get the seller’s acceptance?
House Buying Process
Steps for Making an Offer
You know the Asking Price—what would you offer?
Selling or buying a home is a tough decision for both parties involved. Yes, money matters but at the end emotions drive buyer’s decision. You do not want to miss out, right? So, compared with the asking price (or market value) what $$ number should you put on your offer?
Simply put; the buyer wants a price as low as possible and the seller has reasons not to sell below his threshold. But how to know? The experienced buyer knows that the asking price given by the seller’s agent is higher than the seller is willing to take. That difference you have to figure out by negotiation.
For many the difficult question is how to start the negotiation, what is your starting offer?
That is why rational thinking should guide you for two reasons to stay within your budget and not to upset the seller with the starting offer. Suffice to say, getting a discount on the asking price is everyone’s game.
Getting seller’s attention
Unless you are an experienced property buyer doing comparative market research, your first offers are more attempts of “try and error”. In this article you will find how to start the negotiations in both—the seller’s and buyer’s market. With this information you should be able to avoid a starting offer that might stall the seller’s attention.
Dealing with the opposite situation, when your offer was too high, it can be corrected during the due diligence investigations, as here illustrated. What not to do is to ask the selling agent what price the seller would accept. However, I always ask what the seller would consider as a “fair price” and then to get clarifications how to justify seller’s expectations.
Agent’s role when making an offer
Some willing buyers forget that real estate agents are highly trained and experienced to represent the seller (vendor), because they are so helpful to influence buyer’s decisions. In fact the agent is legally obliged to act in the best interest of the vendor.
Selling agents are masters in driving the sales process by creating a sense of urgency or competition (multiple buyers) to secure the best possible price for the vendor. The best way for you as buyer is to get your best offer across the agent and accepted by the vendor. Don’t be focused on price only, your conditions and DD investigation make or break the deal.
Use the agent’s enthusiasm to get the seller’s cooperation for executing your due diligence. Anything in this process gives you the option to re-negotiate your position. How to do that review the due diligence process. A good deal always has two satisfied parties and a good agent makes the difference. That is obvious while the agent only get paid unless the sale is unconditional.
Assuming that you found a property you want to purchase. The first step would be to find out everything important to you about the property and the seller. A good agent would try to hook your attention and be helpful for making an offer.
If you have a good feeling, you would as second step prepare the conditions you want to put on paper. A good agent will guide you through the paperwork. On few things you need to pay attention;
· Legal name(s) of the purchaser. It can be your name, company, trust, etc. Are you buying as couple or with somebody else (joint tenancy, tenancy in common)? If you are not sure — take legal advice.
· Be clear about your budget and keep a reserve for upcoming negotiations. You need to fill in a Dollar amount as deposit and the purchase price (your offer inclusive deposit). For the coming negotiations with the seller not the asking price the sale price must be the focus. Be knowledgeable about market price (value) and valuations like CV/QV and RV.
· Pre-offer inspection: Use this viewing to adjust your first offer accordantly for getting at least a response from the seller to work with. I always do a viewing for personal considerations (looking at the value for money—see next page)
· For preparing the paperwork you need clarity about your preferred time line regarding settlement and due diligence. The pre-offer inspection will help you to pick the right DD clauses for the offer.
TIP: Some buyers prefer to have a valuation done prior completing the offer. Well, the seller might not accept your valuation and you paid for something before the seller’s response. It is wasted money if the seller’s response I “NO”.
Pre-offer double check
Before you meet with the seller’s agent to complete and pass on your offer make sure:
Read the tips—What get home buyers commonly wrong?
Obtain a mortgage pre-approval from your bank. That helps staying within your budget during the negotiation. Don’t tell the agent your limits. Consider a DD-clause instead of a finance clause.
Double check the information received. We all know there is a grotesque problem with the quality of information, but also where the information come from. Also be aware, different countries have different laws and regulations.
Take it or leave it offer: If you are not able to do comparative market research you could put your cards plain on the table by saying—that is my $$ offer and be prepared to walk away.
The pre-offer inspection makes sure you know what you are bargaining for. I always need certainty that the selected property is worth my attention. Take these tips as summary when viewing a property.
Final step—What to put on paper?
Your offer (on paper) is the begin to negotiate with the seller. The initial offer is just to bring the parties to the table. If the vendor is not responsive, everything (that costs you money) will be in vain. That is why I engage professionals for legal advice, registered valuation, building inspections, etc later during the due diligence process.
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