Purchase Offer

A - Purchase Contracts: Opening offers?

Options to the opening offer: 

You can accept, reject or make a counter offer. Outright rejections should never be made based on the price offered or  because you're offended with it. This will get you nowhere. Forget about being insulted. The only offer that counts is the final offer.

You’re trying to put a deal together. The buyers could very well be testing your resolve or they could be throwing out a wild offer that a desperate seller might accept. In a buyer's market, the buyer's agent is advising his or her client to start low, very low. 

The small down payment:

If you’re concerned that your property might not appraise, look closely at how much the buyer puts down. A minimum amount down (actually less than 20% in today's environment), causes lenders to carefully scrutinize the appraisal.

Understand the lender's position. Anytime a home goes into foreclosure, the lender repossesses the property and then has it resold. The proceeds from that sale need to cover legal fees, administrative costs, perform repairs, maintenance, pay Realtor commissions and then give the lender funds to cover the amount left on the loan.

A foreclosed loan with a small down payment means there will be a large existing loan to payoff after expenses. Therefore, lenders are more likely to reject a loan request from buyers who put down a small amount on a home with a borderline appraisal. 

The large down payment:

Appraisers can almost drive-by a property with 40% or more down and a quick glance tells them that a property will easily appraise.

That’s because if the loan goes into foreclosure, there should be enough money from the foreclosure sale to cover the expenses and the loan balance.

It used to be that you often eliminate appraisal issues when your buyers put down a large amount, especially a third or more of the selling price. Unfortunately, in this unstable job market, the appraisal is only one of many factors that lenders watch.

Multiple offers:

If you’re in a dual offer situation, seriously consider buyers who put a lot down when financing the property versus the buyers who may offer more, but put down next to nothing.

Buyers with a very small down payment have been known to bid higher than the asking price in order to appeal to the seller’s desire for the highest price offer.

Your bottom line:

You may be asked to pay for a portion of the buyer’s closing costs. Sharp buyers who sense that you are fixated on a specific selling price could work the negotiations so that you get your price, while they get you to pay for closing costs that are traditional buyer's expenses.

Always keep your eye on how much you'll net.

First offer–the best offer?

Marilyn vos Savant, in her weekly column "Ask Marilyn",  in Parade Magazine, was asked her opinion on the theory that your first offer is your best offer.

She answered, “When an item–or home–is first put on the market, it gets attention from the largest number of people in the shortest period of time.

At this point, a potential buyer is more likely to make an aggressive offer so that you don’t turn him or her down and wait for better bids. Combine this scenario with the fact that owners often have inflated opinions of their possessions (especially their homes), and it’s clear that the theory makes sense.”

Spoken like a pro.

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