Of course every year comes with its highs and lows, but I miss the days of being able to write contracts sight-unseen and have an acceptance in my mailbox by 5 o’clock. I miss the days of being able to write a full-price offer with no contingencies, generous earnest and down money and know for certain I had the deal Ziplock sealed. I miss having more than 3 properties on the market that matched my clients’ criteria. I miss not having to compete in brutal multiple-offer situations and tacking on escalation clauses and absurdly high earnest money (ya feel me?).
In hindsight, last year’s market seemed just about ideal. Then, buyers at least had the time to think before putting in an offer. Now, it’s not a bad idea to have a contract prepared BEFORE you even walk into a property (and if you don’t, well... you’ve already lost before you’ve even begun. Yikes.)
Rough, I know, but that’s just the reality of the market today. We are in a housing crisis (not to be confused with a recession) meaning we don’t have enough real estate to meet the demand of buyers. In fact, sales of new construction rose faster in June than any month since 2005. Rather than too many houses, this particular market is defined by having historically LOW inventory and undersupply of single-family homes, due largely to insufficient building, and now, a government mandated shut down of new construction in much of the country (Learn more here)
Now, I have no idea what your local market is like, but if it’s anything like mine, then I’m sure you’re struggling with these very things. Even with 14 years of experience and good rapport with my fellow agents, I am still having to fight tooth-and-nail for my clients. I’ve been turning my wheels these past few months trying to figure out the exact formula for writing an offer that sells - and, although some things are completely out of your control and sometimes your buyers just absolutely can’t compete, I have a few tips and tricks I’ve learned that can help your offer SHINE.
So, let’s get to it!
Earnest Money - This of course, is your consideration for the offer, or - in fancier terms - the deposit made to a seller that represents a buyer’s good faith to buy a home. It serves as proof that your buyer is committed to completing the sale by having skin in the game. The more money you encourage your buyers to put down, the more seriously they will be taken by the seller (in most instances) - also suggesting your buyers want this home MORE than anybody else and are therefore willing to risk more of their own personal cash to secure it. Many agents recommend putting down 1-2% of the purchase price, but in an aggressive market it can be more beneficial to offer an earnest money deposit in the 4-5% range.
Price - The worst thing you can do in a competitive market is offer LESS than the listed price. With 7+ offers filing in on the first day, your offer will easily be shoved to the bottom of the pile and won’t even be considered for a back-up (ugh. rude). But, look at it this way, if you were on the opposite end (meaning you were the listing agent) and had a half-dozen offers landing like hotcakes in your inbox and some Joe Shmoe agent sends you a text saying, “Hey, I just sent something great to your inbox,” only to discover he offered $10,000 less than asking price, meanwhile others have sent $10,000 OVER, plus an escalation clause of $2,732, would you give Joe Shmoe any consideration?
Of course you wouldn’t!
Joe, it’s nothing personal... You just have to know how to play to compete.
Terms - This involves a buttoned-up, no B.S. kind of contract. A few Dos and Don’ts to consider when filling out this section include:
Financing - If you’re a 100% financed deal… I wish you the best of luck, my dear friend (at least that’s the case here in my market). Not to be dramatic, but as we all know, cash is Queen B when it comes to a real estate transaction. Of course, not all of your clients can have $420,000 just hangin’ in the folds of their Louis Vuitton, but there are a few things you can do to make your financed deal more appealing to sellers:
Dates of the Offer - A 30-day close is ideal (again, that’s the case in my area. It could be different in your neck of the woods). Although, some lenders will occasionally request for a longer time period when they are being overloaded with appraisals for refinances. When speaking to your lender, be sure to let them know you will likely be competing and ask them if they can handle a quick and seamless 30-day close.
Additionally, a due-diligence period which extends longer than normal often makes the seller leary of taking your offer. Naturally, they’re excited and anxious to move forward with the transaction. A longer due-diligence or extended closing is definitely NOT in their best interest… or your clients. Of course, your buyers need a reasonable amount of time to feel 100% confident with proceeding forward, however a standard of 15 days is usually a good rule of thumb when determining a due-diligence time frame.
If you’re dealing with a cash offer, they typically can do a quick closing. Remember, if you miss out here you can always request to be a back-up offer.
And at the end, there is still a possibility of missing out on the deal... And it’s totally okay. I miss out on deals too! Don’t get discouraged, my friend. Just keep in mind, the best thing you can do for your client is to let them know that you’re in their corner always and they can count on you to be relentless in the search for their dream home. Be there for them. Be supportive and uplifting. Be inspiring, encouraging and proactive - because there is absolutely nothing worse than disappointing your clients with a “no go” for the upteenth time.
Time to pick up the pieces and try again.
You’ve got this!