In our last episode, Bill and Betty Buyer were sitting down with their trusty Agent, Realtor Ron, to draft an offer on their dream home. They had spent the past 3 weekends touring dozens of potential properties, when they finally found just the perfect place!.
When it came time to discuss the offer price, Bill proudly asserted, “We’re going to offer them $50K below the Listing price, and ask them to pay closing costs too!”
Pulling his jaw off the floor, Realtor Ron looked down on the MLS data-sheet for the subject property.
“Their home has only been on the market for less than two weeks,” Realtor Ron stated.
Pulling up statistics for several comparable properties in the same neighborhood that had sold in the past month, Realtor Ron showed the Buyers how the property was actually priced very aggressively, below many of the most recent sales. In addition, a quick check on the County Website revealed that the home was priced just below the property tax assessed valuation as well.
“But it’s a ‘Buyer’s Market,” responded Betty Buyer, “Aren’t all Sellers desperate?”
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There is this tendency when the market softens and slows down for Buyers to expect greater bargaining leverage when it comes to home sales prices.
In the event that you, as a Buyer, decide to offer less than the asking price, there are definitely some strategies you can employ that will help to improve your chances for success.
Just understand that each property and Seller presents a unique set of circumstances, and each needs to be considered separately.
The offer price is just one element to a contract offer, albeit the most predominant. The key to being successful in offering less than asking price is to strengthen all of the other elements of the offer. Here are some suggestions:
1. Cash Buyer: Obviously, the old adage ‘Money Talks’ still bears true today. Cash Buyers will almost always have the greatest degree of negotiating power in a real estate transaction. But let’s face it, the overwhelming majority of Buyers today require some amount of financing.
2. Letter of Loan Pre-Approval: Okay, so if you’re in the clear majority, and plan on using a mortgage loan to purchase the house, then you need to effectively convey/communicate your financial solvency and ability to satisfy the contract. One way this is accomplished is through an official Letter of Loan Pre-Approval furnished by your mortgage lender (always make them ‘address specific’ and not ‘dollar amount’ specific).
3. Letter of Buyer Introduction: Another method I have found to be effective is to draft a Letter of Introduction about my Buyers that serves to put ‘flesh’ on the offer. It helps to divert the attention away from ‘dollars & cents’ and puts the focus on real people trying to achieve their dreams. I know, it sounds corny, but trust me, it works.
3. Earnest Money: One of the purposes behind offering earnest money is to demonstrate the seriousness of your intent to purchase. It makes a statement to the Seller about how much you want their home. If you’re going to be skimpy on the offer price, then soothe the wound with a hefty earnest money deposit.
4. Make it a ‘Clean’ offer: Make your offer as straight-forward and with the least amount of ‘hoop-jumping’ as possible. This means eliminating or reducing any redundant contingencies or addendum.
5. Other Seller Considerations: One of the things I always ask the Listing Agent before drafting an offer is “Are there any other considerations besides price that are important to the Sellers?” You’d be amazed at what is important to some Sellers other than the sales price. Some want an accelerated closing. Others a delayed or extended closing. Sometimes accommodation to these other considerations can make a huge difference.
This is, by no means, an exhaustive list of elements you can vary or strengthen to better position yourself when submitting a low offer. In the next installment, we’ll talk about the risks associated with submitting a low offer.
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Rich Jacobson is a licensed real estate professional providing knowledgeable empowerment and relentless representation for his clients of residential properties and vacant land throughout all of Kitsap County WA and portions of Pierce, Mason, and Jefferson Counties. You can also find him at KitsapLife.com and Crabbing in the Hood.