We expect the real estate market to be moving fast this summer. Both buyers and sellers need to be prepared if they want to make successful moves. One major component of any real estate transaction is the purchase offer process. Buyers need to present offers that are as attractive as possible to the seller, and the seller needs to be able to weigh the pros and cons of any offer being presented on their house.
In our experience, a real estate offer is much more than just an agreement of sale that’s structured in a boilerplate template. Any offer a buyer is making needs to be put together with the seller in mind, while at the same time making sure the buyer is getting a satisfactory outcome on their end, as well. How it is structured will make all the difference. Creativity is often the key.
The Essentials
First, let’s look at some of the basic nuts and bolts of any purchase offer:
- Property address and legal description
- Sale price
- Seller’s promise to provide clear ownership (title)
- Financing terms (whether there is a mortgage loan or it’s an all-cash offer)
- Closing date
- Earnest money deposit
- Specific provisions (who will pay for title insurance, home inspections, repairs, etc.)
- Type of deed to be granted
- Specific state requirements (for example, in Pennsylvania, it is customary to provide a Buyer Financial Information (BFI) statement that displays buyer’s income, employment and overall financial means)
- Final buyer walk-through provision
- Expiration date for the purchase offer
- Any additional contingencies affecting the sale
Mortgage Pre-Approval
There is one thing not on the list above because needs additional emphasis. It is extremely important to secure and include this in your purchase offer if you are financing the home. We’re talking about a pre-approval statement (or at the very least a pre-qualification) from a reputable mortgage lender. You want to be able to display that a lender has done some analysis to determine if you are a credible borrower. A mortgage pre-approval shows good financial standing and reduces the risk that there will be complications resulting from a pending mortgage loan that will often derail the closing process. A mortgage pre-qualification is ultimately less valuable than a pre-approval because it is not quite as solid, but it’s still better than nothing.
Understanding the Needs of Both Sides
Ideally, a purchase offer should be as strong as possible to satisfy the objectives of both the buyer and the seller. A buyer is typically most concerned about overpaying for the property and avoiding any surprises when they move in. A seller, on the other hand, is usually focused on net proceeds to them and a smooth closing process, meaning they don’t want any complications or delays (see our point about a mortgage pre-approval letter above). Focusing on the net proceeds is key – these can be affected by a seller’s assist to the buyer or significant repair credits. Too often, sellers focus on the commission paid to the Realtors®. They should be focusing on the net.
The Negotiation Process
The next topic of discussion is negotiating the sales price and any contingencies. This is where it pays to have experience and where having a knowledgeable real estate agent on your side (whether you are buying or selling) will make a major difference.
A Realtor® will be able to help a seller review and understand the differences between any purchase offers being made, thus weeding out the weak ones and identifying the strongest ones. Though your final return on the property is of the utmost importance, there are other details to look at and creative options that may end up making one offer more appealing than another. Maybe one buyer is offering a lower sales price, but they are waiving home inspections, paying with cash or covering the seller’s transfer taxes or other closing costs. You have to review all the details and determine not only which offer will net you the best return, but provide the smoothest closing experience.
Likewise, an experienced real estate professional will be able to help a buyer craft a more creative and attractive purchase offer—one that achieves the buyer’s goals while appealing to the specific wants and needs of the seller at hand. One of the first steps we take on behalf of any of our buyers is to contact the listing agent (or the seller directly if they are not represented by a Realtor®). We aim to figure out what is most important to the seller, what they are willing to give up to facilitate a smoother sale and what they must have before even considering an offer.
Check out the latest Cyr Team Minute:
Creating a Win-Win Situation
Buy looking at the transactions from both sides of the table and understanding what the buyers and sellers are looking for, we are able to craft a purchase offer that satisfies everyone involved. We can start the negotiations off on the strongest foot possible. The buyer’s offer will stand out from the rest. The seller will see that the buyer is serious and willing to make a deal. As real estate agents, there’s nothing more fulfilling than creating a win-win situation for both parties!
If you are planning to buy a home or you are considering selling your house in Chester County or the surrounding communities, contact The Cyr Team today for the best in local real estate representation.