Tag Archives: due diligence

3 Ways A Realtor Can Help You Win in a Situation with Multiple Offers

This is part two of a three part series on how to win in a situation with multiple offers. 

It’s not what you know, it’s who you know…. and what they know.

Many of the strategies I wrote about in the previous blog on how offer terms can help win a situation with multiple offers are only possible when the buyer has a good Realtor working on their behalf. A strong Realtor has a large vetted network of vendors in all aspects of a real estate purchase. From lenders and attorneys to painters and carpenters, a good Realtor has many qualified contacts able to put a buyer in the best position to buy a home. More importantly a strong Realtor has developed good relationships with other Realtors in the broker community.

  • Quiet Listings 

The Realtors behind Matthew and Alisa Group Real Estate Blog

Most sellers would prefer to have their property on the general market but few unique properties are shopped around quietly among brokers for reasons as simple as getting the right price, the sellers do no want the general public in their home, or the sellers does not want their neighbors to know they are moving. No matter the reason, the result is the same, a buyer needs to be in the know when a property becomes available. A good Realtor spends their time knowing the market conditions, the properties on the market, and the other agents working in the real estate sales market in the area and surrounding neighborhoods. So when a new listing is not going on the general market right away, selling agents will contact other trusted agents they know and have worked with to bring a buyer. Agents working for brokerages with deep connections in the community and many active agents will have further access to these quiet listings beyond their own personal network.

In extreme cases where a buyer must waive a mortgage contingency and/or an inspection contingency, advance knowledge or early access to a property can also allow the buyer the ability to have an inspection prior to submitting an offer or get the property approved by a lender before submitting an offer. Our team of Realtors does not believe a buyer should waive these contingencies unless protected. By getting our clients early access to properties we are able to offer them a competitive advantage while protecting their deposits.

  • Home Inspectors

As mentioned in the previous blog, expedited contingency dates and a short due diligence period can mean an accepted offer. Having a Realtor with a network of trusted inspectors means a buyer can offer an inspection date within two days of acceptance. With a list of multiple qualified inspectors to call, a buyer can almost always find an inspector available within two days.

  • Mortgage Lenders

When an offer has a mortgage contingency, a pre-approval letter must accompany the offer. In a multiple-offer situation, the decision can come down to what lender two particular buyers are using. When a buyer is using a big box lender, such as Bank of America, Wells Fargo, Chase, etc., their offer can be viewed less favorably because the arduous and inflexible underwriting can stall, delay, and even kill a deal after keeping the home off the market for two or more months. A seasoned listing agent will advise their client on the risks associated with taking an offer accompanied by a pre-approval letter from one of these lenders. Similar to the network of trusted home inspectors, Realtors have extensive networks of trusted mortgage lenders. Many Realtors have had to step in and advise a buyer to switch from a big box lender promising slightly lower rates to a mortgage lender known for getting to the closing table.

Working with a Realtor a buyer trusts is a key factor in any real estate transaction. However, a seller’s agent will not only look for the best terms for their client, but also the team the buyer has decided to use. Agents want to work with other proven agents because it assures their client the best chance of success. Using an agent unfamiliar with the area and the local customs of a transaction or an aunt who has her real estate license but has not sold a home in four years will not make an offer appear any stronger in a situation with multiple offers.

In the next post in this series, I will discuss how important the lender can be in a home purchase. Unless all buyers start buying property with cash, the lender a buyer uses can make or break a deal.

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How to Win in a Situation with Multiple Offers: Terms

This is part one in a three part series on how to win in a situation with multiple offers.

It’s not all about the money.

In this real estate sales market, with very little inventory available, well-priced properties are getting multiple offers. This is true nation wide and can be intimidating to all types of buyers. From first time home buyers to seasoned home owners and investors, this market is fiercely competitive. Buyers who have been on the losing end of multiple offers, can make an aggressive over-priced offer which can create more burned buyers who feel they need to pay more to get the home they want.

If a buyer are working within a budget has found a home priced comfortably in the selected price range, how can an offer look attractive to a seller without significantly over bidding? An offer includes more than the price. The terms of the offer are incredibly important to a seller.

Before submitting an offer, a buyer should consider the following:

  • Flexible closing date

A flexible closing date shows the sellers the buyer wants to work with them to make their transition as smooth as possible. Some sellers have their next home already lined up and need to sell their first property before they can close on their next. So a quick close would be preferred. However, other sellers may have renovations planned and would prefer to have a later closing, allowing them to perform renovations prior to moving into the new property. If the buyer has the flexibility, make it know to the seller by putting it in the offer.

  • Quick contingency dates and due diligence period

How to Win Against Multiple OffersWhile the closing date may not need to be rushed, speeding up the dates for inspection and mortgage contingency will look positive to the seller. If a deal falls through, it will most likely be at the inspection stage. Because most failed deals fall through at this stage, it benefits both buyer and seller to shorten the due diligence period. If any problems do arise and the deal falls through, both parties are find out early in the process are are then free to move onto other options (the next buyer or the next home for sale).

  • Larger down payment or pay with all cash

A larger down payment or an all-cash offer means one thing to the seller, low risk. An all-cash offer means there will be no problems due to financing because the offer contains no mortgage contingency. A larger down payment looks better to a seller for the same reason as a bank, less risk. If a buyer puts in more of their own money, the less the bank has to lend. With a smaller loan amount the easier it should be to obtain a mortgage.

  • Escalating Clause

An escalating clause should only be used in a circumstance when the buyer must have a particular home and can afford to have an aggressive strategy. Adding an escalating clause means the buyer will offer  a certain amount ($1000 or $5000) over the highest offer the seller receives. The buyer can always cap the escalating clause at a certain amount to to minimize risk should another bidder be overly aggressive and offer far more than the home is worth. Keep in mind the escalating clause is a risky and aggressive strategy only to be used with much consideration.

Other ways buyers are attempting to set their offer apart include waiving the contingencies all together. We do not recommend waving contingencies to our buyers, however if a buyer is properly prepared it is possible to waive both the mortgage and inspection contingencies while still protecting a buyers interest.

  • Waiving the inspection contingency

If the buyer can have early access to a property,  the access can be used for more than a superficial look. A buyer may be able to schedule an inspection prior to submitting an offer. If the buyer is able to preform an inspection and is satisfied with the report, the buyer can submit an offer waiving the inspection contingency with confidence and no risk to the good-faith deposit.

  • Waiving the mortgage contingency

Waiving a mortgage contingency should only be done when the buyer has complete confidence in their financial means and in the lender. We would not recommend waiving the mortgage contingency unless the lender has pre-qualified the subject property. We work with lenders who can qualify a property within 4 days, however in most cases the buyer would need early access for this strategy to work.

Not all of these options are for everyone. If the property you are looking at is a highly desired property, one or more of these options could help you offer stand out among the multiple offers. Some of these strategies also require a buyer to have early access to the property before it is made available to the general public. In the next post in this series, I will discuss how a buyers choice of agent can position them to win a situation with multiple offers.

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The Home Buying Process Simplified

Condo on Boston's Real Estate Sales MarketBuying a home can be the biggest purchase a person can make in their lifetime. For first-time home buyers this can be the most overwhelming and stressful experience they could go through. Here is a general breakdown of the steps you need to take to buy your home.

The first step is to figure out how much can you afford. The most common formula used to figure out how much to spend on your home purchase is equal 3x your annual income. Keep in mind, your mortgage payments together with your other monthly bills should not exceed more that 36% of you monthly income.

Next, you will want to save for a down payment. Depending on the loan you qualify for, you will need anywhere between 3%-30% for the down payment.

Once you have your price in mind and a down payment saved, get a pre-approval letter. This is incredibly important to have before you start your home search. You can get a pre-approval letter from any bank, but you are not locked into an agreement to get your mortgage from that bank. Having the letter can mean the difference between getting your dream home or getting lost in a pile of other offers.

Understand that not only will you need the down payment for your mortgage but closing costs and the other costs that come up in buying a home such as lawyer fees, inspection costs, etc.

Once you have the price and monies ready, begin a list of wants verses needs for you home. Do you really need walk-in closets? How important is a fireplace? Is size or location the top priority?

Now you will want to start talking to Realtors. Make it clear to your Realtor what your price range is and what you want and need in your new home. There are many different reasons to choose a Realtor: their experience, your past relationship with them, accessibility, etc. The most important factor is an understanding of what you want and for you to understand what your real estate agent will do for you.

Now that you have your priorities and a Realtor to help you navigate the real estate market, start seeing places in person that fit your criteria. Don’t feel discouraged if or when your lists of wants and needs change. You may go into this process with one idea of what you want and then you end up with something completely different.

Buying Property and signing PaperworkOnce you find the home for you, talk to your Realtor about making an offer. Your Realtor will explain what is the best price to offer based on a comparative market analysis. This will show you what comparable properties have recently sold for. Whether it is a buyer’s market or seller’s market, listen to your Realtor and make sure you understand the data they are presenting you. The comparative sales indicate market value for the given property which will dictate the best amount to offer. Your Realtor will help guide you through the contingency addendum. The contingency addendum protects the buyer’s interest and deposit money and allows the buyer to re-negotiate or withdrawal the offer based on the results of inspections preformed during the due diligence period. It’s important to do your due diligence about the house you are trying to buy but the more unnecessary contingencies you put in your offer, the less attractive your offer becomes to a seller. If you check off any contingency, you are not only costing yourself more money by having these tests done, but you are inadvertently telling the seller that you want as many ways out of buying the property as you can get. Many sellers would prefer to go with another buyer or even leave the property on the market instead of accepting an offer they think will fall through.

After your offer is accepted this is where the paperwork starts and lawyers become involved. This is when you actually preform your due diligence and have your potential home inspected and tested. If everything comes back to your satisfaction, time to sign the Purchase and Sale (P&S) agreement and to start choosing paint colors and furniture placement.

If you have any questions or are ready to start the process of buying a home, contact the Realtors of Matthew and Alisa Group Real Estate.

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