How to Make Your Contract Look the Best

Many people have little understanding of the process of purchasing a home, especially when it comes to the subject of real estate purchase contracts. In this post, I will discuss contracts, explaining how deals fall apart and offering suggestions for how they can be strengthened.

Let’s say you want to “make an offer on a home.” You obviously have to decide on an offer price. Everyone knows that part. What people typically don’t realize is that there are literally hundreds of other points a buyer and seller can negotiate IF they know what makes sense. As a buyer, you can request other items at the time you write up the offer. The following pointers should help you prepare your offer in such a way that it will stand the best chance of being accepted.

1) Make a realistic offer. Your offer can and should be “low,” but people who advocate offering 60%-40% off list are dreaming. Such an offer only serves to offend sellers and probably evoke hostility. In most situations, there has been a “lead up” to the offer being presented to those sellers. The sellers know a buyer has come to see the property, and 99% of the time, the listing agent has gotten word that those buyers are very interested and have been asking questions. This information has been relayed to the sellers. When the sellers see an offer for half of the price, it’s an emotional disaster for them. Now try to negotiate with them and see how well you do!

2) Back up your offer with accurate comps of homes you have seen in the market. Include pricing and a summary of your reasoning that supports the offer for the property. This helps the sellers to say, “Well, at least we have an offer,” and puts them in the mindset of wanting to work with you rather than just shooting back a counter offer. Keep in mind that the sellers probably already know about the “comps.” It won’t be a surprise.

3) Offer a quick closing. Why? People are much more apt to take a little less for their home if they can get the pressure of the transaction over with sooner rather than latter. No one likes strung out engagements. If you cannot close within 30 days of finding the perfect home, you most likely should not be out looking. It will usually only hurt your negotiation stance.

4) Keep the contract language simple. Just ask for the price, closing costs, and warranty without specifying a lot of details. For example, instead of itemizing a $250,000 offer price, with seller paying $1,000 for closing costs, 1 discount point (about $2,500), appraisal fee (about $300), home warranty (about $350), simplify it as $249,000 offering price and $3500 in seller closing costs. OR even simpler, if you don’t need the closing cost money, just offer $245,500. Now all these offers are nearly identical, but if you ask for fewer items, the chances of your offer being accepted go up astronomically. The last one for $245,500 is much easier to say yes to than the first approach.

This entry was posted on Saturday, August 9th, 2008 at 3:50 pm and is filed under Buying. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.