BUYER’S ARTICLES – FOR THE SMART CONSUMER
Realtors say that one of the most disheartening situations for a potential homebuyer is having his or her offer rejected by the seller. Obviously, the seller is under no obligation to accept any offer. However, educated buyers stand a much better chance of having their offer accepted by even the pickiest seller.
First-time buyers are often unaware of current trends in the real estate market. They also tend to listen to the advice and experience of their parents, friends, coworkers or other veteran homeowners. A good realtor should be prepared to offer you valuable information that can help you buy the home you want at the price you want to pay.
Realtors have access to statistics and trend information that others do not have. Depending on the market in which you intend to buy, a realtor’s advice could mean the difference between a rejected bid and a successful closing.
Listen to your friends and family when it comes time to select a remodeling project, but listen to your realtor before you place a bid on any home. Realtors are valuable advisors, because their experience has taught them how the housing market varies significantly from area to area. In some areas, potential buyers are able to successfully place bids for less than the asking price of a home. But there are areas of the country where buyers need to offer five percent or more over the asking price before their bids are accepted.
You are generally better off when you make an offer that you know the seller is expecting. Of course, in an area where bids tend to be less than the asking price, you may be able to guarantee success if you offer two percent over the listed price.
The following is advice will help you, as a potential buyer, be as prepared as possible before placing a bid.
Know Your Limits
This is especially important for first-time home buyers, who are often unaware of the cost of maintaining a home. When you begin searching for a new home, you should seriously consider how much house you can afford. This means that you need to look not only at your current finances, but also your anticipated finances five, ten and even 20 years in the future.
A buyer who earns $5,000 a month can easily afford a $1,000 monthly payment while he or she is single. But what if the buyer later marries and has five children? Of course, you cannot see into the future, but you need to consider the possibilities for your future realistically.
This is something that your mortgage lender will never tell you. The lender’s goal is to make money by lending you money for the purchase of a home. The more you borrow, the more the lender earns. The lender will evaluate how much you can pay per month now, but will not delve into your financial future to predict future affordability.
Therefore, you need to know what you can afford well before you begin the home-shopping process. This knowledge makes the bidding process more succinct. When you know what you can afford, you know how high your maximum bid can be.
Have Cash in Hand
First-time homebuyers often have a significant advantage over repeat buyers, because their realtor advises them to be not only pre-qualified, but also pre-approved for a mortgage before they begin looking for a home.
First-time homebuyers also do not need to worry about selling their existing home before cash will be available to close the sale on their new home. Having cash for a fast closing, within thirty to sixty days of the bid acceptance, makes a buyer more attractive to the seller. This, in turn, increases the likelihood that the bid will be accepted by the seller.
When you are selling and buying simultaneously, your bid usually has a contingency. A contingency is an option for the buyer to back out of the sale should his or her current home not sell in a specified amount of time. Most sellers would prefer to avoid contingencies, for obvious reasons.
Offering a significant amount of “hand-money” or “earnest money” will signal to the seller that you are serious about buying the home. The general rule is to offer two to three percent of the bid amount to the seller. However, realtors advise potential buyers to offer more, especially in areas where housing is in high demand or when a home is perfectly maintained and requires no repair. When you offer ten percent or more of the bid price as earnest money, your bid will receive the seller’s attention and you will most likely win the bidding war.
Ask for as Little as Possible from the Seller
This doesn’t refer to straight cash. Realtors know that potential buyers’ bids can come with many restrictions, requirements and requests directed at the seller. Since the seller wants to sell the home as quickly as possible, and with minimal out-of-pocket expenses, it makes complete sense to offer a clean bid whenever possible.
A clean bid comes with no contingencies, requests no repairs or updates, and offers a fast closing. In a perfect world, all bids would be this way. But ours is not a perfect world, and sometimes bid clauses are necessary.
Speak with your realtor, and perhaps the seller, to identify your best options are for adding contingency clauses to your bid.
In a high-demand market, any contingency clauses could lead to a bid rejection. You can reduce the likelihood of rejection by offering significant earnest money that other buyers may not be prepared to offer.
Ask for a Fast Closing
A quick closing, generally within thirty to sixty days after the bid acceptance, is very attractive to the seller. The sooner the closing, the sooner the seller can relocate for a new job, be relieved of the financial obligations of the home, and close on a new home purchase. Sometimes, when you are able to offer immediate closing, you will see that your bid is accepted even though it is not the highest offer.
By following a realtor’s advice, you will have a definite advantage when you make an offer on a home. Here is one final piece of advice that relates not to what you should put in a bid, but rather to what you should not put in a bid.
Insist on a Home Inspection
A popular seller contingency in today’s hot market is to request that the potential buyer agree to forego a home inspection prior to purchase. This is a bad idea.
As a potential buyer, when you opt not to have a home inspection, you are assuming that the home you will purchase is free from all structural problems and other defects. You cannot afford to assume this, because in rare cases the cost of repairs for major structural problems can be almost as much as the price of the home itself.
For more tips on how to get your bid accepted, make an appointment with your realtor, whose years of experience and wide base of expertise can give you access to the resources and information you need to get you into your dream home quickly.