Making a Compelling Real Estate Offer

Making a Compelling Real Estate Offer

Ken DeLeon and Michael RepkaAugust 16, 2013
Palo Alto Daily Post


As we move from the hot spring market into the more temperate summer market, and the inventory of homes on the market continue to increase, buyers should face less frenzy.  Nevertheless, there will be multiple offers and sellers will continue to consider more than just the price when determining which offer to accept. There are many other objective factors including:  length contingencies (if any); the quality of the lender that provided the pre-approval letter; the amount of the down payment; and the amount of time buyers will need to close the transaction. Additionally, there are many subjective factors that warrant consideration such as: the strength of the offer presentation; the experience and reputation of the real estate agent; and, the organization of the offer itself.

Objective Factors

Price is certainly important, but there are a plethora of other elements that impact an offer’s desirability.  Given that an offer becomes a binding contract upon acceptance, it is certainly critical for the buyer to secure all of the protections necessary when making such a significant purchase. However, buyers should realize that each contingency makes their offer somewhat less attractive to a seller.  In other words, most sellers will want a higher purchase price to justify the increased risk associated with a contingent offer, especially if there are other alternatives. 

Buyers occasionally reduce their offer’s competiveness by including contingencies that are unnecessary or duplicative and by including contingencies that take a longer than necessary to remove. Therefore, buyers and their agents should review all the contractual terms of the offer to determine which protections are necessary, but not excessive. By doing so, the buyer may be able to make his or her offer more appealing without taking unreasonable risks.

A good agent may be able to draft contingencies that are narrower than the language included in the “standard” forms, and the customized contingency may still provide the desired protection.  For example, a buyer that wants to make sure that they can build a second floor could include a contingency that is limited to that determination whereas the standard language in the contract would give the buyer the right to cancel based on their subjective determination of the circumstances related to “all physical and non-physical aspects of the Property and any other matter, on on- or off-site…”  Conversely, some buyers include separate contingencies for a variety inspections or reports when the standard language is broad enough to cover these items. 

Presentation Style

In Palo Alto and the surrounding communities, it is very common for agents to present their client’s offer in person. Sellers may choose to accept offers that are slightly less favorable because they experience a personal connection with the agent or the buyer. Alternatively, on rare occasions there are sellers that are off-put by an agent’s lack of professionalism or ability to respond to questions, and those sellers may accept a lower priced offer presented by a different agent rather than continue negotiations with the offensive agent.  Therefore, buyers should consider the agent’s charisma, experience and negotiation skill before moving forward with the transaction.  

Reputation, Experience and Organization

In addition to the offer presentation, sellers may consider the buyer’s agent’s experience and reputation. Agents with a track record of proven results and a strong reputation for integrity may instill confidence that the buyers have been properly prepared and informed— and that the transaction will be smooth.  Additionally, experienced agents may be more knowledgeable about possible restructuring opportunities that may mitigate the risks on the seller’s side without imposing a significant risk on the buyer.  Experienced agents may be better able to respond to questions from the seller or the listing agent.  

Along the same lines, sellers are also more likely to work with a buyer’s agent that is well organized and detail oriented.  Thus, an agent that has a thorough understanding of the transaction process and presents all the signed disclosures, a strong pre-approval letter (verified by the agent prior to presenting the offer), and a detailed verification of funds, is more likely to have their offer accepted.  Buyers may want to ask their agent exactly what they present when they deliver an offer to the listing agent.

When selecting a real estate agent, it is important to remember that he or she will be representing you in the negotiation process. Therefore, the agent will need to understand how to structure the contract in a way that is persuasive, appealing, and compelling to the sellers. It is important that your agent consider both the subjective and objective factors in order to help you get the home of your dreams at the best possible price while securing all your necessary protections.

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