I heard from a couple who tried and failed to buy three different homes in the spring. They concluded that they were losing to other buyers who could pay more money in recounting their experience. To get an offer accepted, they would have to overpay for a property, which isn’t something they are willing to do. So they renewed their lease.
Outbid Everyone on Security
Outbidding on price is a choice some of us shouldn’t make without exploring all other options to outbid everyone on security. Structuring an offer to be the highest price is as unwise as it is easy to do. Like a lot of things in life, outbidding on security takes a little thinking. Most people don’t know how to make an offer appealing to the owner who desires safety. Those who have learned realize it’s worth the effort to learn.
Mysteries and Insecurity
Real estate transactions have three parts. Price. A period of time for a due diligence investigation. And a closing date. Offers get rejected or passed over for any or all of these parts. We often think we were outbid on price, and we sometimes believe we couldn’t come to terms with the closing date. I contend that real estate agents and lawyers don’t give enough consideration to the impact of the contingencies that get stuffed into offers. Contingencies make up the due diligence period. The more the seller has to wait for the buyer to complete their diligent review of the property, the higher the level of insecurity. Mysteries are entertaining when they happen to other people, not when our well-being depends on the outcome.
All Ideas are Not Good. All Contingencies are Ideas.
Every lawyer and real estate agent has an idea of something that should be in an Offer to protect somebody from something that happened to someone once. I offer this as an example of a bad idea: A broker insisted the Offer should include a condition that the owner professionally cleans the house (to a specific standard) after moving out and before closing. The problem to be solved is not as significant as the problems the requirement creates. Namely, seller rejects the Offer in favor of one without this subjective condition. And secondly, the provision is ambiguous, and the parties are unable to force each other to accept their subjective opinions on cleanliness.
WHY Do You Need the Contingency
Most homebuyers do not need the protection of many of the contingencies that get included in an Offer. Consider reviewing your Offer with the person who drafted the Offer and explaining to you WHY they included each contingency. If the answer is anything like, “because we always do.” Or “I don’t know.” there is a good chance the contingency is going to work against you. Keep those terms out of your Offer.
A Simplified Offer
You don’t negotiate the price in a seller’s market. You don’t have to overpay for a house either. By removing the unnecessary junk from an offer, you make the Offer more attractive to the home seller. Ridding the Offer of protections isn’t placing yourself in a greater risk, but not divesting some of the protections will keep you from getting your Offer accepted.
Simplified Offers are possible when the person drafting the Offer understands the meaning of the terms. Learning might not be easy, but it’s worth it to your clients.