How do I make my offer terms look better? And other questions...

Asked by Debi Stoliar, Oakland, CA Thu Aug 9, 2012

Quick background: I've been looking for 7 months, at first it was loft condos, then we moved on to houses because of lack of inventory. In the past months we have put in 8 or 9 offers, 2 of the most recent ones were 25k and 30k over asking price. The latest rejection was today for a short sale, our offer was asking, same as the winning offer, but their "terms" were better. I've asked my agent how we can make my terms better. I have looked online for advice. I have not been able to come up with a good answer and the most my agent has done was shorten a few periods of time. I'm not willing to remove an inspection contingency, that sounds like trouble. What should I do?

Also: I know nobody can predict the market, but was is the general opinion on things slowing down by fall/winter? I've been at it for more than half a year. I look at new listings every day. I've been going to open houses every single weekend for months. Is there light at the end of the tunnel? I'm getting desperate!

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The Medford…, Agent, Fremont, CA
Mon Aug 13, 2012

An age-old definition of insanity is, “Doing the same thing over and over, yet expecting a different result.” If that’s true, then there is a lot of insanity occurring in the Bay Area housing market. It goes like this: a house hits the market, buyers come in droves, many offers are written, one gets accepted, everyone else waits for the next home to appear … lather, rinse, repeat.

Using simple math, if twenty buyers write offers on any given home and only one gets accepted, then the next comparable home can expect to see … nineteen offers. To a degree, that’s what has been happening. We’ve actually seen offers from the same buyers on each subsequent listing we marketed. And that is not allowing for the fact that many new buyers are jumping into the market every week, realizing that if they don’t act soon, they may get priced out for good.

If a buyer is really sincere about getting a home in this type of environment and wishes to bypass the circle of insanity, then they really need to up the ante on each successive home on which they write an offer. In some cases, substantially. They not only need to raise the offered price, they must change all the other terms as well. And therein lays the quandary: frequently offering prices escalate far beyond the point where the house will actually appraise. Sellers are now insisting that offers no longer have appraisal contingencies. This means buyers must be willing to pay the difference between the appraised value and their offering price. To be honest, we don’t recommend writing offers with contingencies removed.

In reality, many buyers don’t have the necessary cash to bridge the chasm and also have no way of obtaining additional funds short of crazy schemes like lottery tickets. FHA and VA buyers are taking it in the chops, both in terms of extra cash and property condition – many sellers are now insisting on sales being “AS-IS.”

Truth is, we all hope things will settle down. Soon. Although the current market may be a boon for sellers, it’s definitely alienating buyers, many of whom are bailing out until things calm down. Whether or not they will have been permanently priced out of the market remains to be seen. The current market is unsustainable for long – perhaps the departure of numerous buyers will be the required dose of reality to help things cool off and come back to some semblance of normalcy.
1 vote
Taylor Suble…, Agent, Oakland, CA
Thu Aug 9, 2012
Oakland is currently the holder of the title of shortest days on market in the country. It's not your imagination. Properties are getting snapped up fast.

You are correct in that you should keep your inspection contingency, but make it as short as possible. Seven days is enough if you work quickly.

See if you can find out what terms you are being beaten by. All-cash? That's a hard one to beat. If you are using an FHA loan, that can be a huge hurdle in a competitive market.

Ask your agent to ask the listing agent for the terms the Seller is looking for. Maybe there is something in particular.

Financing is usually the one term you get stuck with and is very hard to change. If you are using FHA or something like that, you may have to offer more to sweeten the pot.
1 vote
Antoine Pirs…, Agent, Oakland, CA
Sun Aug 26, 2012
What you are asking for is the knowledge of specific agents, and they ( I ) will not give that away online. There are strategies to buying, and that is how I approach it for my clients. You can not find experience on line. It is with the agent. Find the right agent.
Good luck.
0 votes
Felix Hung, Agent, Huntington Beach, CA
Sun Aug 26, 2012

Here are some recommendations I've made to buyers that you can ask your agent about...

For short sales specifically:

1. They will not pay for home warranties (so don't ask the seller to pay for this item)
2. They will not pay for termite inspection or repairs (so don't ask the seller to pay them)
3. Shorten your Home Inspection period to 3-5 days.
4. Get all your required documentation for your mortgage into your loan officer and submit your offers with a copy of the D/U approval (Fannie Mae Automated Underwriting system).
5. Submit a complete offer to include proof of funds to close escrow, copy of deposit, pre-approval letter, credit scores, etc
6. Writing a letter from you and your agent to the seller and the seller's agent: basic idea of the letter - let them know you'll wait patiently for as long as it takes, only ask for updates every other week, you understand any delinquent taxes and HOA fees will be paid by you and that you'll get back any required counters or paperwork within 24 hours.

For normal offers - your agent probably has this one covered.

Good luck! I've attached a blog I wrote about suggestions for short sale offers.
0 votes
Pacita Dimac…, Agent, Oakland, CA
Sun Aug 26, 2012
It also depends on the seller's circumstances.

A critical question to ask is what is the seller's situation and what is important to him?

For example, if the listing agent says the sellers would like rent-back, or stay in the property for a few weeks after close of escrow, you can sweeten the pot by allowing him to stay rent-free for two weeks after you close escrow. You will still need to get a rent back agreement in writing to ensure that he maintains the property in good condition, and you should also make sure you have the property insured during this time.

Other sellers want to be assured that you are going to hang in there in a short sale -- so instead of agreeing to 45 days waiting period, you could extend that wait to 90 days (if you are really interested in the property, you can even lengthen that period). You can shorten your other contingency periods like buyer inspection and appraisal contingencies, but at least show that you are willing to wait it out.

Cash doesn't always win --- but the more cash you put on the table, the stronger your offer gets.

So go ask!
0 votes
Mark C. Ross, , Oakland, CA
Tue Aug 14, 2012
There are two ends to the answer: 1) move down market or 2) cough up more $$$. Another aspect is being suckered in by "teaser" pricing. When a property goes on the market for obviously less than it would appear that it's worth... they're intentionally provoking a multiple offer situation. It is always incumbent on a prospective Buyer to follow relevant comparable sales as they occur. Throughout the distressed market period, there's still been a shortage of quality inventory (as compared to all the REOs, etc.). A tactic I occasionally employ is what I call "bottom fishing"... looking for properties with acceptable size and location... but have been gathering dust on the market. There's still plenty of listings that have failed to sell... mostly because they were priced too high. That doesn't necessarily mean the Seller isn't serious about selling... but you may want to find out for sure.
0 votes
John Juarez, Agent, Fremont, CA
Sun Aug 12, 2012

Your post could be written by countless buyers in the San Francisco Bay Area. Buying the home that meets the needs of the average under $500,000 buyer is a major challenge. Many buyers are frustrated by losing out in multiple offer situations. Remember…in a multiple offer situation there is one successful buyer and the rest are frustrated and must move on. There are no Silver or Bronze Medals in the housing market.

Do not let your frustration turn to despair! Your house is out there and you will eventually get it. Do not give up.

As for terms…you have to be comfortable with the terms that you offer. It would not be wise to give up your inspection contingency to satisfy the desire of a seller. You do not want to buy a house with major problems especially those beyond your capability to fix. Know your limits and make your offer up to those limits. Know that others are capable of exceeding your limits and there is nothing that you can do about it. Try looking a lesser properties for which you may be able to exceed the limits of other potential buyers who are stretching to buy those properties.

Good luck.
0 votes
Tiffany Razo, Agent, Broadmoor Village, CA
Fri Aug 10, 2012
The search will turn out. It may take some time because of today's market. Also, you may have to make some sacrifices and rethink wants vs. needs, or even a slight difference. If you'd like we can speak further to discuss the details of my opinions.



Tiffany Razo
Better Homes and Gardens Real Estate
362 Gellert Blvd.
Daly City, CA 94015
D: 415-666-5886
0 votes
Antoine Pirs…, Agent, Oakland, CA
Fri Aug 10, 2012
Getting desperate is never good as many people make mistakes when they are. Do not let the "hype" influence you. Not sure you are working with a realtor. When buying and selling property, you should be aware of (one of many) buying strategies. You talk these over with your realtor before you write the offer.
On some properties in some area' the market is hot. I have been saying for 6 months that buyers should get in now. Today that market is there. You would have to make an appointment o hear all of my input.
Good luck.
0 votes
Jodi Selene, Agent, Albany, CA
Thu Aug 9, 2012
First, I want to say it IS a tough market. There's a lack of inventory and it's showing up in multiple offers.
Your agent could call the listing agent and ask, What does the seller really want? I mean, they all want the best price, but sometimes they want a quick close and sometimes they need to stay in the home until they can close on their next home and the offer of a free month extra in their home after it's sold is the way to get accepted (but make sure that the agreement is very tight and that you're protected in case of delays, if you go that route).
Sometimes it's a personal letter that gets the property. I represented clients whose offer was essentially the same as another couple's offer, but they took the time to write a beautiful note and the seller resonated with them.
Years ago, when I bought my first house, I was in a multiple offer situation. My realtor expressed what I told her about wanting to plant a vegetable garden in the sunny side yard and that actually turned out to be the reason my offer was chose over another one that was the same amount of money.

Communicaiton is key. This is not a cookie-cutter process. Make sure your agent knows to call and ask....
0 votes
I've included a typed letter with a few of my offers, along with a picture of my dog. It hasn't gotten us anywhere. Do you think a hand-written letter is best? Unfortunately I don't have elegant handwriting.
Flag Thu Aug 9, 2012
Patrick Fiel…, Agent, Plano, TX
Thu Aug 9, 2012
Hi Debi,

Generally speaking, there are ways a prospective buyer can increase the attractiveness of their offer in the eyes of a sellers in a competitive offer situation.

1. Cash is king - The more cash you put down with any proposed financing, the more assurance the seller has of your mortgage eligibility and overall liquidity. A contract that shows that the buyer will only put down the minimum required, does not appear as strong to the seller as one that shows a substantial down payment.

2. Earnest - the more you put down in earnest money (perhaps up to 2% of the proposed sales price,) the more serious you appear to the seller about your intent to go through with the sale.

3. A short closing period will usually appeal to a seller unless they require additional time to find a home or relocate.

4. Minimize the seller's closing expenses and buyer contingencies: offer to split the cost of the title insurance, avoid asking for seller paid closing costs, reconsider asking for the seller to buy a home warranty, etc.

5. Offer a sellers lease back with a low or no fee - this may add convenience to the seller in planning their transition from the home.

I don't think you should waive the inspection contingency either. I feel most sellers would understand that.

I wish you luck in your search!!
0 votes
Thanks for your reply! I seem to be doing most things right, I have a pre-approved conventional loan, I have a 20% down payment ready to go. I've been offering 3% earnest cash.

I guess I need to familiarize myself with what all the closing costs are. If I have a loan broaker, do their closing costs usually contain escrow fees? Or is that a separate expense. So many moving parts in this transaction!
Flag Thu Aug 9, 2012
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