Secrets to a Winning Closing
Should you take a higher offer or an offer with better terms? It’s not as straightforward as it might seem.
When multiple offers are received — a common occurrence in Bay Area real estate deals — a delicate dance begins. Sellers naturally want the highest price, but it’s important to look at more than just the offer price. The terms of the deal are equally important, because each represents an opportunity for something to go wrong.
It’s crucial to pick the right offer, because once that happens, the buyer is in the driver’s seat. Choosing the strongest offer is the seller’s last, best chance to get to closing quickly with the fewest setbacks.
Each contingency the buyer requests (for example, making the contract contingent on an appraisal coming in at the offer price, a contingency on a clean inspection or a contingency on the buyer obtaining a mortgage approval), could potentially derail the deal.
Here are some ways to navigate potentially troublesome contingencies.
Vetting Buyers’ Financial Situation
Knowing a buyer’s financial and purchasing situation can give sellers the edge. A buyer who’s frustrated with the market and has come out on the losing end of a few deals might be more amenable to removing contingencies or increasing the offer price. A buyer with a large down payment might be willing to forgo an appraisal contingency because he can put more cash into the deal if the appraisal comes in low. Is a buyer intent on finding a home in a certain neighborhood or school district? He might be less willing to walk away from the deal over a contingency.
If the strongest offer involves an inspection contingency, you can be ahead of the game by having a pre-listing inspection done and making the report freely available to buyers. This strategic move can help eliminate the potential pitfalls of an inspection contingency and speed a deal toward closing.
Is the roof a little older, causing buyers to worry it might need to be replaced? An inspection report
showing a clean bill of health for the roof will put their minds at ease. A good inspection report for a home that’s older and potentially at risk of plumbing issues can reassure buyers that they won’t soon be saddled with expensive repairs.
While many inspectors check for the same conditions, not all inspectors are the same. Some are known to be nit-picky, uncovering a handful of small issues that spook buyers. In this market, it’s easy to forget how small a few hundred dollars in minor repairs actually are on homes that start at half a million dollars.
In a deal involving an appraisal contingency, it’s important to make every effort to ensure the appraisal is conducted fairly. For instance, a comparable home that sold for a lower price may suffer from an unseen issue, such as a report showing $35,000 in termite damage, or past permit or code violations.
There are many other sources of information than the MLS, which is the primary source appraisers use. Checking all available sources can provide insight into why a home sold for a lower price. Having access to this valuable information can help the appraiser get a more accurate picture of a particular home’s true value – and of course strengthen the seller’s bargaining position.
Suppose you receive two offers on your home. One is $15,000 higher than the other; the lower offer has no contingencies while the higher offer has three contingencies. A smart negotiator knows that removing contingencies is simply a more difficult path.
This is one area in which there is no substitute for experience. An expert knows that it’s smart to talk the buyers requesting fewer contingencies into increasing their offer.
How We Give Our Clients the Edge
One important service we provide to our clients at the Cal Agents is digging deep into an offer to tease out issues that could help or hinder the deal later. When the offers come in, our agents are just getting started. They look over each deal with a fine-toothed comb to help you decide which one represents your best dollar and also the best chance of a quick, drama-free closing that gets cash in your bank account as quickly as possible.
We contact the buyer’s loan officer to find out if she’s put in offers on other properties. We ask all the right questions to get to know the buyer and her motivations.
When it comes to inspection contingencies, our agents are already ahead of the game. We strongly recommend that all of our sellers have a pre-listing inspection completed by our recommended (thorough but fair) professionals. We’ve seen sellers turn down our recommendation and suffer the consequences when issues with the home’s condition were found later.
If you choose not to have a pre-listing inspection done but a buyer requests an inspection contingency, we’ve worked with inspectors all over the area, so depending on the home’s location, we might be able to make an educated guess about which inspector the buyers will use. We can use this insider knowledge to recommend against a particular deal in which buyers are likely to use a particularly troublesome inspector.
We research comparable properties that have been recently sold and that an appraiser is likely to use as part of his analysis. Then we canvass the available information about those properties to be sure the appraiser is comparing apples to apples. With the information we uncover, the appraisal can often be adjusted upward.
We use battle-tested scripts to talk to buyers about both terms and price. Our proven strategy is to use our experience and expertise to increase the lower offer — often the path of least resistance. We recognize buyers who mean business, and we help them recognize the competition they are facing for your home.
At the Cal Agents, we want to make sure every client chooses the best, strongest offer, because we know that the extra dollars won’t help you at all if the deal never makes it to the closing table.
That’s the Cal Agents difference.