Sometimes buyers find themselves in a position of offering on a house that looks real sharp in the marketplace. You know the listing. That solid three-two in the cute neighborhood with good schools blah, blah, blah and only $199k.
Although most people think the price is the end all be all, and money is a strong motivator, but the best offer is not always the highest. Their are many factors to consider. The price and ultimately the net proceeds to the seller will always carry a lot of weight with the seller. Obviously when it comes to cash, the more the merrier. The listing agent may have a different angle. Listing brokers here in Washington state, have a statutory obligation to keep the best interests of the seller. Sometimes a clean offer for $201k with a large earnest money deposit and 20% down is a better deal than the border line 3.5% down offer with $500 in earnest money no pre-qualification letter and so on at $203k.
Buyers should consider all the variables that might effect a seller's decision to choose. Putting up 1-2% in earnest money shows the seller that the buyer is serious about the house. Earnest money is more or less a deposit on the house. That money is in jeopardy if the buyer decides for no good reason to back out of the deal. Buyers are protected against certain events beyond their control and have contingencies for financing and inspection. But in the end putting up more earnest money always looks stronger than an equal offer with less. Of note: veterans using a VA loan should be an exception to this.
Writing offers with excessive addenda can be a mistake that even some seasoned agents make. Addenda should be used for contingencies such as financing and inspection. There are quite a few addendum forms that are available to suit a wide variety of possible scenarios. I have seen agents submit offers however with addenda attached that had no relevance to the subject property. A clean offer is a simple, straight forward offer, and its strength should not be underestimated. That said, the appropriate addenda for relevant aspects of the deal should always be used!
Buyers should always have their financing pre-approved when submitting offers. Many buyers run around looking at house before meeting with a mortgage professional. Most sellers and their brokers want to see at least, a pre-qualification letter before considering an offer. A pre-approval letter is even better. (pre-approval means the lender has acquired some documentation and run the client through the automated underwriting system) I think it is safe to say that 70% of real estate transactions that fail, do so because the financing failed. This is why the pre-qual or pre-approval letter is important.
Buyers agents should talk to the seller's agent prior to writing the offer. Try to find out what makes that seller excited. Usually sellers are motivated by the almighty dollar; sometimes seller's have another motivating factor. This knowledge can help the buyer's agent tailor the offer to appease the desires of the seller and make their offer stand out against others even if it is not the highest price.
It should be noted that all of this commentary only goes so far. A clean offer for $200,000 is not likely to beat out a sloppy looking offer at $220,000. But most multiple offer scenarios bring a handful of offers within a couple of thousand dollars of each other. It is here that the well crafted offer can win the day.
Happy house hunting and keep it clean and simple, whenever possible.
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