After showing a first time buyer a very viable listing for his needs, as we stand in the kitchen, he asks, so what is the next step....?
Ah, my favorite part of the buying transaction, making and negotiating offers.
Depending on the client's experience with real estate, I will take preliminary steps before we draft an actual contract. Before we get to this phase, I will have had a buyer consultation and have pre-approved by a lender.
Assuming we have already consulted and the buyer is already pre-approved, I will start research data on the property. I will pull market statistics (by area or zip code or neighborhood with recent data) and market comparables (other similar properties in the area that have sold, currently active, or pending). I often go to Zillow for their zestimate and also "RPR" (Realtor tool offered by my mls). I will make my assessment of the properties value and also forward relevant data to the buyer so they can make their own assessment.
Doing this assessment clarifies for the buyer the value of a property and potentially what the property will appraise at for financing. This also ensures that I can articulate to the listing agent why we feel this offer price make sense. In a seller's market where value of homes is on the rise or a multiple offer situation, we may have to offer higher than our perceived value in order to win over higher offers.
By the way, it may not be the offer amount that makes you the best offer. It can also come down to terms such as timeframe to close (quick or long), timeframe of discovery period (inspecting property and deciding if the findings are acceptable.) , and contingencies (financing, buyer needs to sell another property, appraisal). Sometimes it may come down to the rapport or familiarity between the agents. Some agents may be more easy going to work with, some agents may be known to be agile problem solvers in making deals "work," etc.
Before I write up the offer, I will review the mls information for the property. I will read the remarks which may include offer deadlines, what is included with the sale, and if there are documents that needs to be reviewed in order to make tighter offer. Example: A termite and property inspection may have already been completed and there is only minor work needed. Should this be the case and the buyer feels comfortable with using the seller provided report, the buyer may make their offer AS-IS or offer less than list price based on this information. By making this informed decision, the buyer can not come back and re-negotiate the offer referencing back to the condition of the property based on this information.
Should the listing agent have provided additional documentation on the property, this will be downloaded and sent to the buyer to review. I will make my own assessment of this information and offer my recommendation to the buyer when making an offer.
Also, I will contact the listing agent and make inquiries to activity level, any current offers in hand, and if the seller has anything requests or needs that I can incorporate into the offer. Requests may include a rent-back, active lease agreements on the property, etc.
While putting together the market stats and any additional information, I will begin to fill out an offer summary page. This document is a worksheet to what will ultimately go onto the offer or aka purchase agreement. This page also highlights the main points in a simple fashion and is also less intimidating from the actual contract.
I will review this summary with the buyer, once this summary is agreed upon, I will transfer it to the contract.
Once the offer is drafter, I will go over the offer with the buyer and highlight the main points.
If the buyer is a first time homebuyer, I usually do this face-to-face and allow plenty of time for questions. This also puts the buyer at ease and more confidant in making their offer. After all pages of the contract is signed, I will put together the offer package to be sent to the listing agent.
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