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The Basics of Presenting an Offer on a House

Tue, 30 Sep by Quintal Realty

The Basics Of Making an Offer on a House
Buying a home is a little bit like getting married, first comes love then comes the legal contract.
And like marriage, the way you structure your proposal will have an effect on the outcome.

Typically, the “cleaner” the offer, the more chance there is that the seller will entertain accepting the offer. A “clean” offer simply is an offer with the least “subject to’s”, reasonable money offered, and a reasonable deposit.
A “subject to” is a way of saying to the seller that you will buy their property but you reserve the right to back out of the offer if, for example, you fail to get financing. The most common subject to’s are financing, a property inspection, or selling your current home. But “subject to’s” can be other things as well, such as ” my Father viewing and approving the property by August…”, or, ” the city bylaws allowing a garage to be built”, etc.

Most buyers believe that it is just the amount of money you are offering that influences the sellers decision to accept. Although the amount of money offered plays a large part, it is the “package” of your offer than can make the difference of whether the seller will accept or deny your offer.

The seller, guided by their realtor, will view your offer and categorize difference aspects of it, such as, the amount of money offered, the amount of the deposit accompanying the offer, how many “subject to’s” are there. All of these things will play a part in your negotiations.

All things being equal, the seller will usually go with the offer they view as being the most reasonable and has the most chance of ending in the sale of their property.
This is to say that unless there is an underlying reason for the seller to accept a less than “ideal” offer, such as needing the money from the sale, the seller will usually “counter” your offer with different terms or outright refuse it.

In some cases a buyer will attempt to give a “low ball” offer to a seller in an attempt to see if they will “bite”. Although this is a legitimate thing to do in the case where the buyer truly believes that the price that the seller is asking is either inflated, or the property needs a lot of work such as a foreclosure property etc., it is generally not a good thing to do.

Presenting an offer that is unreasonable does several things. First, it immediately angers or insults the seller, second, the seller will usually outright refuse the offer, third, if the seller does not refuse the offer and chooses to counter the offer, the counter offer will usually be as unreasonable as the offer that was presented to them. Remember the marriage proposal? Do not tell your girlfriend that the meal she prepared for you is terrible just before you ask her to marry you!

There are many other factors that go into a successful offer to purchase and just one single factor can make all the difference. For example, pretend you are the seller and you receive two offers on your property, your Realtor will council you on what to do in this situation, but let’s say the offers are identical, same amount offered, same “subject to’s” , etc. and the only difference in the two offers is that one party gave a $10,000 deposit and the other $5,000. Which offer would you choose? Of course, you would most likely accept the one with the largest deposit because they appear to be more serious about buying your property.

As you can see, the amount of money you offer is not the only factor that will influence a seller to accept your offer. Like a marriage proposal, it is sometimes “how you say it”, and the “sincerity of your proposal” that can make the difference whether you are single or homeless!

What Contingencies Should I Have On My Home Purchase Offer?

Tue, 02 Sep by Quintal Realty

What Does Contingent Offer Mean? You’re looking for homes and find one that really piques your interest, except it has a “contingent offer” status. As you keep browsing, you notice a lot of properties do. What’s a contingent offer? Should your offer have one?

A contingent offer is pretty standard. It means an offer on a home has been made and the seller has accepted it, but the finalized sale is contingent upon certain criteria that have to be met. These criteria, or contingencies, typically fall under three major categories: appraisal, home inspection and mortgage approval.

These contingencies are mainly put in place for the buyer to back out of a sale if something goes wrong, usually without losing their deposit. A seller might entertain other offers, but won’t deal with another buyer until the contingent offer is finished in one way or another.

Home Inspection Contingency

A home inspection contingency could well be the most important one. It gives the buyer the right to have the home professionally inspected. If something is wrong, the buyer can request it be fixed or they can back out of the sale. It’s rarely advisable to waive an inspection contingency.

“Never in my life have I seen a home inspection waived,” said Bishoi Nageh, vice president of branch operations for The Petra Cephas Team at Mortgage Network Solutions.

If something is wrong with a house, a good inspection will find it. Nageh recalled an instance of a buyer who asked the seller to fix up some windows, then found mold had been growing under the framework. Once you know the problems, you can talk with the seller about what they need to fix before you buy the home.

Appraisal Contingency

With this contingency, a third party hired by the lender evaluates the fair-market value of the home. In the instance the appraised value is less than the sale price, the appraisal contingency lets you back out of the deal.

“It’s in no one’s best interest to overpay,” Nageh said. “If the home comes in under the [asking] amount, you have the right to back out.”

In hot markets, eager buyers might feel pressured to waive it, but they could end up paying more. However, the lender will only put up a certain amount of money for the appraised cost—not the asking price—and the buyer will have to cover the rest.

For example, let’s say you have a loan that covers 90% and you need to put 10% down for a home selling for $500,000. If the house is appraised at $475,000, the lender is only going to cover 90 percent of that appraised value, or $427,500. And instead of a $50,000 down payment, you would be expected to put down $72,500 to cover the difference. Waiving this contingency can be a gamble.

Mortgage Contingency

You don’t want to sign a property sale without having the money to back it up. A mortgage contingency protects the buyer and seller from getting into a sale without a proper loan. Under this contingency, the buyer has a specified time period to obtain a loan that will cover the mortgage. If the buyer can’t get a lender to commit to a loan, the buyer has the right to walk away from the sale with the down payment.

To expedite the process, “know if you qualify sooner than later,” Nageh said. That way, you won’t be wasting the seller’s time or yours during the loan-hunting period, which could take a couple of months.

Like an appraisal contingency, eager buyers and sellers in hot markets might want to waive this contingency, especially if cash is on the table. But waiving this contingency means that if your lender delays or denies your loan, you can lose the deposit, so it’s a risky venture.

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