By Julie Garton-Good
Named by the National Association of Realtors® as one of “The Twenty-five Most Influential People in Real Estate” Julie speaks internationally on real estate trends, consumer centricity and real estate agent profitability.
There’s nothing more frustrating to a ready, willing, and seemingly able buyer than to lose an offer to another buyer — especially since the seller was not specific (down to the letter) about what he expected to receive.
Sure, there’s the list price; but in today’s fast-paced market, a buyer/ prospect may offer thousands more than the list price and STILL not be the lucky buyer who gets the property!
That’s why sellers should be as specific as possible with buyers in what they want to receive and achieve in a successful offer.
Let’s tackle the major elements the seller should be prepared to address with serious buyers. I suggest that sellers (or their real estate agent) prepare a “Suggested Contract Requirement” sheet to give to buyers, outlining what they expect in the following:
By now, it should go without saying that buyers without loan pre-approval shouldn’t be competing in the current market; but sadly, some are. That’s why it’s important for the seller to specify that buyers be pre-approved for loans ample enough to fund the purchase price.
Or what about the buyer who claims to have “cash” coming to him to fund the purchase (often coming from proceeds of an estate or settlement of a law suit.) The buyer’s funds are delayed. In order to close the sale, he must borrow the money, causing the seller a three-week delay in accessing his proceeds. Verifying the buyer’s funding (which is tougher to do in a “cash” sale) is vital for sidestepping potential delays for the seller.
Big Deposit Money
In the old, slower school of home buying a decade or more ago, buyers would offer a meager amount of money or even a post-dated check with the idea that they could always up the ante if need be. In today’s market, more (rather than less) deposit money is advised in most situations. Not only does it subtly signify to the seller how financially motivated a buyer is, but can serve as a buyer’s first (and often only) shot at a strong first impression to the seller.
By letting prospective buyers know the minimum amount of deposit money the seller is seeking, it places a strong buyer on equal footing with competitors. It also gives a heads-up that if you want a stronger foothold with the seller in this area, exceeding the suggested minimum amount is certainly in order! If a buyer structures an offer to include minimal contingencies like obtaining financing in a certain amount and the property appraising for at least the sales price, etc., deposit money would be at little risk of loss.
And what about contingencies? Should a seller require that buyers make all offers free of positively all contingencies if they’re serious about the property? Hardly. But keeping contingencies to a minimum definitely gives buyers an added advantage over their competition and results in a smoother sale for you as a seller.
If a seller specifies a list price when putting his house on the market, why not set other minimum requirements for offers and share them with prospective buyers? While this hasn’t been the common practice of most sellers in the past, many are finding it a practical way to sort through the myriad of offers received in order to go with the strongest possible buyer (not to mention reducing anxiety and headaches for potential buyers!)
By the seller noting suggested contract requirements on a printed sheet circulated to prospective buyers, buyers have an idea of minimum requirements and should attempt to meet or exceed them if they plan to compete for the property. Obviously, buyers are free to make any offer regarding the items. Likewise, a seller would be free to accept an offer that didn’t contain the suggested requirements.
Real estate consumers have learned over the decades in purchasing and selling property, that there can be a marked difference between the sales price and net proceeds. If a buyer pays a seller his “list” price, those are gross proceeds. Deducted from the gross will be the costs of sale (commissions, closing fees, etc.) as well as any outstanding liens against the property (like mortgages or property taxes) Once these costs are deducted, the remainder is termed the net proceeds. Sometimes the difference between gross and net is slight; but other times, it’s a huge chasm.
The best way to achieve definitive results is to make sure that you (or your real estate agent) estimate your sales costs before listing the property, and that you determine the type of offer (including the type(s) of financing programs) you’ll consider in order to achieve your net proceeds amount.