Making a Good Offer

Buyer’s Offer – A Case Study – A Weak Offer is a Rejected Offer

Making a Strong Offer

Imagine this scenario. It may sound like a great offer but it really isn’t:
VA Loan: 100% Financing 0% down
Closing: 60 Day closing
Contingent Sale: Purchase is contingent on the sale of another property. Property is under contract but with an IBuy style investor.
Purchase Price: Buyer wants to offer 10% below list price
Days on Market: Home has been on market about average DOM for market
Market Direction: Leaning towards seller’s market
Purchase Area: Desirable gated community in SW Florida. Homes sell very easy there

Let’s Take a Closer Look at the Buyer’s Offer

VA Loan: 100% Financing 0% Down

  • Buyer’s Perspective: This is highly favorable for the buyer, especially for veterans or active military personnel who are eligible for VA loans. It allows them to purchase a home without a down payment, making homeownership more accessible.
  • Seller’s Perspective: While VA loans can be advantageous for buyers, they come with specific requirements for sellers, such as certain conditions the property must meet. Some sellers may be wary of these requirements, fearing additional costs or delays. However, accepting a VA loan offer can broaden the pool of potential buyers.

Closing: 60 Day Closing

  • Seller Perspective: Contract length varies by market but most markets are around 30 days for a typical residential transaction. Keep in mind seller takes the home off the market during a pending contract usually. and buyers are hesitant to write back up offers.
  • Buyers Perspective: Buyer has plenty of time to pull out. Especially with the contingent sale deadline going all the way to close. Buyers earnest money is pretty safe and protected. That is a scary thing for the seller. Having the home off the market during the busy selling season for at least 60 days.
  • Both Perspectives: A 60-day closing period is relatively standard, providing ample time for the completion of financing, inspections, and any contingencies. This timeline should be comfortable for both parties, assuming there are no unforeseen delays.

Contingent Sale

  • Buyer’s Perspective: Making the purchase contingent on the sale of another property can protect the buyer, ensuring they are not financially overstretched by having to manage two properties if the sale falls through. It’s a common clause when the buyer needs the funds from the first sale to finance the second.
  • Seller’s Perspective: A contingent sale introduces uncertainty and can be less appealing to sellers, especially in a seller’s market. The deal’s success is dependent on another transaction that the seller has no control over. If the buyer’s sale falls through, it could derail the purchase. The fact that the contingent property is under contract with an iBuyer could either mitigate or exacerbate the seller’s concerns, depending on the perceived reliability of iBuy-style investors to close deals promptly.

Purchase Price: Buyer Wants to Offer 10% Below List Price

  • Buyer’s Perspective: Offering 10% below the listing price might be a strategy to negotiate a better deal, particularly if the buyer believes the property is overpriced or if they are trying to account for potential repairs or updates.
  • Seller’s Perspective: A lowball offer in a seller’s market is risky and might be outright rejected if the seller believes they can get a better deal. However, if the property has been on the market for the average days on market (DOM) or if the seller is motivated to sell quickly, they might be more open to negotiation.

Days on Market: Home Has Been on Market About Average DOM for Market

  • Both Perspectives: If the home has been on the market for around the average DOM, it suggests that the property is priced fairly or that the market conditions are balanced. This timeframe gives both the buyer and seller a reasonable benchmark for how quickly homes are moving and could influence their willingness to negotiate.

Market Direction: Leaning Towards Seller’s Market

  • Buyer’s Perspective: In a seller’s market, buyers have less leverage. Offers should be competitive to catch the seller’s attention, especially for desirable properties. A low offer or one with multiple contingencies may be less attractive.
  • Seller’s Perspective: With the market leaning in their favor, sellers might be less inclined to accept offers below the asking price or those with complex contingencies. They have the upper hand in negotiations and can afford to hold out for offers that meet their terms more closely.

Overall Analysis:

This offer contains several elements that might concern a seller, particularly the contingent sale and the offer price being 10% below the listing price. Given the market is leaning towards a seller’s market, the seller might be in a position to wait for a more straightforward or higher offer. However, if the property has been on the market for an average amount of time without much interest, the seller might be more open to negotiation, especially if the buyer’s contingent property is indeed under contract and likely to close. The success of this offer will largely depend on the seller’s motivation and the perceived reliability of the buyer’s contingent sale closing.

author avatar
Sammy Loggins
My name is Sammy Loggins. I am a real estate buff and investor

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