How does pricing affect the competitiveness of your offer?
By Aimee Baeza
There is a popular misconception that the highest offer always wins the deal. Yes, in a few cases that may be true, but more often than not, the best terms can get you into escrow. Let’s walk through some common scenarios where the right terms can win the deal.
Seller In Possession
A standard purchase agreement allows the seller to stay in the property up until the new deed has been recorded, but that might not be sufficient time for the seller to vacate the property. Sellers who need extra time may be more inclined to entertain offers granting them permission to remain in possession for X amount of days. Knowing the seller’s needs and wants is crucial, a savvy buyer’s agent will always ask the right questions prior to submitting an offer on your behalf.
If the seller needs more time, then your agent will add an addendum titled “Seller License to Remain in Possession”; it will spell out the terms of the agreement and protect your home even after escrow has closed. You’ll have a leg up over the other buyers and buyers agents who did not do their homework.
Non Contingent Offers
This may sound harsh and negative, but a contingent offer has no place in a competitive market. Unfortunately, a contingent offer (even with the highest purchase price) is placed at the bottom of the pile. Let me explain what a contingent offer is.
A contingent offer is written if a buyer needs to sell their home or investment property in order to purchase a new one. If their property does not sell, then the buyer has the right to cancel and walk away with their deposit.
This poses a big problem for a motivated seller who wants to close escrow as soon as possible. A simple, clean, offer will always surpass a contingent one, even if the price is higher.
Quick Close and Shortened Contingencies
In a perfect market, the terms in a contract would be left boilerplate- 30 Day escrow, 17 day inspection period and loan contingency, but in a competitive market a quick close can lead you straight to the finish line. Shortening the length of escrow lets the seller know you mean business. For example:
Let’s say the seller is moving out of state and needs to sell their home ASAP to purchase their next home. They received 2 great offers, the first is $20,000 over asking, but they require a slightly longer escrow of 40 days.. The second offer is $10,000 over asking, but they shortened all contingencies and can close escrow in under 14 days.
More often than not, a seller in a hurry will choose the second offer. The headache of a long escrow may not be worth an additional $10,000. Again, a smart agent will call the listing agent to get the full story behind why the seller is moving.