Category Archives: Housing How-To’s

What you need to know about the real estate process and tips for buyer and sellers.

6 Reasons Why Your Offers Keep Getting Rejected

Let’s take a look at the 6 reasons why your offer isn’t getting accepted in this booming, multiple-offer market.

1. Ignoring the Market

First off, you need to have a reasonable idea of what to expect before you even consider writing your offer. Take a look at the last few sales in the neighborhood… did they all sell right away? Did they sell for more than the list price? Were there multiple offers? Are there several homes for sale, or just the one you want to bid on?

A few minutes of research can give you a reasonable idea of just how competitive the bidding will probably be for the house.

Too many Buyers are bidding as if they are the only Buyer. You’ve got to respect your competition to have a chance to beat them.

2. Ignoring Their Own Weaknesses

Every Buyer has weaknesses. In a competitive market, you’ve got to set aside your ego and honestly assess yours.

For example: Are you getting a mortgage? If so, you’ll be less-desirable than an all-cash buyer. Meaning, you’ll probably have to bid a little higher than the cash offer to get your’s accepted.

Are you an FHA or VA buyer with a small down-payment? You’ll probably have to pay even more of a premium to be worth the risk.

Are you a contingent buyer? Or needing a long escrow? If the appraisal comes in low, do you have the extra cash to make up the difference?

Take a few minutes to think about why a Seller would not want to accept you. You and your agent have to either solve those problems before you write the offer, or you have to write an offer that specifically compensates for your weaknesses.

3. No Rapport With the Listing Agent

If there will be multiple offers, you need the listing agent to be your advocate. It is critical that your agent be professional, respectable, and present both themselves and you as competent and serious.

The Sellers are the ones who make the final decision, but they are usually looking to their Listing Agent to give them guidance and recommendations.

If, for example, there are ten offers on a property, the Listing Agent is probably uncomfortable with five of them just because of things the Buyers’ agents did or didn’t do. Everything else being roughly equal, these Buyers have no chance of getting the Listing Agent’s recommendation.

The Sellers are looking for the highest price from a Buyer who will actually perform and close the deal. It’s your agent’s job to make sure the Listing Agent believes you will absolutely close and without hiccups or drama.

4. Focusing Too Much on the List Price

Remember, the list price of a home is an arbitrary number they may not accurately reflect the market value of the home. It’s not the price the Sellers want, it’s the value they listed their property for to hopefully get them the highest price.

Buyers commonly assume that the best strategy is to offer the Seller full price and then wait for a counter. I have two clients who did this within the last week and they didn’t even get a counter back.

Consider that every other bidder knows that there are multiple bids. Some will bid full price and hope. Others will bid higher right out of the gate, which sends a clear message that they are more serious and more in love with the house than the full-price bidders.

If a Seller is getting 5-10 offers and 2-3 of those offers stand out from the rest, they will be the ones to continue negotiation and the others will be rejected. To get your offer accepted, it is critical that you make it to “round two” of negotiation, and simply offering full price may not be enough to get you there.

5. Poorly-Written Offers

There are a lot of important parts of your offer besides the price. Too many Buyers write the terms that they would like, or simply leave in the default terms. Other Buyers correctly use offer terms as a way to make their offer stand out from the pack.

Try and write all of those terms as the Seller would want to see them. In other words, don’t give the Seller anything they’d need to counter except for maybe price. This makes you look reasonable and accommodating.

For example:

  • Close in 30 days (only longer if it’s what the Sellers wants)
  • Offer extra time after close for the Sellers to move out. Or even an inexpensive rent-back for longer time-periods.
  • Put down a large deposit (closer to 3% in CA)
  • Shorten your Inspection Contingency from 17 to 10 or even 7 days
  • Equally shorten (or even remove) your Loan and Appraisal Contingencies
  • Do not ask for the Sellers to pay for inspections
  • Consider and increased deposit
  • Include or exclude items from the sale (refrigerator, washer/dryer, etc.) as the Seller would like
  • Make sure that all of the costs are split as would be customary for the area
  • Anything else that the Listing Agent indicates would be appreciated

Also, be sure that your pre-approval letter is rock solid. Many basically indicate that the lender has pulled a credit report and looked at the application, but these are weak letters. Yours should say that you lender has also verified employment, verified funds to close, reviewed bank statements, etc. The stronger the better.

6. Bungling the Negotiation

Let’s assume you are savvy enough to have made it to “round two” of the negotiations – meaning you are actually getting a counter offer and not getting rejected right away. If you’ve made it this far, you’ve got a chance… and this is where a lot of Buyers screw things up.

First off, did the Sellers counter just you? Or did they counter several Buyers? Your agent should try and figure out how many Buyers received counter offers and sometimes the Listing Agent will even tell you if all of the counter offers were for the same price and terms.

Most of the time, there will be multiple Buyers receiving counter offers at roughly similar price and terms. This is where the winning Buyer typically steps up and not only accepts the counter offer, but offers back to the Seller at an even higher price. Depending on the situation, this may not be necessary. But the more bidders there are, the more likely someone is to step up and up their bid.

Losing Buyers commonly:

  • Drag their feet with their reply (the longer you wait to answer, the less-enthusiastic you look)
  • Counter back at price below the Sellers’ counter.
  • Accept the Seller’s counter when other Buyers are probably re-offering more.

But Doesn’t This Mean You Are Overpaying?

A property is worth what someone else is willing to pay for it. If there are multiple offers on a home, clearly there is a strong market for it and you could probably sell it immediately for the price you paid.

That being said, could the appraisal come in low? Yes. Which, is why many Buyers are removing their appraisal contingencies from their offers.

To be clear, I’m not saying that I’m a fan of all of this. This market is as frustrating to the agents as it is for our Buyers. But this is the market we are in and if you want to buy a home in a competitive neighborhood today, these are all factors you should consider.

If you are looking to buy a home in Danville or the surrounding areas, please call me at 925-212-2908 and I’d be happy to help. If you are elsewhere in the Bay Area, please find the agent on this blog from your area.

And, if you know a frustrated Buyer who has been making any of these mistakes, please forward this article to them and hopefully it will help.

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When To Lock-In Your Interest Rate

Here is exactly what you need to know about when and how to lock-in your mortgage interest rate.

A mortgage interest rate-lock is when your lender commits (in writing) to give you your mortgage at a given rate, even if market rates rise before the loan is funded. They are taking a risk, so they charge a fee of anywhere from 1/8-1/2 of a point for the security. A “point” is a one percentage of the amount of the mortgage. Shorter locks (15-30 days) are more expensive than longer locks.

You don’t have to lock-in your rate. Many buyers don’t and that’s perfectly fine. However, if you really need to ensure a cap to afford the home, or you are worried that even a slight rise in rates would make you unhappy, then you should strongly consider paying a little extra to lock-in your interest rate.

Step 1: Get a House Under Contract (this is getting harder and harder recently).

Don’t even worry about locking in your interest rate until you’ve secured a property.

Step 2: Price it Out.

Ask your lender for a quote to lock-in your interest rate through the close of your transaction, adding a little extra time for possible delays. 30-45 day locks are the most common.

Remember, they are “selling” you an extra feature. It’s not as bad as undercoating on a car, but it is an optional add-on. Be sure all of your questions are answered.

Step 3: Inspections and Disclosures.

Your rate-lock will expire in 30-60 days, so essentially it only applies to this property. Don’t stress too much about locking-in rates until you are very sure that there aren’t any “deal-breaker” problems with the house. You should know this within a week or 10 days from getting into contract.

Step 4: Lock-In Your Interest Rate.

Once you are sure this is the house and you are happy with your quoted rate and costs, go ahead and lock in it. Your window to lock in your rate starts when you are sure this is the house, and ends about a week before close (to give your lender time to process). For most buyers, this is roughly a 10-day window.

Your lender will provide you, in writing, with a document detailing your lock, the cost, and the expiration. If it’s verbal, it doesn’t count.

Common Confusion

You don’t need to lock a rate before securing a property.

If a rate lock expires, you can’t get it back.

If interest rates go up, you win. But if they go down, you have to pay more for the right to drop your rate. This is a “float-down” clause that adds to the cost of your initial lock. Be sure to ask about this when you get your initial quote.

Finally, you aren’t required to lock-in your rate. Explore it, and weight the pros and cons, but know you don’t have to lock in your mortgage rate.

How To Win A Bidding War Without Getting-Ripped Off

bidding-war-273x300Bidding wars are once again the norm in Danville and all along the 680 corridor. Here’s how to win a bidding war without getting ripped-off.

Imagine your dream house pops up for sale. You rush to see it and want to submit an offer. Unfortunately, ten other people are doing the exact same thing. Here are the steps you need to take to have the best chance of winning a bidding war without overpaying.

Sometimes buyers lose a bidding war because there is one, really desperate buyer who offers a crazy-high price right out of the gate. Usually theses are the buyers who have lost out on so many houses that they are content to overpay just to be done. In this case, there isn’t much you can do. Basically, sleep well knowing they are the ones who got ripped-off, not you.

Most of the time, however, only two or three of the ten offers are ever really in contention. These are the buyers that get counter offers. Your goal with your initial offer is to “make the cut” and be one of the buyers to receive a counter.

Step 1: Have Your Ducks In A Row

Be non-contingent. If you have to sell a house in order to buy, you aren’t going to win. Sorry. Sell the house first and then look for a house. If your market is strong enough, try selling and asking for a 30-90 day rent back to give you time to find the right house.

Be fully-approved by your lender. Not only have they reviewed your application, but they’ve taken the additional steps of pulling credit and verifying employment and assets. The more work you and your lender to up front, the stronger the pre-approval letter they can write in your behalf. It makes a difference.

Know the area. Know the schools, the HOA, the taxes, and time the commute. Know for sure that this is the neighborhood, price range, and house you want.

Step 2: Have the Right Agent

Yes, it makes a difference.

Just as the sellers are looking for the right buyers to be in contract with, their listing agent is looking for the buyer’s agent that they want to be working closely with for the next month. If your agent is well-spoken, experienced, local, and respectful, they are likely to get very helpful guidance from the listing agent. If your agent speaks poorly, doesn’t know local customs or procedures, or asks dumb questions, the listing agent is likely to give them just enough information to be fair, but not win.

Now, imagine you’ve “made the cut” and are one of the final two or three buyers in consideration. Assuming price and terms of all buyers are similar, the quality of your agent could make or break you. At this point, the sellers care most about picking the buyer who is most likely to close and not cause them additional headaches. Better agents have already set their buyers with proper expectations. And better agents are going to be better at preventing molehills from becoming mountains during escrow.

If everything else is similar, listing agents will often tell their sellers something like:

“I don’t know anything about agent 1. Agent 2 seems okay but they asked some weird questions… I’m not sure how they would respond if anything weird came up during inspections. Agent 3, however, seems like the really know their stuff and I think they would really do a great job to help get the deal closed. They seem like the best to work with…”

I recently one a bidding war for my clients because the sellers found my personal facebook page and decided I was a person they wanted to do business with.

The truth is that, of the ten offers, five probably never have a chance because of the way their agents presented themselves.

Step 3: Make The Sellers Like You

The sellers can choose to sell to whoever they want. Oftentimes, it’s the buyers they like the most, on a personal level, that win the house.

Be respectful, classy, and easy-going. Act like you’ve “been there before” and be cool, even if inside the stress is driving you insane. With every word in your offer, every email, and every conversation your agent has with theirs, come off as likable as you can.

Also, your agent needs to call the listing agent to clearly understand the seller’s wishes and the bidding rules. They need to ask:

“When are offers due and how would you like ours delivered?”

“Aside from price, what are the sellers looking for in an offer?”

“Where are the sellers moving to? Would they appreciate any rent-back or even a few ays after close to move out?”

“Is there a disclosure package available?”

If the seller’s need a rent-back, give it to them. If they don’t want to fix the deck, don’t ask them to. Simple stuff, but lots of buyers’ agents don’t even ask.

Here’s how being likable helps… The listing agent may call your agent and say:

“My sellers really want to work with your buyers, but you aren’t quite there… would they be willing to come up to X and get this deal done?”

The likable agents with likable clients get those phone calls.

 Step 4: Write an Acceptable Offer

Write an offer where the only thing the Sellers would ever decide to counter might be price. With good communication, the listing agent should be able to guide you on just about everything else.

Here are a few of the key parts to get right:

  • Give the sellers any specific requests they have made. (because most other bidders will too)
  • Close date: 30 days or less.
  • Short inspection contingency period. 7-10 days at most.
  • Loan contingency should be removed within 7-10 days, including the appraisal contingency if their is one.
  • If you can afford it, don’t have an appraisal contingency.
  • All transaction costs (escrow fees, HOA fees, taxes, etc.) should be per local custom.
  • Don’t ask the sellers to pay for any inspections.
  • Don’t ask the sellers to commit to making any repairs.
  • Let the listing agent pick the title company.
  • Have a deposit of 3%
  • Submit a complete package: Offer, any signed disclosures, pre-approval letter, proof of funds, and a personal letter to the sellers.

Regarding price, you and your agent need to determine how high you need to bid in order to at least be among the leaders. Maybe it’s $10,000 over asking price. Maybe it’s $50,000.

Don’t be one of the buyers who will offer list price based on principle and expect the sellers to counter them back. You have to appear to be enthusiastic and easy to work with. Offering just full price can give a bad impression to the sellers.

Of the ten offers, half will be at or below list price and never have any chance of winning.

Step 5: Considering the Counter Offer

If you’ve taken the steps above, you will almost always get a counter offer. In bidding wars, the sellers make what is called a “multiple” counter offer. This means that, even if you accept, the seller has to accept your acceptance before you are legally in contract. And, the listing agent should be happy to tell you how many buyers received counters.

As the buyer, you have four options: walk away, accept, counter back at a lower price, or counter back at a higher price. Here, a great buyers’ agent can really help by getting as much guidance as possible from the listing agent.

Imagine in our example that, of the ten original offers, three received counters. Of those three, one is likely to either walk away or counter back at lower terms. The idea of a bidding war is stressful and buyers to get flustered and run sometimes. Another buyer is likely to just accept the counter. The third buyer (you) has a choice of either accepting or countering higher to win.

Generally, if parts of your offer are weak, such as a low down payment, out of area agent, or needing more time for contingencies, you may need to counter higher to win. But, if you have a strong local agent, strong approval, strong down-payment, and your agent has great report with the listing agent, then maybe you’ll with by simply accepting.

Remember as well that the sellers don’t have to give all buyers the same counter. Sometimes sellers will give an easy counter to their safe buyer. (Think of applying to three colleges, including one that you know you’ll get into just to be safe.) If the counter you receive is too easy, then you are probably their safe buyer and should strongly consider raising the price.

Step 6: Perform

So you’ve handled the counter properly and the seller has accepted your offer. Congratulations. But know that this is still different than a normal transaction.

In a normal, one-offer, transaction, the buyer has a lot of power. If something goes wrong or an issue comes up during an inspection, it is often in the seller’s best interest to correct the problem.

In a bidding war, however, there are several unhappy, losing buyers who would happily swoop in and take your place if they could. If a major issue, like a foundation problem, comes up, then the seller has to get involved. But as minor things come up, you as a buyer are just going to have to accept them if you still want the house. Don’t expect the seller to credit you back $2,000 to fix the electrical problem. They would be better off just selling to someone else.

In other words, expect that there will be some minor issues and budget for them when you make your offer. It’s very reasonable to expect to spend .5%-1% of the purchase price on repairs.

Finally, don’t let the natural feelings of buyer’s remorse take over. It’s natural to second-guess yourself and the price you paid. Just remember that a house is worth what someone will pay for it, and the losing buyers would probably be happy to take your place. Point is, as long as you weren’t too much better than the other offers, you didn’t get ripped-off.

Good luck out there. And, if you are in the Pleasanton-Danville-Walnut Creek-Orinda stretch, I’d be happy to help.