There’s more to an offer than the price, you know!
Maybe in this red-hot marketplace, both buyers and sellers alike have concluded that the only negotiable part of the Agreement of Purchase & Sale that carries any weight is the purchase price.
But there are four or five other salient points that can make all the difference during the offer presentation…
I was having a conversation with a buyer-client of mine last night during which he surmised, “Let’s be honest here, David, the only thing that really matters on this offer is the price!”
I vehemently disagreed.
There is an offer on the table for this property, priced at $1,199,000, but the listing agent has agreed to hold off on reviewing the offer until my client has an opportunity to view the property on Saturday.
I owe her, big time!
We don’t know what the terms of the other offer are, but we still need to make our offer as strong as possible.
Is this the type of property that was destined to receive multiple offers and sell for over-asking?
Maybe. Maybe not.
But at this point, before we get to the bargaining table and put down a purchase price, we need to look at all the other negotiable parts of the contract and determine how we can make our offer the strongest.
I’ll come back to PRICE at the end…
Deposit – A deposit is typically deemed to be a “sign of good faith” in that you’re allowing the seller to hold something as collateral until you close the deal. Do you remember asking your teacher for a spare pen back in public school and she’d ask for your shoe? It’s kind of like that…
The deposit is held in the listing brokerage’s trust account until the closing date, at which point the money would be transferred to the seller via the real estate lawyer’s trust account.
The amount of the deposit is really what’s at stake here.
Some people have made claims that in this red-hot market where every deal is closing with no issues, deposits have become moot. But I completely disagree. What good is an offer for ONE-KAJILLION-DOLLARS if there is no deposit? What’s to stop the buyer from reneging on his promise of providing the aforementioned KAJILLION-BUCKS if he has nothing to lose by way of the deposit?
The deposit is the reason for the seller to tie up the property.
If the buyer was willing to give a $4,000 deposit on a $2,500,000 property, clearly he is in a position to walk away from the deal with little to lose.
A deposit has been historically deemed to be 5-10%, but in this market, it’s usually always 5% or less. I’ve even seen people offer $350,000 for a property and try to provide a $5,000 deposit (roughly 1.4%). Sadly, it sometimes works…
A surefire way to strengthen your offer in multiples: provide a deposit of more than 5% if you have the cash at hand, or even 10%. It forms part of your downpayment anyways!
Closing Date – This might not be as crucial a bargaining chip to some people, but consider the following scenario.
The sellers of a $350,000 condominium have purchased a house and the deal closes on November 1st. These sellers receive two offers on their condo: one for $355,000 with a September 1st closing, and one of $350,000 with a November 1st closing.
Which one do they take?
Clearly, they want more money for their property and thus the $355,000 offer is superior, but if they have to move out of their condo and into a short-term rental for two months (or live in a van down by the river…), then is it worth $5,000?
The closing date can make or break a deal, both for a buyer or a seller.
A buyer might be waiting for a cash bonus from work due on July 1st and thus can’t close the deal in May. Or, maybe the buyer has two months left on his lease and doesn’t want to waste $1600/month on the lost rent.
A surefire way to strengthen your offer in multiples: give the seller their desired closing date.
Conditions – As I wrote in yesterday’s post about “Waiving The Status Certificate,” many sellers want immediate gratification and are looking for a “clean” offer with no conditions.
If you’re purchasing a house and there are multiple offers in play, do your home inspection in advance! Offers are being presented on Thursday, so do the home inspection on Tuesday and give yourself plenty of time to pour over the results and plan accordingly!
If you can nail down a firm financing commitment, then you can go in with no conditions on financing!
If you think that ALL deals firm up, and conditions are meaningless, think again.
Consider this condition that I put in one of my offers for a pre-construction condo in the west end:
This offer is conditional upon the Buyer obtaining, at his/her own expense, a date(s) with Jessica Alba, Scarlett Johansson, and/or Vanessa Hudgens on or before the closing date, failing which, this offer shall become null and void and the deposit shall be returned to the Buyer in full with no deductions.
Now how good is my offer with this condition present?
How can somebody suggest that an offer with conditions is “essentially” the same as an offer without?
If a seller has an offer for $565,000 with conditions on financing and home inspection, and an offer for $563,000 that is “clean,” then they also have a very, very tough decision to make…
A surefire way to strengthen your offer in multiples: do the legwork in advance and go in with as few conditions as possible, if any at all!
Chattels & Fixtures – Remember my blog post about the old lady that wanted to sell all her old-lady furniture with the condo and ask for an extra $10,000 – $15,000?
The flip-side would be the buyer asking for the 52-inch Plasma TV, the patio set, bar stools, wine fridge, and leather couches while keeping the ofer price under-asking.
You’re not on Wheel of Fortune circa 1988 where you get to pick items out of the staged room (I’ve made this joke before, but, “I’ll take the dehumidifier for thirty-five dollars, Pat!”).
Roll in your tongue, stop dreaming, and don’t ask the seller for his autographed Mickey Mantle baseball bat that hangs above the fireplace.
A surefire way to strengthen your offer in multiples: only include the chattels/fixtures which are included on the MLS listing.
And last but not least…
Price – This has always been, and always will be, the most important facet of any offer to purchase or lease.
There isn’t much more to say about it than that.
We’re not talking pesos, baht, or defunct French francs here; we’re talking about Canadian Dollars as specified on the standard TREB Agreement of Purchase & Sale.
The seller will always look at the price first, and always assign the most weight to it, but if the other negotiable points of the deal aren’t to the seller’s liking, a concession on price isn’t out of the question.
A surefire way to strengthen your offer in multiples: well……you could always offer them ONE-KAJILLION-DOLLARS…
Being successful in a multiple offer situation does NOT come down to offering the most money.
It comes down to negotiating, and forging a relationship with the listing agent as soon as possible.
A compromise has to be made on ALL of the other negotiable points of the deal, and the goal as a buyer’s agent and for the buyer is to provide the seller with everything they could possibly want, and then hoping that your price holds up.
Time and time again, I get the listing agents (at cooperating brokerages) to tip their hands to me and allow me to make my offer as strong as possible. Maybe it’s my boyish-charm or my promise of back-rubs that exceed all expectations, but don’t underestimate the importance of relating to the cooperating agent!
It’s not impossible to win in multiples with the second-highest price, so long as every other conceivable concession has been made…
