9 Tips for Home Sellers: What You Should Know to Land a Buyer’s Offer

“What do I do when I get an Offer?”
– That is a common question from sellers.

If the offer is at or above asking price the answer may be easy. But remember money is not the only consideration. You may prefer a lower offer with better financing or a stronger buyer or a more convenient settlement date. When all factors are favorable, and the price is right—set the contract and reel your buyer in quickly. 

Typically with my assistance, you will negotiate. It is an art (somewhat like fishing), where you may give and take over price, terms special conditions, or closing costs. Even carry back financing, dates of possession, or included personal property may come into play. 

Here are some tips to help you throughout the process: 

Aim for a Sale

Remember, while your aim is to get as much as you can for your home, the buyer’s aim is to find your lowest acceptable price. In the end, however, you’re both angling for the same catch: a sale on the best possible terms for both of you. 

Evaluate the Buyer

Find out as much as you can about whether the buyer can afford to purchase your house. You’ll gain peace of mind knowing your buyer is qualified to pay the price you agree upon. Buyers who are ‘prequalified’ have been told by a lender how large a mortgage they are likely to qualify for, while buyers who are ‘preapproved’ have a tentative loan commitment from a lender. 

Stay Cool

Keep communications on an agreeable level. At all stages of negotiation, be as flexible as possible. Don’t lose your cool—even if the buyer gets tense—or you might lose your sale.

Ask Questions

When offers come in they may contain complicated terminology, sometimes even 2 or 3 addenda. They should be carefully considered in person either at my real estate office or in the quiet of your own home. I will help you to understand all of the ramifications.

Consider all Offers

Remember, you have 3 basic choices: you can accept the offer, reject it, or counter offer with an alternative that suits you. Give consideration to every offer, even if it’s lower then your asking price. Outright rejection is seldom wise unless it is so ridiculous you know the buyer is simply fishing. With my counsel, you might make a counter offer close to your asking price. That seems fair for your buyers and lets then know, while you are not inflexible, neither are you so anxious to sell you’ll take anything. 

Respond Quickly

When buyers make an offer, they are in the mood to buy. But moods change. Be sure to respond as soon as possible, even with a counter offer. Buyers are known to get ‘buyers remorse’ in the middle of the night. Don’t delay responding if you really want that sale now. Keep mum, of course, about the minimum price you’d accept, but keep the dialogue going. It is not unusual to exchange 2 or 3 counter offers. Remember, I am professionally trained to find a meeting of the minds where everyone wins.

Rely on your Agent

Rely on me to keep negotiations moving forward. Realize agents are required by law to bring you any offer – no matter how low. Knowing what you want from the sale, I am in a unique position to help negotiations along. By relaying your counter offers, I can depersonalize the delicate money discussions and keep negotiations flowing toward eventual agreement. And remember it is to our financial benefit to see you get the highest price the buyer is able to pay. 

Be Patient

Exercise confidence and patience as the buyer weights the counter offers. Be forthcoming with all information requested and call attention to all the areas of agreement. Be positive. When disagreements occur, iron out all the small negotiating areas before getting down to any real stumbling block later when most items are agreed.

Consider Sweeteners

As the bidding gets close to your acceptable price, you might offer some extras – ‘sweeteners’ – to make a higher price acceptable to the buyer: the inclusion in the sale of draperies, lawn furniture, bbq grill – whatever you don’t mind giving up. If you are in a position to offer financial support, now is the time to offer to negotiate points or hold a second mortgage to help sell your home.

Take Care with Contingencies

In drawing up your contract, consider requests for contingencies carefully. Contingencies – stipulations such as obtaining financing or home inspections – are typically used to smooth acceptance of a contract without delaying the buying decision. Each contingency must be satisfied before the sale is final and should include a time limit for work to be completed.               

When you’ve landed your buyer, your signed acceptance of a written offer becomes your sales contract. Except for removing any contingencies, this document is the binding basis for the sale.

Ready to sell your home? Call Steve today to get the process started: 760.476.9560

How Do I Submit an Offer to Purchase a Home?

When you make an offer to purchase a home, your agent uses a purchase agreement form to enter the terms of your offer to buy the property you have selected.

To be valid, your offer needs to:

  • be in writing and signed by you as the buyer;
  • be definite and certain in detailing the terms for your purchase;
  • show your serious intent to enter into an agreement; and
  • be communicated to the seller who can accept the offer.

Your signing of the purchase agreement which your agent has properly filled out satisfies the first two conditions of terms and intent. To be definite and certain in its terms and conditions for enforcement, your offer needs to:

  • identify you as the buyer, and name the seller;
  • describe the real estate;
  • state your price and the form in which you will pay it; and
  • set the time for payment of the price — your full performance.

To be enforceable, the offer does not need to be on any particular form.

However, to be valid, the offer needs to be communicated to the seller for their acceptance.

To communicate your offer, your agent delivers your signed purchase agreement to the seller or the seller’s agent for their consideration.  

Neither the seller nor their agent has any legal duty to acknowledge or respond to your offer.

If the seller signs their acceptance of your offer intending to sell, their agent will deliver the signed purchase agreement to you or your agent.  

However, if the seller does not accept your offer, your agent needs to urge the seller’s agent to respond with a counteroffer or a formal rejection signed by the seller.

A rejection of your offer occurs when the seller:

  • does nothing and the time for acceptance runs;
  • returns a signed, written rejection stating no counteroffer will be forthcoming; or
  • prepares and submits a counteroffer, using either a counteroffer form or new purchase agreement form stating different terms.

Without first preparing and submitting a counteroffer, the seller may make an inquiry into your willingness to consider different terms. The inquiry for clarifications or changes is not a counteroffer or rejection of your written offer. Such an inquiry does not bar the seller from a later but timely acceptance to form a binding agreement.

However, when the seller attempts to accept your offer by first altering its terms in some way prior to signing the acceptance provision, the change in terms creates a counteroffer to perform on different terms. The written counter is a rejection which terminates your offer.

The seller’s agent has a duty owed to their seller to present every purchase offer they receive, regardless of the terms offered or the form used to present it. However, neither the seller nor their agent has any legal duty to respond to an offer. A failure to respond to an offer does not automatically mean your offer was not presented to the seller. Further, the offer need not be prepared on a form to be enforceable.

In fact, the back of a business card may be used to make an offer. However, provisions in boiler-plate purchase agreement forms state the essential terms and conditions of an offer needed to make it clear, complete and enforceable when accepted.

What happens when the buyer or seller breaches the purchase contract?

Remedies available to buyer when the seller a materially breaches a purchase agreement contract include:

  • abandoning the transaction by entering into a mutual cancellation of the purchase agreement and escrow instructions
  • acquiring the property by pursuing specific performance of the purchase agreement
  • pursuing the recovery of money, whether or not the buyer still wishes to acquire the property

For example, when the seller resells the property to another buyer at a higher price after accepting an offer from the original buyer, the original buyer may pursue specific performance and demand the seller adhere to the purchase agreement.

However, if the original buyer decides not to pursue specific performance, the seller is liable to the original buyer for the difference in price. A buyer’s money claims include:

  • general damages, money directly expended or the monetary value lost in the transaction
  • special damages, money collaterally lost due to the seller’s breach
  • prejudgment interest at the rate of 10% on all monies recovered.

A buyer is allowed to recover expenditures incurred prior to a seller’s breach to prepare a property so they can take possession, such as construction costs advanced by a buyer for upgrades and alterations. However, the purchase agreement by its provisions needs to reflect the intention of the buyer to incur these expenditures.

Conversely, a seller of real estate faced with a materially breaching buyer needs to promptly decide whether to:

  • enforce the purchase agreement;
  • remarket the property for sale; or
  • retain the property and postpone or entirely forego any resale effort.

A seller’s total recoverable losses when promptly remarketing and reselling the property include:

  • carrying costs of mortgage interest payments, taxes, insurance, maintenance and utilities incurred by the seller and interest on the seller’s net equity between the date of the breach and the date escrow closed on the resale less the property’s rental value when the seller remains in possession; and
  • any reduction in the seller’s net proceeds on the resale below the net proceeds the seller was to receive from the breaching buyer’s transaction due to:
    • the increased closing costs the seller additionally paid, such as the new buyer’s nonrecurring closing costs, financing fees on the resale and mortgage prepayment penalties; and
    • any decline in the property’s resale price.

When the seller takes the property off the market or is not diligent in their resale efforts, their recovery of money is limited to their out-of-pocket transactional expenses, property operating expenses incurred before the buyer’s breach, and any move out and move back relocation expenses to fulfill their performance under the purchase agreement.

When the seller remains in occupancy through the date of the breach, these costs are offset by the rental value of the property.

5 rules of engagement for requesting repairs from sellers

When buyers and sellers start going head-to-head, no one comes out a winner 

Key Takeaway:
It’s reasonable to ask for roof and termite clearances and that the home’s primary systems work. It’s not reasonable to ask for upgrades, abatement or cosmetic changes. 

Real estate sales and continually increasing prices have been on a six-year romp. With sellers firmly planted in the driver’s seat, a significant percent of homes have been sold “as-is” with little or no regard for repairs. When we begin seeing shifts in the market, requests for repairs will begin to reappear like spring flowers after a long winter freeze.  

Lets look at what is reasonable and unreasonable with regard to repair requests: 

Continue reading

Costs to Sell Your Home

To make an informed decision about the arrangements and conditions for selling your property, you need to know the costs you will incur on a sale. Selling costs consume some of the price you will receive and thus reduce the amount of net sales proceeds on closing.

Selling costs you will likely incur in the preparation and sale of your property include:

  • Home inspection report (HIR): The fee a home inspection company charges to conduct an inspection of the property and provide an HIR you use to properly prepare your transfer disclosure statement (TDS) your agent hands to prospective buyers.
  • Structural pest control report and clearance: The fee a pest control operator charges to inspect and submit a report on their findings and the costs of repairs necessary to eliminate any infestation and repair any existing damage or condition allowing for infestation.
  • Compliance with local ordinances: The costs associated with retrofitting, curative permits and any repairs necessary to meet local ordinance standards as a requisite to a change in ownership.
  • Natural Hazard Disclosure (NHD) report: The fee charged by a third party for a review of the county records and the preparation and submission of an NHD report on the natural hazards affecting the property due to its location.
  • Smoke detector/water heater safety compliance: The costs incurred to install smoke detectors and water heater bracing to comply with local ordinances.
  • Home warranty insurance: The premium charged by a home warranty insurance company to issue a policy to the buyer.
  • Escrow fee: The amount charged for escrow services to process the closing of the sale.
  • Recording fees/documentary transfer tax: The combined recording fees and transfer taxes collected by the county recorder to convey title.
  • Title insurance premium: The premium the title insurance company charges to issue a policy of title insurance on your conveyance of the property.
  • Reconveyance fees: The reconveyance fees and recording fees charged when your mortgage is paid off to release the mortgage liens from the record title to the property sold.
  • Broker fees: The fees earned by the transaction brokers and paid on the close of escrow for the sale of your property.

Your agent estimates the expenses you are likely to incur on a sale of your property by preparing a seller’s net sales proceeds sheet and reviewing it with you when listing your property for sale and reviewing the merits of each offer received to buy your property.

What is the Final Walk Through?

final walk-through of the property you are set to purchase is your last chance to confirm that all agreed-to repairs are complete and that nothing has materially changed since your home inspection.  

The final walk-through happens shortly before closing. It will likely take you and your agent an hour or less to complete. Also, be sure to bring a copy of your home inspection and final purchase agreement so you know which specific repairs to review.  

Here is a list of what to look for when doing the final walk-through:

  • Ensure agreed-to repairs have been made.
  • Check that all appliances and fixtures to be included in the home purchase are present.
  • Ensure no trash or unwanted items left by the seller are present.
  • Check for the presence of mold or standing water in all the rooms, including the bathrooms, the kitchen, near the water heater and the laundry room.
  • Test all of the home’s systems, including the heater, air conditioner, appliances, garage door and doorbell.
  • Check the outlets by bringing along your cellphone charger.
  • Walk around the exterior of the home to ensure the landscaping is intact and no exterior damage has occurred.

Finally, don’t hesitate to ask questions! I will be there at the final walk-through to provide answers and help you if issues arise.

What Happens If I Withdraw My Listed Property From Sale?

Occasionally, a situation arises which causes the owner of a property listed for sale to 
withdraw their property from the market. This owner has the option to voluntarily withdraw their listed property before it sells or the listing expires. 

Reasons an owner may have for withdrawing a listed property from sale include:

  • a change of job;
  • a family crisis;
  • the inability of the market to deliver the desired selling price; and
  • other personal reasons.

An owner who withdraws their home from the market is not breaching the listing agreement. However, they do interfere with the broker’s expectations of locating a buyer and earning a fee.

Therefore, the owner needs the broker’s consent when withdrawing the property from sale. If not, withdrawal triggers the broker’s right to collect a full fee as agreed. 

When the owner and the broker mutually agree to a withdrawal of the property from the market, no fee is due the broker, unless:

  • the owner and broker agree to the payment of a sum of money for the marketing effort undertaken and the opportunity the broker lost to earn a full fee by locating a buyer; or
  • the property is sold within the listing or safety period — with or without the broker’s involvement — in which case the full fee is due to the broker.

Conversely, the broker is entitled to a full listing fee when the owner’s conduct, without the broker’s consent, causes the listed property to be:

  • withdrawn from the market;
  • transferred to others;
  • further leased; or
  • otherwise made unmarketable.

Further, the full fee due the broker compensates them for the time, effort and money invested in the marketing of the property before the owner removed it from the market. Also important is the broker’s lost opportunity to locate a buyer and earn a full fee under the listing.

If you have questions about listing agreements, your homes value or the market. . . I am only a phone call or email away.

What is Arbitration?

Arbitration in real estate transactions is one form of dispute resolution.

Persons who are parties to an agreement may grant an arbitrator the authority to hear their dispute and resolve it for them instead of initiating a lawsuit in a court of law. On conclusion of the hearing, the arbitrator issues a binding award in favor of one of the parties.

In home sales transactions, the buyer and seller agree to binding arbitration by initialing an arbitration provision in their purchase agreement. As a private process, binding arbitration avoids court costs of litigation and thus expedites the dispute resolution process.

However, binding arbitration requires the buyer and seller to give up their rights to a jury trial and any appeal from the arbitrator’s decision. The arbitrator’s award is final and a judicial review is not available to correct any type of error, even when the arbitrator incorrectly applies law or assumes facts that do not exist.

Judicial protection by appeal from an arbitrator’s award is only available when:
• the parties to the agreement have agreed the arbitrator’s award is subject to “judicial review”; or
• the arbitrator exceeded their powers set by the arbitration provision.

Some pre-printed purchase agreements contain boilerplate arbitration provisions. However, agreeing to bring any future disputes to arbitration by initialing the provision is voluntary. All purchase agreements contain a resolution-by-mediation provision as a prerequisite activity to arbitration.

In a home sales transaction, the buyer and seller separately need to decide, with the counsel of their agent or attorney, whether to agree to the limitations of binding arbitration by initialing the arbitration provision in their purchase agreement.

What is a Buyers Agreement?

It’s good practice for the buyer and seller to each retain their own agent to act as their exclusive representative in a real estate transaction. In the context of a real estate sale, the buyer‘s and seller each separately employ a different licensed broker under a listing agreement. The listing agreement establishes that the broker will receive a fee in exchange for providing real estate services.

The broker employs licensed individuals as their agents. Their agents then solicit sellers and buyers to employ the services of their broker, and in turn the agent.

On entering into a listing agreement, the client retains and authorizes their broker and agents to diligently and continuously perform the agreed-to real estate services on behalf of the client. The broker’s agent works directly with the client, and in doing so, acts on behalf of the broker.

Regarding the broker fee, the seller of property typically pays the real estate fees due all the brokers. The fee is disbursed from the price paid by the buyer in the sales transaction. On each broker’s receipt of their fee on a sales transaction, the brokers share the fee with their agent(s) who participated in the transaction.

When the buyer’s broker receives their fee from the seller as agreed on the sale, the buyer obligation under their employment agreement to ensure their broker is paid is satisfied. Thus, the buyer does not owe their broker a fee.

Occasionally, the buyer’s broker structures their fee to be paid by the buyer as part of their total acquisition costs and purchase price. Here, the buyer directly pays their broker a fee as agreed in their employment agreement. The seller is paid their purchase price for conveyance of the property to the buyer and owes no fee to the buyer’s broker from the purchase price received.

Overview of What Agency Means For You.

First Time Home Buyer New Tax Bill Example

To illustrate how the changes to the standard deduction, repeal of personal exemptions, mortgage interest and state and local taxes might affect a first-time homebuyer, consider the example of Barbara Buyer. Barbara, an accountant making $91,580 per year, is single and currently rents an apartment. She also pays state income tax of $5,086 and makes charitable contributions of$2,088, but the total of these is lower than the standard deduction, so she claims the standard deduction.

Barbara’s tax liability for 2018 under the prior law is as follows:

Income $91,580
Standard Deduction -$6,500
Personal Exemption -$4,150
Taxable Income $79,862
Tax $15,619

Under the new law, Barbara would get a tax cut, computed as follows:

Income $91,580
Standard Deduction -$12,000
Personal Exemption $ 0
Taxable Income $77,492
Tax $12,988

Tax Difference Under New Law.
Even though Barbara would not get the benefit of the personal exemption under the new law, her higher standard deduction would more than make up for the loss. In addition, the lower tax rates of the new law would help deliver the total tax cut of $2,632 ($15,619 – $12,988) as compared with the prior law.

However, let’s take a look at what happens to Barbara if she were to purchase a condo costing $440,000 (median price for a condo in California). She takes out a 30-year fixed rate mortgage at 4.5% interest, putting down 20%. Assuming she buys early in 2018, her first-year mortgage interest would total $15,372 and she would pay real property taxes of $5,500.

As a first-time homeowner, her tax liability under the prior law would be computed as follows:

Income 91,580
Mortgage Interest $15,372
Property tax $5,500
State Income Tax $3,738
Charitable Contributions $2,088
Total Itemized Deductions -$26,699
Personal Exemption -$4,150
Taxable Income $60,731
Tax $10,837

Note: Under the prior law, Barbara would lower her tax liability for 2018 by $4,783 ($15,619 – $10,837) by purchasing the condo. This is the financial effect of the prior law’s tax benefits of buying a home. This amount effectively lowers her monthly mortgage payment by $399 per month

Now, let’s take a look at what her tax situation would be under the new law as a first-time homebuyer:

Income $91,850
Mortgage Interest $15,372
Property Tax $5,500
State Income tax $3,738
Charitable Contributions $2,088
Total Itemized Deductions -$26,699
Personal Exemption $0
Taxable Income $64,881
Tax $10,213

Tax Difference Under New Law. Even though Barbara would still be able to claim all of her itemized deductions under the new law, she would lose the benefit of her personal exemption. However, her taxes would actually go down under the new law by $623 ($10,837 – $10,213) as the lower tax rate would more than make up for the loss.

Download the Example sheet Here

Download (FIrst-Time-Buyer-Example.pdf)