In working with buyers and sellers over the years, one thing I've noticed time and time again is the notion that the highest price will always win out when it comes to real estate. Sure, it is true in many cases, but certainly not all. Here are 3 scenarios to think about:
1) Highest price, weak financing (or lack thereof)
Yes, every seller wants to get as much money as possible for their home. But if the buyer's financing is not very strong, even the highest offer will not work since the ability to close escrow is very shaky. By weak financing, I don't necessarily mean someone who is putting less money down. It means that the lender who supposedly pre-approved the buyer for a loan is either not well-known, is unresponsive, has a bad track record, or didn't really do a proper job in qualifying the buyer. In addition, proof of funds from the buyer and credit scores are not substantial or well-documented.
One thing that bothers me at times is when buyers with FHA loans are overlooked simply because they're getting FHA loans. What many sellers need to realize is that an FHA loan is NOT an indicator that a buyer has poor finances. In fact, I've seen buyers getting conventional loans end up cancelling escrow because they cannot qualify for such a loan after all. On the flip side, buyers need to also understand that sellers are VERY concerned about a buyer's financing these days and should make sure that they have their financing well-documented to provide to the seller. If a buyer doesn't have very strong financing (i.e. plenty of liquid money available for a down payment, good credit scores, stable and well-documented income, steady job history, and a solid lender ready and willing to lend to this buyer), he/she needs to understand the potential limitations of purchasing certain homes as a result.
2) Highest price, weak buyer's agent
Sometimes your real estate agent can make ALL the difference. Real estate transactions are complicated. There are several moving parts involved, and if not everyone is on the same page, the transaction is at risk of not closing. If a buyer has a weak real estate agent -- i.e., won't return e-mails or phone calls, doesn't know the basic steps of a transaction, doesn't know the purchase contract, doesn't have a handle on his/her client's financing, etc. -- then everyone involved is in for a long, shaky, stressful ride. An agent who knows how to communicate properly, act with a sense of urgency, and follow through thoroughly can actually cause a seller to want to accept the offer from that agent's client instead of another buyer simply because there's a higher chance to close escrow with the strong agent.
In my experience, I've represented buyers for whom our offer was accepted despite being a few thousand dollars less than another offer because of how well I was able to communicate to the listing agent and present my clients in the most positive and honest light possible. In addition, I've represented sellers who accepted a lower offers on their homes because they felt that the buyers' agents were better equipped to handle and close the transactions. In all cases noted here, I can honestly say that they were among the smoothest transactions I've ever been involved in.
3) Highest price, won't appraise
This is a tough one to swallow for some sellers. There are some buyers out there who want a home so badly that they'll offer well above the list price -- and slightly above the market value in some cases. While that's a wonderful situation for the seller, there is a risk in today's market that the home will appraise for less than the higher purchase price offered, causing issues with the buyer's financing (if any) or making the buyer feel like he/she is getting a bad deal. What the seller needs to figure out is whether the buyer can and is willing to pay the difference between the offer price and the lower appraised value. What the seller also has to understand is that finding a buyer who will pay above market value regardless of the appraised value may not be easy and can take much longer to find.
The key to putting any transaction together is to figure out if you're being presented with the best deal at the moment. Figuring out what the "best deal" may be is quite subjective, and sometimes the best deal may not always mean the highest price.
No comments:
Post a Comment