Buying A Property In South Florida – Read This Before Making Your Offer.
Do You Really Want It?
It goes without saying…or does it? We all know that buyers want to purchase the home for the lowest price possible. Sellers want to sell the home for the highest price possible. My experience however is that neither typically takes into account the other’s position when negotiating a contract.
As a buyer that is looking for a home to live in ask yourself the question: do I really want this particular house? If the answer is yes, then read below and you will have a greater chance of entering into contract for it.
I work with residential real estate sales in South Florida and the bulk of my customer portfolio is sellers. I have an in depth understanding of this side of the coin so to say. If you are in the process of placing an offer on a home that is priced correctly and situated in a high demand area, be prepared to pay fair market value or don’t waste your time prepping the offer. You’re not going to steal it. I emphasize fair market value here – don’t low ball the offer and of course I am not suggesting overpaying.
Become Educated On Pricing
You should be working with a licensed real estate agent that understands / is familiar with the local market you are considering moving into. Your agent should have a working knowledge of the average, median, low and high prices of similar properties per square foot; highest and lowest closed sales; average sales cycle times; original list price to actual closed sale price percentages and other relevant market facts and trends. He / she should be able to educate you on the most probable sale price of the home you have in your sites and show you how that range of value is derived. You bet the listing agent has done that with the sellers and they are expecting you to come somewhere in that range with your offer.
When working within the parameters of a home that is in overall good shape, priced properly according to the local market numbers and it is not a distressed situation for the sellers…you should expect to pay a reasonable purchase price if you truly see yourself becoming the next homeowner.
For your offer to be considered you need to make it reasonable. I have been in several multiple offer situations wherein my listing comes onto the market and on opening weekend we receive 15 offers from the prospects that toured the home. Of these 15 offers 10 come in with the same or similar purchase price number and the other 5 come in significantly below asking price. Guess what happened to those 5 low ball offers? New homes in high demand areas that are properly priced and showcased the way they should be online will generate lots of traffic within the first week of being on the market. An agent working with one of the low ball offers took perhaps 30 minutes of his/her time to prepare it after his/her customers spent a good hour or more deliberating on how to get the deal of a lifetime on the terms they submitted to purchase the home. Let’s not even get into the amount of time that was spent by both the buyers and their agent on their journey to get to this specific home as “the one” they want to make theirs. Well the sellers took 3 seconds to look at the first page of the offer that presents the price and they hit the delete button and moved onto the next one.
Your time is precious – don’t waste it.
The Devil Is In The Details
As a consumer you want to be protected when making your offer to purchase the largest financial asset you will probably own in a lifetime.
Consider both sides of the transaction and your proposal to purchase will be more enticing to the seller.
Here are my recommendations for some of the points in a contract that are oftentimes abused by buyers and their agents when presenting offers to sellers:
- if you require financing for the purchase of the property do not make the financing contingency a 45 or 60 day loan commitment period. Buyers should already have provided income, asset and credit verification to the lender they are working with prior to touring the marketplace. 30 days maximum for a loan commitment on the contract. Period. Do the legwork before you jump in the car with your agent to look at homes. Most sellers will not be open to contracting with a buyer that is asking for such a long time to secure their financing. As a purchaser your lender should have you positioned so that all that is required once your offer is accepted is title work, an appraisal and inspections. You want to come across as a solid candidate when presenting your offer. Do not bring into question your ability to qualify for financing by submitting an offer with an unnecessarily long commitment period.
- 10 day inspection period – not 15. The most utilized contract in the South Florida resale residential real estate marketplace is the “FarBar As Is 5” current day. The period stipulated within the contract is a protection period for the buyer to carry out their due diligence on the home and have their inspections performed to make them aware of any defects that may be uncovered with the integrity of the home (wood destroying organisms, functionality of the appliances, electrical and plumbing systems, foundation, roof, etc.). Within this period the purchaser can withdraw the offer after performing inspections if there is anything that is not to his / her satisfaction and the seller has lost these days in marketing time / exposure to other potential purchasers. Most inspection companies have 24-48 hour availability to schedule and same to one day turnaround times on providing reports once they complete their inspection of the subject property. 10 days is more than enough time to get it done.
- do not low ball the earnest money deposit on the contract. You’re purchasing a $450,000 single family home in Pembroke Pines and asking for a $1,000 show of good faith for the entire length of the contract period through the day of closing? If you were the seller would you not want the buyer to show more good faith? This comes back again to making a reasonable offer with reasonable terms. Absolutely as a buyer you interests should be protected. If financing, you have the financing contingency looking out after your interests. Both financing and cash buyers have the inspection period to protect them as well.
- show your proof of funds. Making an offer on a home and the contract stipulates that you do not require financing and are paying in cash? For the seller to take the property off of the market and enter into contract with you show them the money. They’re not going to take your word for it…would you? Imagine you are the seller and you’ve taken the property off of the market for 45 days, closing day comes around and the buyer doesn’t have the cash to close. Of course you should block out account and telephone numbers that may be disclosed on a regular asset statement.
- this statement is for the current South Florida single family and town home markets – the outlook may be different down the line but this is predicated on today’s conditions. Do not ask for seller concessions toward your closing costs. For the 300k plus market there are too many buyers in the marketplace and not enough inventory. If you do not have the “cash to close” then right now is probably not the time for you to be looking at real estate. Save a little more and make sure you have your down payment and closing costs money ready to go. Your mortgage lender should have made this magical number clear prior to you touring properties with your agent. I will say that if you have the credit and income to qualify but you are short on some (not all) of the funds to close, then you may want to consider purchasing new construction as builders tend to give concessions toward closing costs / upgrades on their inventory. Have this conversation with your agent for guidance. I’ve worked with buyers before that are otherwise ready to move forward but have needed the “cash to close” help and we’ve been able to secure their home with different new construction builders that helped them cover the difference. Most non-developer sellers are not willing to concede $5,000 or $10,000 plus to seal the deal when there are plenty of buyers out there today that do not need this help.
- 2 weeks on the appraisal contingency. This is more than enough time to get it done – whether the offer is cash or financed.
Too many times I’ve received the second phone call from an agent: “Oscar I’m sending you the offer right now, they’re finally ready to move forward”. The first phone call took place a few days or sometimes a few weeks prior to the second. My reply to the second phone call more often than not is: “Sorry my friend, we contracted yesterday and we’re just waiting on the escrow letter to pend the sale on the MLS”.
Found the home you want?
Make your offer and try to seal the deal.
Thanks for the read and best of luck on buying that home.
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