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You are here: Home » 2014 » September

HOW PICK AN OFFER

So you put your home on the market and now an offer or two is coming in for you to review. You’ll of course be wondering if any of the offers will be any “good.”

 

Most people focus on price to the exclusion of nearly everything else, but that can be dangerous. The highest offer is not always the “best” offer, although obviously price will be one of the primary factors. But besides price, you’ll want to look at whether the buyer needs to sell a home first, are they asking you for any credits towards their closing costs, and if so, how much are they? You’ll also need to look at what fees and costs they are asking you to pay versus which ones they are willing to pay. Then you’ll look at how much they are putting down for a down payment, how much is their deposit, and how strong is their financing approval letter. You should also look at the appraisal issue, and if your price is higher than recent solds, is the buyer willing to pay the difference if the appraisal comes in low?

 

Let’s say your home is listed for $450,000. Two offers come in. One is at $447,000, and the other at $460,000. Which offer is “better?” Well, the $460,000 offer sure looks better, but we really can’t tell at this point. What if the $460,000 offer is asking you to pay $10,000 of their closing costs, they need to sell a home that isn’t even on the market yet, and they absolutely need it to appraise for $460,000 or they won’t have enough cash?. And then we’ll say that the $447,000 offer is all-cash, with them picking up about $1000 of the fees that the Seller normally pays, and they’ll let you rent-back the property for 2 months after Close of Escrow at no charge. Hmmm, now the $447,000 offer is starting to looking pretty good…

 

So just know that when you get an offer, you’ll need to look at the WHOLE picture before you label offers as “good” or “bad.”

 

HELOCS ARE BACK?

“Using your house like an ATM…” That was the phrase we heard a LOT back in the early 2000’s. At first, some lenders even used this phrase in their advertising as a way to entice borrowers to apply for a HELOC (Home Equity Line of Credit). But then it became a term of derision as values dropped and people found they had borrowed more than their home was worth. Lenders started shutting down these lines of credit and we didn’t see banks making any new HELOC loans. Until now…

That’s right, now that values are back up, some banks are rushing right back into the HELOC business. Some people view this as a healthy sign that the market has recovered and that, “It’s different this time…” Others slap their foreheads and say, “Oh, no. Not again!” I will say that one thing that IS different this time is that lending rules have changed, and lenders are supposed to make sure you can afford the payments, and I don’t know of any lenders making loans at 125% of your home’s value like they did last time.

Personally, I’m not opposed to HELOC loans in principle. They are a financial tool that can be used wisely, or abused. If you have high credit card debt with high interest rates that you can’t pay off another way, a low-interest rate, tax-deductible HELOC MAY be right for you, but only if you don’t run your cards up again later! So please, please be careful with any equity you’ve managed to grow in your home. I know that pool would look great back there. I know MasterCraft is having their end-of-the-season sales on waterski boats. But please, map out your financial goals, set a spending plan, and make sure you are on track before you start adding any new debt. Very few people have gone broke because they didn’t add ENOUGH debt to their lives!

COMING SOONS

This happens to me quite frequently. I’ll meet with a potential seller, we come to an agreement that we’ll work together to sell their house, do the paperwork, and set a date to go on the market. Then just as I’m leaving they’ll say, “…and you’ll put up a ‘Coming Soon’ sign, right?” They are surprised when I tell them I don’t recommend that strategy, and here is why. Let’s say we’ve decided to list their home at $450,000, and I put up a coming soon sign, but we aren’t going to go on the open market until next week. Someone drives by, sees the sign, calls me up, sees the inside of the home and has me write up an offer for $450,000.

 

“What’s so bad about that?” you say. Shouldn’t I be happy? I make more commission, seller gets the price they wanted, everyone is happy, right? Wrong. The house didn’t go on the MLS, it didn’t get on my website, didn’t get on the other real estate websites, etc. We don’t know if someone else would have offered more money and/or better terms because it wasn’t EXPOSED. I’m much rather we had waited, exposed it to the market, and odds are, this buyer would have still been there and they still would have offered their $450,000. Then after we know it’s been fully exposed, if that offer is the “best” one, great, they can accept it and we know we did the best we could. But too many times I’ve seen homes sell quickly before they get exposed to the market, and you hear of some buyer who says, “I would have written an offer on that home if I had known about it!”

 

I bring this up now because the number of sales like this (called “pocket listings”) is soaring, and some of the major real estate web portals are coming out with a way to search for these. As for me, I vote for MORE exposure, not less! I’d prefer everyone that lists their home with an agent instruct their agent to list the home on the MLS so ALL the buyers can see it!

DON’T WANT TO SELL UNTIL BUY?

So you’d like to buy a new home, and to do it you have to sell yours. Let’s say that you know for sure that you want a bigger or smaller house, or different neighborhood, and there are quite a few homes on the market that would meet your needs. So in this case, you can put your home on the market, find a buyer and then hopefully find a seller willing to accept your contingent offer. If you can match up the dates to avoid a double-move, even better. Although sometimes you have to sell first, move into a rental, then buy your new home.

 

But what if you have fairly specific needs for your new home, and there aren’t many (or any) like that for sale right now. Let’s also say that you still really like your home. This means you only want to sell your home IF you can buy the right home, otherwise, you’ll stay put. However, these creates a danger zone for you. What if the “right” home comes on the market, but they won’t accept your contingent offer because your home isn’t even on the market yet and it sells quickly to someone else?

 

One solution is to go ahead and put your home on the market, and when an offer comes in, you counter back with a contingency on YOU finding the home of your choice within a certain amount of time. That way you aren’t stuck in the situation where you’ve sold your home but don’t have the home you wanted to move into. Yes, I know that many buyers won’t accept a seller contingency like this, but it’s something you can try. The other option is to buy the new home first (if you qualify), then sell yours after. This method has risks, too. The first is that you’ll probably have two mortgages for a while, and the bigger risk is what if the market tanks right after you buy the new home? I also know of one lender that will make you a “bridge” loan where they make one big loan on both properties, then you pay the loan down when the home you are leaving sells.

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