writing a purchase offer
A buyer’s agent made me laugh out loud yesterday when he said, “You’re so famous I can’t believe I’m talking to you; you’re everywhere online.” I get a big kick out of that kind of reaction because I truly don’t see the celebrity perception that some people form. I’m just a Sacramento real estate agent who writes about real estate every day and sells a bunch of homes in Sacramento every year. It’s not like I’m on TV or anything. I’m not a best seller at Amazon. I put my pants on one leg at a time like most people — mostly because I’m too old and cranky to jump into them with two feet like some 20-year-old surfer dude.
I call a lot of buyer’s agents these days, especially when I see they have showed my listing, for example, on which almost every buyer who sees it wants to write an offer. I figure it’s better to discuss the situation upfront. Text messages and email are all too easy to ignore. But a phone call is kinda jarring to many agents; it’s too personal, I sense, whoa, what is this sound? My phone is ringing and I’m in the middle of playing Plants vs. Zombies, the new Beach wave. What the?
I call agents because I figure it’s better to talk to them before they write an offer. So many never call the listing agent to get more information or glean insight. If I don’t talk to the agents, they’re left staring at their buyer’s bright and shiny face who asks, “How much should I offer?” And the answer appears to be: Whatever you want. I get offers all over the board these days, and some are pretty wild.
Much of this confusion, not all of it, unfortunately, would be resolved if the buyer’s agent would just call the listing agent before writing an offer. One question to ask is how many offers do you have or have you received? That would shed a lot of light on the situation. Without breaking fiduciary to her seller, a listing agent can also help guide the buyer’s agent to writing an offer that is likely to get accepted.
There is always more behind buying a home than numbers and pictures. There are people involved. It’s not just an address with four walls and a roof.
My focus is to make the seller happy and get the seller into escrow and closed. I don’t mind calling buyer’s agents and talking. It’s how we used to do business in the old days before agents threw offers at the wall to see if anything sticks and then resumed reading Facebook.
If a home for sale in East Sacramento needs work, does that mean a home buyer can or should offer less than the asking price? Imagine this scenario. A home buying couple has been out touring homes with her East Sacramento Realtor for several days. They had been looking at homes in East Sacramento both online and in person, trying to find the home that speaks the loudest and stirs up those emotional longings. Finally, they stumble upon a home with the right number of bedrooms and baths, the layout is perfect, and the location is highly desirable, but, alas, it’s not in the best condition.
The home needs a new roof, and the elderly sellers don’t have the money to replace the roof. The hardwood flooring under the carpeting is in pristine shape but rolling up carpeting to haul off to the city dump is really not in the buyers’ future plans. Perhaps the flooring slants a little bit because the home has been around for 75 years. The hottest design trends that are featured in all of the home remodeling magazines are not found in this home; instead there is basket-weave tile in the bath, which the buyers would prefer to rip out.
Still, there are very few homes for sale in the buyers’ price range in East Sacramento. This home might be perfect in every way except for the defects the buyers noted. How much should the buyers offer if they decide to move forward? That’s always the big question. This could be the home of their dreams.
First, a buyer might want to consider the fact that the home is priced correctly and at market value, which is often the case. The price probably already reflects the work. Perhaps another home the buyers don’t much care for is priced less because it is a home that is much smaller and located on a busy street? Figuring out an offering price does not mean buyers should automatically offer less because the home does not measure up to their ideal needs. Market value does not depend on a buyers’ future home improvement plans.
Buyers, too, might point to the days on market, as the novice typically assumes incorrectly that longer days on market always means a home is overpriced. Sometimes newbie real estate agents make that mistake as well. What longer days on market can also mean is many home buyers do not want to buy a home that requires any work at all, so they pass it by. Not that it’s priced incorrectly. For many first-time home buyers, any amount of work is too much work.
The savvy buyer will instead see an opportunity to buy an East Sacramento home that will increase in value after the right kind of improvements are made. They also welcome the chance to apply a personal touch to their new home and might even spend afternoons strolling the aisles of Home Depot. Often, these types of buyers, believe it or not, are real estate agents. If you want to buy a home like a real estate agent, then you might want to talk with your agent about the comparable sales and look at the sales price the way a professional would. Because only a novice would believe a lowball offer is the right answer.
It’s a fine line to walk when looking at homes to buy in Sacramento and feeling the urge to make an offer. The dilemma is when you spot a home you like, should you make an offer with the possibility that if you keep looking you might find something better, which means you would have to cancel a contract? Or, do you wait to make an offer until you are absolutely certain you’ve viewed every single home that might fit your parameters, opening the window of opportunity for another buyer to step in before you can act? It’s a tough place to be. Moreover, may I suggest that it’s not really a good idea to look at homes if you’re indecisive.
Even some veteran Sacramento Realtors are struggling with their buyers. I followed up on a showing of a duplex in Carmichael to find out if the agent would share his buyer’s thoughts with me. I always like to pass on feedback to my sellers, keep them in the loop about what’s happening, and answer any possible questions that might arise from the showing. The agent said the buyers were interested, but they had other homes they wanted to see over the weekend, which was 4 days away. Why do buyers think they have 4 days to look at homes in Sacramento?
We have limited inventory in Sacramento. The principle for a seller’s market in Sacramento is when you spot a home you like, buy it. Right then. Immediately. Make an offer. Commit. There is no time to soak in a bubble bath and contemplate your place in the world, wondering what would it would be like if we were all living on a blade of grass and not planet Earth. Chop, chop, people, pen to paper or mouse to screen.
I don’t enjoy informing buyer’s agents that we are in pending status now and they can only submit a back-up offer. Another agent texted late yesterday that he had just scanned an offer to send to me on the same duplex in Carmichael. Because of the way texts work, I could see that he had texted me a day earlier at the same time, asking questions about the duplex on behalf of his buyers. I pointed that out, that he had contacted me 24 hours earlier and let him know that yes, the property was pending. Maybe he was a part-time agent who could only work after business hours, I dunno.
His response was he had told me he was sending an offer 24 hours ago and it was STILL today damnit, even though much later in the evening. As though somehow he imagined we would wait for a less-than-list-price offer from him, because I had inquired as to the amount of the offer and suggested that he bump it up. He didn’t bump it. He didn’t even send it. If I had a dollar for every time an agent said he was sending an offer and didn’t . . .. He wanted to know how high the winning offer was, and I instead asked if his offer was still less than list price. Yes, it was. Well, then, day late, dollar short.
If you don’t make an offer, you can’t buy the home. If you don’t eat yer meat, you can’t have any pudding.
When most Sacramento home buyers envision buying a home, they tend to view their first home as a place to live in-lieu-of an investment. This means they want the home to be in tip-top condition without any defects. They strongly care about the sales price only if nobody else does. If there are no other offers, in today’s fall market, they might offer less than list price in hopes of negotiation. Yet, if the house truly meets their needs, home buyers will pay what it takes.
I think about how this compares to some of the homes I’ve bought in my life. I came into real estate as a buyer’s agent for investors, and I started at a small Newport Beach real estate company, which I later bought. My training was untraditional but valuable. Today, I strongly believe that every agent should at least work a few years for a major broker before trotting off on their own, if that’s what they desire, because there is so much to miss by not having the proper training and absorbing social etiquette about the business. It’s only in retrospect that I see this about myself. I was lucky in my ignorance.
When this Sacramento real estate agent decided to buy her third house, I found out everything I could about the seller. I had been watching this particular home in the Sunday open house ads (before the Internet). It had a white picket fence — a Dutch Colonial. It was so darned cute, oozing curb appeal. The listing agent was informative and told me things she probably should not have such as the sellers had bought another home across town and moved out months ago. She told me where they moved, which was a very expensive part of town. People just blab if you ask the right questions.
The house had many problems. It was overpriced; featured a lovely gaping hole in the living room ceiling; the hardwood maple floors were in terrible condition and the wallpaper was atrocious.
I made an offer that the listing agent said would not get accepted. It was less than list price. My earnest money was $500 and there was no down payment. This was 25 years ago, when loans were assumable, and I offered to assume the existing financing. My offer meant that the seller had to take money out of a savings account to pay the commission and closing costs, because there was no money generated in the offer to pay these things.
The listing agent expressed doubt that the seller would take my offer and actually said that in all her years in the business, nobody writes an offer like that. That’s because she was in traditional real estate and not investment real estate. In my mind, I figured I would fix up the house and increase its value; make it my own. I can tackle just about any home improvement project by myself. DIY is not difficult.
To help the agent submit the offer, I drew up a list of benefits for the seller, explaining why the seller should take the offer. I laid out how much the seller has already spent over the past 6 months or so trying to sell the house. Mortgage payments had to be made even if the seller wasn’t living there. I compared that sum of money to the smaller amount the seller would need to pay to close escrow. I pointed out that banks might be reluctant to loan money on a home with a hole the size of a small car in the ceiling. And I ended it by documenting the release of liability from the loan that the seller would obtain when I formally assumed the loan.
The seller signed the offer. The agent practically fainted. This was very different from the way homes are sold today. But sellers still sell because it’s a benefit to themselves to do so. That part has not changed.
I think home buyers pass up some great opportunities in the Sacramento market by insisting on buying a move-in ready home. They can’t personalize the home or express themselves when it’s already done for them. And they pay more for updated homes, making them completely dependent on future appreciation and principal reduction to build equity. But I just go with the flow and help everybody achieve what they want. That’s my job.