Be A Better Buyer: Submitting An Offer
  By Albert Joy

The majority of my business is helping sellers sell their property. Understanding what the seller is looking for will help you understand what it takes to be a better buyer. These are the things I look for when an offer is on the table.

One: THE FIRST OFFER IS USUALLY THE BEST.

I pay a lot more attention to the first offer than any subsequent offers because the first offer, by experience, is usually the best one. This offer is made by the buyer who has been out looking at properties, has made lower offers on other properties and lost the bid. This is the buyer who understands exactly where the market is, and what he or she needs to offer in order to get a winning bid. Offers that come in after that are usually people who are either trying to test the market, new to making offers, or are not quite as motivated as the first buyers. Especially in Hawaii, understanding how much property you get for the money you are spending, otherwise known as “sticker shock”, is a big hurdle to get over. Sometimes the buyer ends up making several offers before actually winning a bid on a home that acceptably meets their needs.

Two: THE REPUTATION AND PROFESSIONALISM OF THE AGENT AND COMPANY PRESENTING THE OFFER.

This has some significant bearing of how much weight I will give this offer before I present it to my seller. Based on experience, the agent advising the Seller should have a strong handle on whether the agent and company representing the Buyer counsels their clients well, and helps their clients through the buying process, or whether the agent or company takes unnecessary risks in client preparation or representation. It is a compensating factor, in determining whether or not to proceed with an offer regardless of terms. I’d rather have a low down payment offer with closing credits from an agent who knows their business, rather than a full price cash offer from an agent who has a questionable track record.

Three: PRIOR CONTACT FROM AGENT.

Standards of practice now dictate that as a minimum, the agent representing the Buyer submit a cover letter, introducing himself, his clients, and giving some background on how long they have been looking, whether the Buyer has been to a lender, etc. Taking it one step further, it is usually very helpful for both agents to briefly discuss major points of the contract that will be necessary for their clients’ successful participation in the contract, such as closing dates, degree of disclosure, how long it will take for the principals to respond to any offer, etc. This helps everyone work out minor details regarding the offer so we will not have to go back and forth over minor issues. A good agent will be able to narrow down the clients decision to a yes or no. However, many agents work it out in many different ways. I believe that this is a more professional and ethical manner of dealing, especially now that we have 12 to 15 page contracts. It's better to have a meeting of minds as much as possible before we go to paper.

Four: WHAT IS THE CASH DOWN PAYMENT IN PROPORTION TO THE OFFER PRICE.

Although it may not seem fair, the party with a higher cash contribution holds a stronger ability to close, and should be given strong consideration before other issues. If the appraisal turns out low or if there are additional costs, we know that the additional equity position of these people is would not jeopardize the escrow over minor dollar amounts. If a buyer is squeaking by with seller closing cost credits and is borrowing money from their parents in order to close the deal, they will have a higher hurdle to clear when it comes time to the closing. That does not mean that a low down payment offer is not good, or valid. It does mean that if I have a choice between more down payment and less, take more.

Five: QUALIFICATION LETTER OR PRE-APPROVAL.

If the Buyer has a qualification letter or pre-approval, it shows me that they know what they are doing, they have done their homework, and they are serious about buying something. Pre-approval is better than a pre-qualification because it means that these people have actually done a complete loan application, and are only looking for a property that meets their financial boundaries. It means that they are serious, ready to go and that there are not going to be any surprises during escrow. Pre-Qualification is almost as good, but not as quite, because that means the loan application process is not going through and things may pop up during the escrow process. Sometimes, if clients are not so serious about looking, or if an inexperienced agent or loan officer is handling their loan application, errors or oversights on their application can be costly and/or kill the deal after everyone’s done so much work. Do your homework, square away your finances.

Six: LOOK AT ANY OTHER CONTINGENCIES.

Now, if all other issues have been put to rest, I will look at any other contingencies or red flags that may be on a contract. If there is a long closing date, contingency on obtaining cash is unusual, or if possession dates or anything of that nature is not normal. If any of these issues arise, I investigate further, check with the real estate agent, ask for clarification, and find out whether it's valid or if it's some kind of quirk we can work through. There is always a reason someone asks for something strange or unusual. It’s my job to figure out what it is if I am to represent my clients’ best interests. As a Buyer, if you don’t need it, don’t put it in. The cleaner contract gets the prize in a competitive market.

In summary, there are tons of people always looking for property. What separates the lookers from the Buyers, is the level of motivation. The simplest way to be a better buyer is to get your ducks in a row. Become pre-approved, know what you are looking for, and become very familiar with what market values are in the area. Sue a professional agent who will represent your interests in an ethical manner. In order to get a feel for market value, don’t just look at what is in the newspapers, magazines, or even just the Internet. Pay particular attention to properties that are in escrow. Look at what has sold and at how long it’s taken to sell. Also become physically familiar with the properties that are in escrow now. You can do this personally or you can have an agent that you trust interpret the market for you in that fashion. With the internet and the type of information that we have at our fingertips now the volume of data is pretty large. The agent's role either changes from one that merely provides you with mounds of information to one that interprets the data for you, giving you reliable, professional conclusions. The agent you select should help you digest market data, and offer guidance to successfully win on a bid on the next best home for you.