RISMEDIA, July 15, 2009-Are you providing professional skills and guidance to buyers in structuring their contract offer to help them get it accepted?
You converted the original home buyer inquiry to an appointment. You qualified the buyer as to needs, wants and price range, helped them obtain mortgage pre-approval and developed rapport to start the home search process.
Now six weeks later, 29 home showings and second showings to both sets of parents, your buyer client says, “We want this one, let’s make a contract offer.” You’re excited. You’ve finally found them a home. You’ve done it!
Almost, but not yet. In fact, you’re not even in field goal range yet.
There’s more to preparing a contract than simply filling in the blanks!
The goal is to prepare the contract offer to get it signed by the seller, and not questioned and rejected!
And yet, knowing that a home cannot be sold without obtaining a signed contract by the seller, it is amazing how contracts are being prepared and submitted by many Realtors® and buyer agents. Contracts are being prepared and submitted which are impossible to read, are incomplete, dollars don’t up, are missing documents or disclosures and have dates that are impossible to meet.
This is not the time to rush in filling out and completing the contract offer paper work. This is not the time to assume your buyer’s offer is too low and won’t be accepted, and does not warrant your time and energy to prepare and present. This is not the time to simply call the listing agent and present a verbal offer or just fax or email the contract offer to the listing agent for them to present.
Contract presentations are what we are in the real estate business for. They are the result of providing professional service to buyers looking to purchase a home. Why then are Realtors and buyer agents spending so little time in preparing buyers in advance of a contract offer and little or no time in structuring the contract to make the offer as strong as possible regardless of the price offered?
Regardless of the number of pages in a sales contract, the agreement to purchase can be broken down into three separate parts: price, terms and conditions. Each has to be satisfactory to obtain seller acceptance and a signed contract offer.
In some situations, full price offers are not acceptable due to the buyer’s terms and conditions in the contract offer. In other instances, contracts get accepted and signed even though the offer was much lower in price than other competing offers, but was more favorable for the seller in terms and conditions. Then there are the contracts where the price is acceptable, but the contract offer is sent back to the buyer for initials on all the corrections which had to be made.
Avoiding time delays when negotiating a contract can be the difference in obtaining seller acceptance, or losing out to another offer, especially if the delay is due to reasons which could have been avoided with proper preparation of the contract offer to begin with.
Preliminary Information in Preparing Contract Offers – Contact the Listing Agent
In most listing agreements, the listing agent is the gateway to a contract presentation with the seller.
Don’t just start writing the contract offer! Don’t assume the seller will accept a normal closing date! Inquire as to the sellers preferred closing date time frame. It would be important to know that the seller wants a six month closing and the buyer needs a two month closing due to the sale of their present home or the seller needs an immediate closing and the buyer has a home to sell and it is not even on the market yet.
Don’t be afraid to ask if there are there any offers being negotiated at the moment. If there had been any offers presented, were they refused and when? If so, try to obtain information as to what is the status of the listing, what price has been refused and try to obtain any other information that may be helpful. Some agents do like to talk.
And be diligent in inquiring whether the property is a short sale or pre foreclosure. This is information that buyers should know and agents need to have prior to preparing contract offers.
Obtain a copy of the Sellers Property Disclosure in advance of preparing a contract offer and review it with the buyer. Information provided in the disclosure may have an affect on the price the buyer will offer, and may have affect on the market value of the home.
Why wait until the contract presentation to obtain the sellers property disclosure? Obtaining the disclosure after the fact requires extra time in getting it signed by the buyer, but more importantly it may provide information which may change the buyer’s desire for the home or the price they are willing to pay for the home.
For homes built prior to 1978, obtain the Lead Based Disclosure. By law, this form must be completed by the seller, signed and dated prior to the buyer’s acknowledgement signature. Again, why wait to obtain it at the contract presentation and then go about obtaining the buyer’s signature?
Prepare the Buyer
The first step is explaining the process of negotiating a contract offer with the buyer. Buyers need to know and understand how the process of presenting their contract offer works.
They need to know that there is no cardinal rule that there must be some fixed amount that a seller will negotiate from their asking price. They need to know that a seller has options when a contract offer is presented: they can accept it, make a counter offer or refuse it without even making a counter offer.
They need to know that the home is on the market and is being shown to other buyers during the process of contract negotiating and perhaps afterwards in many cases. They need to know that new offers may be presented while theirs is being negotiated.
When buyers are not informed with information like this, and if the contract negotiations do not work out, there is a great chance that the buyer places all the blame on the agent.
Be sure the buyer has provided a copy of their Mortgage Pre-Approval.
Be sure a copy is included with the contract offer. Why? The first question to be asked by the seller and listing agent at a contract presentation will be “Does the buyer have Mortgage Pre-Approval? And this is where the benefit of a Mortgage Pre-Approval letter provides advantages over a standard Pre-Qualification letter. There is a difference!
A good practice would also be making a phone call to the mortgage representative to obtain the time frame they feel is necessary to process the mortgage application and what additional information the buyer needs to provide. With information like this, there is a better comfort level in knowing what time frame is needed in the mortgage contingency clause in the contract offer.
Tomorrow I will discuss the three parts of a Contract Offer.
Licensed since 1971, David Fialk, CRB, CRS, ABR, GRI, e-Pro Certified Internet Professional, is the broker/owner of Choice Realty Co., Iselin, NJ and provides Real Estate Sales Seminars and Training. He can be reached at 732-283-3400 or David@ChoiceRealty.com.