VOL. 42 | NO. 16 | Friday, April 20, 2018
The process of elimination in multiple-offer scenarios
These multiple-offer scenarios are getting old, and buyers are mad as heck and aren’t going to take it anymore. That is until this weekend when they will dust the frustration off their jackets and boots and dive back into the fray.
Suppose a family owns a home in Nashville, or heaven forbid, another city and they want to buy a home in Nashville, but their current home is not on the market.
Buying another home is no problem as long as they have the financial resources to purchase the new home without selling the other.
If not, they are toast. An offer to purchase with a sale-of-home contingency for a house that has not found its way to the market will be rejected before the buyer can crow three times.
If the buyers have sold their houses, passed the myriad inspections and negotiated the repairs – and the sellers have the cash on hand to purchase their homes – they think they should be able to buy contingent on the closing of their homes, not the sale of the homes.
That should fly, right? Sorry, but no. Only if they offer a ridiculously high amount and surpass all of the other offers will they win, and at times, not even then.
The buyer who prevails will have a very clean contract complete with a substantial earnest money check, now known to some as trust money.
They will close when the seller wants to close, even if that means the buyer must move twice.
There is no doubt the storage facilities in Nashville are filled to the brim with the belongings of those forced into the temporary housing awaiting possession of their permanent homes.
Back to the multiple offers: Many think heartfelt letters to the owners combined with Hallmark-quality photographs of the children will aid in the selection process. That ploy might work as long as the offer is the best, or at least tied, in other areas of value, such as price.
A smiling, beautiful child is worthless as a bargaining chip if the offer is $20,000 below list.
The seller has no interest in contributing to the college fund of the buyer’s children, however cute the children might be.
When there are multiple offers, the listing agent will often print them and rank them before presenting to the seller. Offers that are heavily laden with contingencies are presented first in order for the seller to sign the “rejected” spot on the offer.
Then comes the ranking by price with those being grouped into the rejection pile and the consideration stack.
Some are easily eliminated due to the price.
If a house is listed for $400,000 and someone presents a cash offer for $380,000, that will not be favored over an offer for $400,000 from a person getting an 80 percent loan.
The offers are then measured by the percentage of the loan and the type of loan the buyer is getting, and there are various weights given to each of the bundle of financing options available to buyers.
For example, a 75 percent loan from an online lender with no ties to the Nashville area could be trumped by a 100 percent loan from a local, well-known lender that provides physician loans.
Since the beginning of time, the local banks have chased doctors, and there apparently is no better means of corralling their business than to provide a 100 percent loan at a low interest rate with no private mortgage insurance.
Realtors can bank on these loans – and do.
Then the other pre-approval letters are weighted.
Believe it or not, some buyers create their own banks, and many are skilled graphic artists crafting credible logos, believable addresses and lofty titles for the signatories.
Since Google arrived on the scene, these are more easily exposed, and Google now plays a vital role in the process, as does social media.
Many times, when the buyers are being vetted, their Facebook and Instagram accounts are visited as the list is narrowed. Posts such as “considering a move to Nashville after losing job” or “made an offer on a house we do not like, but the market is tight, and we can walk after the inspection if something better comes along” are not helpful to those hoping to be selected.
Offering to be “as- is” with an inspection included has no value. On the other hand, offering to buy “as-is” with no home inspection will incur favor and has monetary value.
Every home has $3,000 to $5,000 in repairs, no matter what the sellers think. Seller with savvy agents know that “as-is” with an inspection is the same as having a traditional inspection contingency, inasmuch as the buyer is going to demand repairs or money with the threat of walking once the deficiencies are noted.
Price, possession date, closing date, earnest money, loan amount, inspections, terms, contingencies and, finally, the familial beauty will decide who wins. Have fun.
Richard Courtney is a licensed agent with Christianson, Patterson, Courtney and Associates and can be reached at firstname.lastname@example.org.