6 Ways To Craft An Offer A Seller Can't Refuse

Common sense tells you that when it comes to buying your dream home, offering a lot of money helps.



Knowledge that's not so common: Even in real estate, money isn't everything. Buyers with the biggest offers don't always prevail.

If you sweeten your offer with intangibles, your bid will stand out in neon lights, say three noted real-estate experts.

The success of this strategy hinges on thinking carefully about the needs of a seller. Each is different. For example:

• The moving seller: Sellers in the midst of purchasing and moving into a new home may want to close the sale of their old house quickly.
• The burned seller: A seller who was stiffed by a previous buyer who sounded committed and then abandoned the deal may need to trust that this sale will truly close.
• The busy seller: These sellers may love the relief of letting their home go "as is," freeing them from worries over inspections and repairs.
• The sentimental seller: People relinquishing a longtime family home often want assurance that the new owners will treasure it as they had.

We asked three noted real-estate experts for their tips on crafting an offer that a seller will find irresistible. They are: sales trainer Floyd Wickman, founder of Floyd Wickman Team and one of Realtor Magazine's "25 most influential people in real estate" in 2000; sales trainer Tom Hayman, co-founder of the Real Estate Negotiation Institute; and Ilyce Glink, real-estate expert and author of "Buy, Close, Move In!: How to Navigate the New World of Real Estate — Safely and Profitably — and End Up with the Home of Your Dreams."


6 steps to 'yes'


Here's how our experts say it's done:

1. Hire a skilled negotiator.

You might think that with today's market saturated with homes for sale there'd be little competition among buyers. But you'd be wrong. At least in some markets, the stand-out entry-level homes that are priced right are generating multiple offers. (Read "House hunting? Time for homebuying negotiation boot camp.")

Your secret weapon against such competition is an experienced, well-trained real-estate agent. Buyers who don't use an agent "are shorting themselves the knowledge and experience," Glink says. Sellers pay agent fees so there's no DIY discount. "If you don't use a broker, you are not going to get the house for 3% less," Glink says.

Screen several agents. Ask about any advanced training. Hayman advises asking how many years they've been in real estate, how many buyers they've represented and if they specialize in the geographical area you're interested in. (Avoid agents who try to work the whole town.) Look for credentials from institutes such as Wickman's and Hayman's and the National Association of Realtors' "accredited buyers' representative" designation.


2. Get pre-approved for a mortgage.


Before you make an offer, get approved for a loan. This gives you almost as much power as a buyer with cash, Hayman says. (Caution: Don't confuse this with "prequalifying," a quick chat in which you tell a lender how much you make and where you work.)

Get started by printing and filling out a Uniform Residential Loan Application and Statement of Assets and Liabilities, here, at Freddie Mac. Take the package to lenders to shop for price and terms. Ask your lender to write a letter you can show sellers saying you're approved to borrow up to, say, $200,000.

"If they know you have a loan commitment in place, they'll treat you as a very serious buyer, even if your initial bid comes in below what they were expecting," Glink says.
Your pre-approval offers a seller confidence:

• Your bid won't fall through (as some do) because you can't get financing;
• Sellers get their money more quickly, in 10 days to two weeks instead of the 30 days a bank typically requires to approve a loan. "That could make or break the deal in some cases," Hayman says.

Even better, suggests Wickman: Show a seller that your lender will let you borrow even more than the home costs. This is not to signal that you'll pay more but that your offer is less risky than others.

Get into the seller's head


3. Learn all you can about the seller.

This job is tricky. But it's crucial. "If we want make an offer that a seller is going to be attracted to, we have to understand what is important to the sellers," Wickman explains.

However, it's commonly the agents, not the buyer and seller, who do the communicating. So your agent will need to be a super sleuth.


Wickman, for example, starts his reconnaissance the minute he walks into a home for sale, long before any of his buyers are thinking of making an offer. He chats up the seller's agent, casually asking why the owners are selling, where they're going next, whether they've made an offer on another home and even if they've missed any mortgage payments. With his friendly chatter, Wickman tries to learn if the seller is pressed for time or money, whether they're working against a deadline to close on another house or get children into a new home before school starts. He's listening for clues about how deeply the home's owner is attached to the house, how badly they want to sell and what it would take to make them happy.

Hayman says he'll ask a seller's representative directly, "Is this going to come down to price alone, or are there other factors important to your seller?"

A seller's agent doesn't have to disclose any of this information, but many will. At this point, before the dealing starts, a seller's agent is most likely to share information freely while respecting her client's confidentiality.

"It's amazing the answers you can get," Hayman says. "Any time you can create the opportunity to dialog with the other side, that's part of the job of negotiating."

Although it's not often done, you can also consider calling or visiting the sellers to ask them directly what they most need from the transaction.

However, be prepared for resistance from your agent. Agents are trained to believe it's a bad idea for buyers and sellers to meet. They worry, Hayman says, that their clients might:

• Disclose information that could ruin the sale.
• Dislike each other, souring the deal.
• Or hit it off fabulously, ditch the agents and work out a deal on their own.

4. Make concessions up front.


Armed with whatever you've learned about the sellers, you're ready, with your agent, to imagine any objections the seller might make to your offer. Decide how to neutralize each objection and make life easier for the seller.

Here are some convincing concessions to consider:

• Make a "clean offer:" Buyers frequently ask sellers for help paying their closing costs. Make a "clean" offer with no request for help.
• Include an automatic escalation clause: In a competitive environment, offer to automatically increase your offer by a specified amount – say, $500 — over the highest bid. You can put a limit on how high you'll go or not. Be sure your offer requires the seller to show you any other offers in writing.
• Time: When sellers want to move quickly, jump, if you can. Sellers often are grateful to save a mortgage payment, storage costs or rent on interim storage or accommodations. Or, if sellers need to wait until a new home is free, or because they need time to pack, let children finish school or say goodbye to friends, offer to delay your move-in date. You can always charge rent. You can also use this tactic in reverse to get your own needs met: When Glink and her husband bought a home long ago, they sweetened the offer with a $3,000 bonus if the deal could be done quickly, by a specific date. This got their deal closed quickly.
• Earnest money: The (refundable) deposit for $2,000 or $3,000 that you attach to a bid to bind the offer is called "earnest money." "The bigger the deposit, the more serious you are," Hayman says. To make a good impression, offer more, up to 10% of the purchase price. To further sweeten the deal, Wickman suggests making part or all of the deposit non-refundable after the home has passed inspection, to demonstrate that you want to stay in the deal.
• Accelerate the deal: A purchase offer is typically contingent on certain milestones that are set by state law: The buyer has a certain number of days to get financing and an appraisal, the seller has a time frame to have an inspection done. Where the law allows it, you can shorten or eliminate deadlines to raise your offer's appeal.
• Waive the appraisal: Appraisals have become a source of anxiety for sellers, and deals often fall apart because the appraiser finds the home is not worth the purchase price that the buyer and seller have agreed on. Banks will only loan you a percentage of the home's appraised value. But, if you're able, you can include in your offer the promise to pay any difference in cash — up to, say, $5,000 over the appraised value.
• Waive the inspection: Here's how this enticement works: Some sellers will take a lower price if you offer to buy the house "as is." You, however, reserve the right to back out of the deal if you don't like what the inspection turns up. Some sellers love this because it allows them to close quickly, free of the cost and burden of correcting unforeseen problems. Says Wickman: "To buy a house 'as is,' to say to a seller, 'You won't have to do anything, no matter what the appraisal is, no matter what the inspection,' that could be a huge difference."
• Wave money: Never underestimate the sweetening effect of money. Offering the full list price or more is the traditional way of getting a seller's attention.
• Wave cash: If you've got the wherewithal, offer to pay in cash. For a seller, cash signals your financial solidity and promises a quick closing and no waiting for you to get financing.

Pull out all the stops

5. Write a love letter to the sellers.

When you really want a place, you'll go to some special lengths. "Sellers care deeply," Glink says, when you explain with sincerity what owning their home would mean to you, who you are and how you envision your life there.

"If I were a buyer, I would say to the seller: 'I would take care of your home. It looks like you've got a lot of love in the home and we love it,'" Wickman says. "I think I'd humble myself. I'd say, 'If it was possible that we could pay more, we would.'"


Hayman tells of Phoenix-area clients searching for a one-level home with tile floors and wide hallways in the $200,000 price range. "Lo and behold, we found the perfect house," Hayman says. "It was owned by an investor and was vacant, but there was another (higher) offer. I had my buyer's wife write a letter from her heart. She said, 'I have lupus. I'll be in a wheelchair soon. I can't tell you how much it will mean to me to be able to get this house.'"


Within an hour after Hayman personally presented the offer to the sellers, their agent called to accept. The woman's letter had persuaded the seller to forgo a competing bid $15,000 higher.

6. Get your offer presented in person.

Finally, the expert sales trainers say your offer has a far better chance when your agent presents it to the sellers in person. Not all agents will do this. And not all sellers' agents will let them. But, as a buyer, you can sure try. Start by asking, when you're interviewing agents, "Are you going to present my offer in person to the seller?"

It's an old-fashioned practice that's been largely abandoned in favor of sending a fax. "To me, that's a) lazy and b) less effective in terms of representing your client," Hayman says.

The advantage of personally delivering your offer:

• Your case is presented directly, heading off any misinterpretations.
• Your agent can directly address any questions or objections.
• The chance to "humanize" your offer and convey something about you can help tip the deal in your favor.

As Wickman puts it, "people buy people."


Source:  MSN Real Estate, article by Marilyn Lewis