WHEN YOU’VE FOUND THE RIGHT PROPERTY
You can obtain a current market analysis from your Realtor. A good CMA (Comparative Market Analysis) should contain at least 3 comparable properties that have recently sold in the neighborhood of your desired property. Variations in the properties should be accounted for with appropriate deductions. This report provides you with an idea of whether or not the asking price is reasonable by using data.
DETERMINING WHAT TO OFFER
When it’s time to decide what you’re going to offer, there are many factors to consider.
CONDITION – The condition of the property is extremely important. Take a look at the list of items below to factor into your decision. Also consider which of these would need inspections and how much that would cost you if they are not completed as part of the listing.
# of Bedrooms, # of Bathrooms, Age, Appliance,s Curb Appeal, Drainage, Driveway/Walkways, Electrical, Fencing, Flooring, Foundation, Garage, Gutters, Heating, Insulation, Landscaping, Lot Size, Parking, Quality/Materials, Roof, Septic System, Siding, Sq. Footage, Utilitie,s Water System, Window Type, Sewer Lateral (in some cities, as of 2019, Rio Dell, Arcata?)
COST TO COMPLETE DEFERRED MAINTENANCE
Any and all of the items listed above may be in need of some kind of maintenance, or work. Consider which of these you would feel need to be addressed prior to moving in, and what their costs will be. Once you calculate that number, use that as information to make an offer price that takes some of this into consideration. Oftentimes properties are listed with deferred maintenance, and as the new homeowner, that will fall to you.
WHAT’S FIXABLE AND WHAT IS NOT
It’s important to consider what aspects of the property are reasonably changeable and what cannot be changed. Think about things like: Access, Multi-Level Buildings, Distance Between Houses, Location, Lot Slope, Natural Light, Neighborhood, Schools, Zoning, Etc.
BEING COMPETETIVE WITH YOUR OFFER
Each real estate transaction is different. Sometimes you know that the seller is eager, or that the property hasn’t had any other offers, or that there might be some aspect to the sale that makes it seem like you have a lot of room to negotiate and so you want to start low. Sometimes you know that the property has had 15 other showings the same day as you, after being on the market for one day and that there are at least 2 other offers coming in by the end of the day. Either way, you do need to take into consideration that other people may be trying to buy your dream property at the same time as you – and you may not know about that in advance. Quite simply, the easiest approach is to offer your ‘highest-and-best’ at the outset. This does not mean that you have to offer full price, or that you offer your top spending limit. Try to write an offer that, if not accepted, still leaves you with no regrets.
WRITING A COVER LETTER
Writing a cover letter expressing your personal interest in the property is an option when submitting your offer. Personal letters may or may not affect whether or not your offer is accepted. If you are especially interested in a property, or if you have a loan type that might be less desirable for a seller because of it’s requirements and limitations, you may want to communicate about that with the seller. Maybe you use your cover letter to stand out from the crowd in a multiple-offers situation? The cover letter also offers you an opportunity to express why your offer is the way it is. It is not required to submit an offer to purchase property.
WRITING AN OFFER
The California Residential Purchase Agreement form is a daunting document of 15 pages of fine print. Your realtor will walk you through each aspect of your offer and should inform you of the meaning behind the technical terminology in this contract. Because it is a contract, you should know the implications of what you are signing and having read the contract in it’s entirety. Below is a brief outline of the major points so that you can be prepared when it comes time to make an offer.
How much are you going to offer?
GOOD FAITH DEPOSIT
As part of your offer, you will be making an initial deposit on your purchase. The amount is usually 1% of the purchase price you are offering. The idea behind the deposit is that you are showing the seller your sincere interest in making the purchase. The deposit is refundable, should the sale be cancelled according to the terms of the contract, but it is also the money that you stand to lose should you default on the contract (See Paragraph 21 in the offer). You also have the option of setting an increased deposit later in the sale to further strengthen your offer and show interest in good faith.
When writing an offer, you should be prepared with the name of your lender and knowledge of the kind of loan you will be applying for. You should have a pre-qualification letter from your lender with the address of the property you are making an offer on that includes the amount you are offering. Additionally, you may be making a down payment, and you should know what this amount will be prior to writing your offer.
The length of escrow is the time that it will take to purchase the house. You can choose the length of the escrow period in your offer. Shorter escrows are more attractive to sellers, but you have to keep in mind the amount of time it will take to get your loan organized, if you aren’t paying cash. Typically, it takes 45 days to go through the process. 30 day escrows are common as well, depending on the lending situation. Talk to your lender about this.
The Inspection period begins as soon as your offer is accepted. Again, you can choose the length of this period, and again, shorter inspection periods are more attractive. The default length is 17 days. In this time period, you can inspect any and all aspects of the property, and based on those inspections can renegotiate your offer, or cancel.
There are a few fees that are negotiated in the contract. Escrow fees, Title Insurance, and County Transfer Tax. You can elect to pay these fees as the buyer, ask the seller to pay them or can split them 50/50 with the seller. In this section, you can also elect to have a home warranty, the cost of which is also negotiable.
APPLIANCES AND OTHER TERMS
The offer is your chance to ask for everything that you want included in your purchase. Talk to your Realtor about what is considered “affixed” to the property – meaning it will transfer with the sale regardless. Items that do not transfer that buyers typically want are appliances, large items like hot tubs, stacks of firewood, etc. Before writing your offer, you should have decided what you’d like to have stay on the property. If there are items that you definitely want removed, you should also write that into your offer for clarity.
The contract has a Dispute Resolution Section that says that most disputes will result in Mediation, with a few exemptions (Paragraph 22C). However if it cannot be settled through mediation, the dispute will be decided by a neutral arbitrator. Both parties in a dispute can agree to a third-party neutral arbitrator as well. But if they do not agree, a third party will decide. Signing this part of the contract is voluntary and is another act of good faith toward the other parties in the contract.