Monday, 9 March 2020

THINGS YOU MUST DO BEFORE YOU MAKE YOUR FIRST REAL ESTATE OFFER


Have you seen the property of your choice that you would like to make an offer to buy? If yes, there is a process to understand and follow. Yes, there is a process.

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Most real estate investors do not bother about understanding the process because the entire process is often handled by their solicitors or agents. However, as they participate in the process and move beyond their initial transactions, they begin to learn through questioning and observation.

This process of learning is not the best and would also be better if at the beginning, the real estate investor had some basic understanding of the process. The offer process is often preceded by your decision to buy a property and searching for the ideal property that best meets your criteria. If you are working with a lawyer or real estate agent, you should engage with and involve them in the entire process.

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The first aspect is your offer to the seller in writing and his or her response directly or through his or her agent. Your offer could be accepted, rejected or a counter offer. A counter offer is when the seller rejects your offer and also proposes that you buy at a specific price or subject to specific conditions. This cycle could be repeated until a mutually accepted price is reached or both parties terminate the process.

In order to stand a good chance of making a difficult-to-reject offer, there are certain things that you should keep in mind. One basic factor to consider is the context in which you are making the offer. Is the real estate market a seller’s or buyer’s market? A seller’s market is one in which the seller has an upper hand in most negotiations because there are more buyers than sellers.

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A buyers’ market is one in which the buyers have an upper hand in most negotiations because there are more sellers than buyers. Depending on which side of the divide you are, your understanding of the context will help you make better and informed decision.

The critical element in a letter of offer is price and this aspect should be strategically managed. While most sellers and their agents always anticipate and make room for negotiation they are usually put off when the offer is unreasonably lower than the current market value of the property.

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Most of such offers are usually dismissed as unserious and simply fishy. Of course, if you want to ensure that your offer is accepted at first sight, then offer a price that is higher than the asking price.

Unless there are other issues that the seller is considering, you will generally receive a yes. This sometimes happen in a seller’s market. A low-ball offer could also be accepted if the circumstance is right and it is done strategically. A low ball offer is a slang for an offer that is significantly lower than the asking price of the seller.

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However, if the seller is seriously distressed, he or she could accept an offer that is far below the actual market value. At other times if the buyer makes an offer that has favourable terms and conditions that meet some other more important considerations of the seller, the likelihood of acceptance increases.

Remember that the seller might have other offers that he or she is considering so that yours should at least have a reasonable consideration. In order to stand out from other offers your letter of offer should state clearly a good price that is as close to the asking price as possible.

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One of the key things that a seller wants to be assured of is that if your offer is accepted you are ready to pay as soon as possible. There have been instances when due to the intense competition for a property the letter of offer has photocopies of bank drafts attached to the letter of offer. While this is unorthodox it was simply to communicate readiness to the seller in a competitive seller’s market.

If the letter of offer is your first letter to the seller or his agent, then it should contain a request for documents required by your Solicitor to conduct a search at the Land’s Bureau to confirm the title of the seller.

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It is also important to put “Subject to Contract” at the upper side of the letter. This means that your offer is not binding until a formal agreement has been signed by the parties.

This is to protect you and allow you to withdraw from the negotiation without penalty should negotiation break down or you lose interest in the transaction. (Punch)

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