SELECTING YOUR BUYER
Recently, we wrote an article listing the six most common seller mistakes.
Number five on that list was carelessly selecting your buyer. In some respects, the selection of your buyer can be more difficult than setting the initial price on your home. Selecting the wrong buyer can be a time consuming, costly, and frustrating mistake. While it is always possible to make a mistake, hiring an experienced realtor and being frank with him or her will put you a step ahead.
Before we start, let’s get away from the concept of selecting your buyer on the basis of personality alone. Everyone would like their home to be enjoyed by nice people, however that by itself says nothing about the probabilities of closing your deal.
Let’s also set aside the idea of simply taking the highest offer. Purchase price, like personality, won’t necessarily close the deal.
For purposes of discussion we can separate the types of issues into two broad categories, those that are reflected on the face of the documents and those that don’t necessarily appear on paper.
Issues On Paper
The standard California Residential Purchase Contract is eight pages long and has 33 numbered paragraphs. A number of these paragraphs deal with issues potentially critical to your deal. In addition to the contract itself, there can be contract addendums and counter offers. There is really no limit to the number of possible additions and modifications to the contract.
No matter how confusing, this mass of paper becomes, it defines your “deal.” And, the issues your deal presents, in the context of the marketplace and your own wants and needs, should all be carefully considered in your selection of a buyer.
Some examples of these considerations are purchase price, good faith deposit, down payment, financing conditions, contingencies, length of escrow, etc. and etc.
The combinations of these factors define the buyer’s profile. The objective in a multiple offer situation is to decide which of the buyer profiles best fits your needs. For example, in a down market, a buyer with a lower purchase price, but a large down and no contingencies is probably preferable to a buyer with a high purchase price and a deal which is contingent upon the sale of their own home. Why? Because in a down market the buyer who has to sell their home before they buy may not find a buyer or may not get enough from their sale to make their purchase.
Buyers’ wanting long escrows may, or may not, be as desirable as buyer’s requesting a short escrow. A pre-qualified buyer is good, but maybe not as good as a pre-approved buyer.
Issues Off Paper
The off paper issues can be just as complex as the technical terms of the deal. And, this is where you must be candid with your realtor. What are your wants and needs? Do you have your replacement property already in hand, or do you need time to find and purchase it. Should a rent back be considered on your place or do you need a short escrow..
Is there a lot of deferred maintenance on your home, or is the property pristine and ready to go? Do you need an “AS IS” deal? Can you afford to make repairs if they’re requested?
As if that wasn’t enough there’s more. What’s the market doing? If it’s going up, the buyer’s purchasing power is disappearing and if the market is going down the buyer’s purchasing power is increasing and your negotiating position may be becoming weaker. In other words, is the marketplace driving the deal in one direction or another?
There’s more. Was your original asking price realistic? Will the property appraise? Will the lender lend on it and if so, how much? What type of loan is the buyer getting? If it’s an FHA loan are there section 1 repairs that will have to be done? If your property is a condominium, has the project been FHA approved? Do you have HOA issues? Is there an assessment coming? Are the HOA dues low or high for the neighborhood? Do you pay Mello-Roos? And, if so, how much?
After saying all of that, here’s some pointers you can take away from this welter of information:
1. Avoid the temptation to leap at the highest price;
2. Avoid the temptation to sell to the most likeable buyer;
3. Use an experienced Realtor and be frank with him or her’
4. Pay attention to the elements of the buyers’ offers;
5. Try to list your own important needs;
6. Be aware of what the market is doing around you; and,
7. Tally up the characteristics of each of the competing buyers and try to match those characteristics to your own interests, as well as, the market forces at play.
If you’re thinking about listing your home for sale and would like to get a free comparative market analysis do not hesitate to give me a call.
OTHER INTERESTING AND INFORMATIVE INFORMATION SOURCES
- Full Service Property Management In Orange County California A informative website presented by OC Property Management providing usefull information to both landlords and tenants.
- RISMedia Media Center Video presentations of timely real estate topics.
- Real Estate Today Radio The premier online real estate radio station.
OC Property Management & Sales, Inc.
DRE Lic# 01886215
This article is intended to be a general discussion only, and should not be considered legal or real estate advice. Your use of it does not create either an attorney-client or broker-client relationship. Any liability that might arise from your use or reliance on this article, or any of its links, is expressly disclaimed. This blog is not legal, real estate, loan, accounting or tax advice, and is not to be acted on as such, it was outdated the moment it was written, and is subject to change without notice. If you are dealing with a potential problem with your investment property you are advised to retain the appropriate licensed professional.