Striking this balance comes with a lot of unknowns. However, what we do know is that the seller has their own set of motivations that the buyer likely will not have insights to. Generally speaking there are 4 components of an offer that a seller is assessing. These factors are usually looked at on the whole when a buyer is considering whether to accept your offer, counter it or decline it. Presenting an offer that does not have any appeal to the seller typically results in the seller declining the offer with no counter or not responding at all.
So, here are the 4 things that you need to consider in giving your offer strength and appeal. If you are making an offer that is unappealing on all four fronts, your offer likely won't get any traction. The more factors that are favorable, the more likely your offer will be accepted.
PRICE: Price is ultimately the biggest deal maker or breaker, but is not the only factor. Offers that come in close to what the sales/list price ratios look like for comparators should be viewed as a favorable offer. Offers well below the market without some other compelling upside for the seller will likely be disregarded and may be offensive enough that the seller no longer wishes to engage in future discussions about you purchase their property, even if you end up being willing to pay more. Afterall, a home is a personal possession for most people and one they take great pride in, making it feel personal when low-ball overs come in.
POSSESSION: Depending on the seller's personal situation, closing earlier or later could make a difference in the attractiveness of an offer. Some seller's may even be willing to give on other offer components if the deal facilitates their personal circumstances. If you have flexibility in your closing or possession dates, you should make that known to the seller's agent.
CONTINGENCIES: Contingencies represent risks to the seller. Risks that could affect the deal getting all the way to close. Contingencies may come in various flavors, but the most common ones are inspections and financing. On the financing front, having a pre-approval letter (pre-approval letter not just pre-qualification) helps give the buyer confidence that you have at least gone through the high-level review with the lender and have provided documentation to substantiate your financial circumstances. Offers that have no contingencies are the most favorable for sellers, but may not be an option for every buyer. In some cases, buyers may choose to pursue a home inspection but not include an inspection contingency. This would mean that the inspection is for the buyer's knowledge only and findings will not affect the deal. It puts the burden on the buyer that they will purchase the home and deal with fixes regardless of findings.
FUNDING: There are two parts to this. The first is the deposit. The larger the deposit, the stronger the message is to the sellers that you are serious about buying the property and are willing to put your money where your mouth is. Be cognizant of the scenarios where the deposit may not be refundable as you are determining the amount you wish to put down. The second aspect of this is cash vs. financing. Given that financing a property typically has contingencies attached to it (getting approved after underwriting, having the home meet appraisal requirements, etc), a cash deal is generally more favorable to a seller.
The key is to consider all four of these offer components when assembling your offer. That in combination with the aforementioned considerations will help you strike the right balance and make an offer that has a hope of getting accepted or at least keeping the negotiation open until you can strike a deal.
NAPLES REAL ESTATE BLOG
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