How does a first time buyer successfully compete in a competitive real estate market? Every buyer is brings a different strengths and weakness to the table but it is the packaging that makes the difference. Every buyer should start their home search by talking to a mortgage broker. We always recommend talking to an Oregon-based broker, someone who knows our market. Being pre-approved serves multiple purposes. Most importantly, it is a reality check. Can I get a loan based on what I bring to the table? Can I afford the loan based on the way I live? Even though I am qualified for $350,000, I am only comfortable with the payment on a $275,000 house. Should I hold off, take care of some credit issues so that I qualify for a higher rate.
The next step, or in conjunction with contacting a mortgage broker, is deciding on a Realtor (we have mortgage broker recommendations). Ask questions. I’ve previously written: The Questions You Should Ask Your Realtor and Our Answers. Then be prepared to commit to your chosen Realtor. Working with a Realtor under contract is becoming the next thing in this real estate market.
Finding the home is the easy part.
Just about everything in a real estate Earnest Money Agreement (the offer) is negotiable. The highest priced offer is not necessarily the best offer. Cash is king when it comes to financing. The larger the percentage financed, the higher the risk of the deal failing over financing. If the sales price is being raised above asking price so that the seller can pay buyer’s closing cost (“seller paid closing costs” are really “buyer financed closing costs”), the property has to appraise for that amount. Again, its higher risk. It sounds like lending restrictions on 100% financing are tightening.
So what does the cash-poor buyer do to compete? First, it helps to have a good (true) story. “Mary and George are buying their first home together and fell in love with your home…” The Realtor has to be able to relate that story either in person or by way of a cover letter. Shoving an offer in a fax machine with “please respond” written on the cover sheet is not the way to get the seller to feel warm and fuzzy about your offer. The listing agent cannot refuse the buyer’s agent right of presenting an offer in person, the seller can though. It can be tough coordinating the schedules of three parties to make that happen so the vast majority of offers are presented electronically. The buyers agent needs to talk to the listing agent to up sell the buyer.
Since the offer may not be everything the seller hoped for in dollars, it is a good idea to try to match the terms that the seller is looking for. Does the seller want to close by a certain time? Do they need possession for a couple of days after closing so that they can close on their new home with the equity of the sale? Those are the sorts of things that can make a lower dollar offer more attractive than other offers. Shortening up the standard 10 day inspection period also makes a stronger offer since the vast majority of offers that fail do so during the inspection period.
Keep reading for terms that are negotiable in an Oregon Earnest Money Agreement:
- Number of days to make formal loan application after acceptance
- Additional provisions (asking the seller to provide documentation of
rent, leases, provide a home warranty etc)
- Personal Property to be included in the sale
- Fixtures that would normally be stay with the property but the seller is
taking (the antique heirloom dining room lamp).
- Number of days to review CC&Rs and the title report
- Well testing, if applicable
- Inspections: length of inspection period, what is being inspected,
- Length of lead based paint inspection period
- The closing date
- The date the buyer is entitled to possession (their keys)
- Date the buyer takes over payment of utilities and other prorated items
(usually the same day as possession but doesn’t have to be)
- If there is a tenant, does the seller have to evict before closing to
provide vacant property
- The escrow company
- How the escrow money is deposited and when a promissory note is redeemed
- The expiration date and time of the offer and how many days the buyer
may still accept the offer if the seller accepts after the expiration date