Buyers - How To Write An Offer

The fundamentals of writing offers are fairly similar throughout the country. Everything below will assume that the buyer (you) are pre-qualified, have a high caliber buyers agent to represent you, and you have identified a property that you would like to purchase. Nick Ahrens makes sure his clients go through a much more detailed and customized strategy with his clients than what is outlined here. The purpose of this document is to give a general outline for writing a quality offer, and to make sure you have an advantage over your competition. 

Step 1. Have your agent call the listing agent and gather information. Do not call the listing agent

Before getting too excited about writing and offer, it is important to have your agent call the listing agent to gather information. Do not call the listing agent yourself. The worst possible thing is for the buyer to reach out to the listing agent. I’ve seen it happen, and I’ve seen a lot of unethical behavior and dishonest action resulting from this, including:

-Agents lying to buyers in attempt to extort more money for their seller; unethically and dishonestly raising the price for that one person.
-Buyers angering agents so much that when their offer is presented to the seller, the agent tells the seller to not accept the offer.

-Sellers not wanting to accept offers from an agent representing both sides because, in the end, who will the agent favor more? The buyer? The seller? Dual agency can be disastrous.

When buyers call listing agents, it rarely ends up favoring for everyone. The likelihood of illegal and unethical activity becomes high. If the buyer wants the listing agent represent them, the likelihood of these dishonorable actions increases tenfold. Be sure to always have your agent call the listing agent to gather information. Below are a few of the many important things that your agent will ask about:

1.) Is the property still available? Are there any offers submitted (if so, how many)?

2.) What would be ideal for the seller? Would they like a quick close? A rent back? Are there contingencies upon the sale? Is there anything else the seller would love to see?

A) Sometimes a seller wants to rent their house from you after the close of escrow for 2-12 weeks, otherwise known as a “rent back”. This allows them time to find a property to purchase and move to.
B) Other times a seller will decide to sell “contingent upon finding a replacement property.” This means that if our offer is accepted, the house will only be sold to you IF the seller finds a new home to purchase and gets their offer accepted. There are various methods to resolve this potential situation (Nick does not recommend a contingent purchase or sale when possible). 

Step 2. Determine an estimated market value. Analyze comparable properties (“comps”) that have recently sold.

The purpose of analyzing “comps” is to estimate the market value of a property. In essence the purpose of “comping” a property is to estimate the likely sales price of a property. This is obviously a valuable piece of information to have before writing an offer.

List price and sales price are not the same thing. Some homes sell above list price, some at list price and some sell below list price. The listing price is simply an agreed upon number between the seller and the listing agent. In this section we will discuss the basics of analyzing comps to estimate market value. Again, these are simply the basics of analyzing comparable properties; it is a highly complex topic.

Comps are a tricky thing. Without MLS access and a without a true real estate expert, they are nearly impossible. In fact, many real estate agents, are poor in their ability to accurately comp a property, making them a crappy real estate agent. Assuming an online resource can comp correctly is a catastrophic mistake that some people make. Incompetent agents often comp better than most online resources due to its complex nature. Anyhow, let’s get into it.

In order to be a comp, a recently sold property (past 0-6 months) must have similar quantitative and qualitative characteristics. Here are a few of the dozens of characteristics we analyze: square footage, number of bedrooms and bathrooms, level of privacy, level of road noise, size of the lot, year built, quality of the view, etc., etc., etc... This list goes on and on and on.

Some of these characteristics may be of greater or lesser importance to you as a buyer; however, you as a buyer are only one person out of the entire group of buyers out there who create the market. For this reason we analyze the property from a broad, market perspective, and not according to your personal preferences.

To make things more complex, characteristics of comps are never identical to characteristics of the property you want to purchase. We must come up with properties that have similar characteristics to the property you want to purchase and then compare the qualitative and quantitative characteristics of all comps with the property you want to buy. Top notch agents will be able to get into much greater detail with you. To put it simply: there is way too much information and education that goes into being able to accurate comp a property than we can put here. 

After your agent generates a list of these approximately 5-15 comps, we then have to analyze them in regards to the current state of the local real estate market. Then we take these historic sold prices and calculate what they would be in terms of today’s values: has the market gone up or down since they sold? And by how much? Only now can we accurately compare property values with the property you would like to purchase. Yes, this is a highly complex subject. If your agent cannot explain this in a level of detail light years beyond what is written here, you may want to fire your incompetent agent and hire a more experienced and more educated real estate agent. Agents should provide you comps and be able to rationalize why most comps sold at higher and lower prices.

Use all of this information to determine an estimated market value for the property you’d like to buy, then move ahead to creating a negotiation strategy by combining your personal situation, step 1 and step 2.

Step 3. Discuss gathered information and then formulate a negotiation strategy with a price and terms you feel comfortable with.

Everyone has a different set of different financial circumstances, temporal restrictions and everyone’s personal life. For this reason it is important to have a high quality agent with whom you can trust to openly discuss these topics. Discussing your needs, finances and everything else is a topic that should have been discussed a long time before writing offers.

NEVER talk to the listing agent directly. If you talked directly to the listing agent, then you would be talking to someone who has a legal fiduciary duty only to the sellers. Who do you think the listing agent will favor?

Discussing the information gathered in step one and combining it with your personal situation is what happens here in Step 2. This creates a solid foundation for your customized strategy to buy this property. Determining the offer details requires an expert negotiation strategist. Make sure your agent can explain to you their thoughts on the situation. These are too many trade secrets Nick uses, so be sure to ask him for ideas. 

Step 4. Draft, sign and compile the offer package

After a strategy you feel comfortable implementing has been decided upon, take action. Your agent will draft up an offer and likely send it to you for electronic signature. The offer will be submitted by your agent as a package consisting of the pre-approval letter, proof of funds for the down payment, and some other items.

There are a few other things Nick requires of his clients to ensure we have a strong initial offer that stands out among the crowd (more secrets that should not get discussed here).

After the offer is signed, its time for your agent to assemble the offer package and submit it to the listing agent. This happens via Email. Nick always makes sure to call the listing agent to explain the offer and discusses why his clients are amazing why they are ideal for this property. At this time Nick Ahrens also asks if the agent has any questions about the offer, before it gets presented to the seller. This is a psychological tool to ensure the seller gets the offer presented in a smooth fashion and the agent can answer all questions they may have. 

Make sure your agent asks for an estimated response time. It is important to know what day we can expect a response to the offer.

Step 5. Wait for a reply and continue viewing properties

At this point we have done all we can for this property. While we await a response to our offer, continue to look at more properties. Hope for the best and prepare for the worst... If you continue looking at homes and the offer does not get accepted, you have not wasted any time because the search continued.

Step 6. What’s Next?!

Talk to your agent about how to approach the one of three likely outcomes that will result from submitting your offer. What usually happens next:
1. Your offer is accepted - Get excited, the next few days are busy and important.
2. You receive a counter offer, or multiple counter offer - Prepare to respond or not respond. 3. The seller accepts a different offer - Continue searching. 

San Clemente, CA
San Clemente, CA

*This was written by Nick Ahrens in 2017. It is merely an opinion, not intended to be a definitive system that works every time for everyone. Every homebuyer and family is different and all are in a different situations; because of this, talk to your local real estate expert to modify your search and customize your approach. Nick Ahrens, Remax Premier Realty, Kamran Realtors and their affiliates are not liable or responsible for any loss in attempted interpretation and use of this information.