Making the Offer | Buying a Home in Los Angeles
This is the fifth part of the series Buying a Home in Los Angeles.
When you finally find the home you want to purchase it’s important to be familiar with and well-educated on how to make an offer, and not just any offer, but a great offer!
We want you to be ready when you find that special home to pull the trigger and make that offer. We’ve talked about the inventory of Los Angeles homes being very low and as a result, the market being very competitive. If you drag your feet making an offer on a home you love, it’s quite possible by the time you are ready to make the offer, it will already be gone.
It’s currently not a Buyer’s market in LA. With inventory being low, when a good property comes on the market in a good area, chances are you’re not going to be the only person making an offer. Assuming that you are ready to go with your pre-approval letter from your lender, how do you make sure yours is the winning one? Your realtor will guide you along in the process. In order to get the most value out of your realtor it’s important you listen to the advice they are giving. They are your advocate. It’s important to remember that this process is simply business, it’s not personal. The more you can put your ego aside, the better off you will be!
How well is the home priced?
Your realtor will know how well the home is priced by having compared it with recent sales in the immediate area. They will inform you what a reasonable price is and hopefully provide information showing how they got there. If the home is reasonably priced then you need to make a reasonable offer. If a reasonable offer is presented, then the seller should entertain that offer, either by accepting it or negotiating with a counter. Don’t try and low ball a seller. It never works out. Although they shouldn’t, the seller will more than likely take a low ball offer personally and not respond. The seller knows his or her bottom line and you know your top. Try and stay within a reasonable range and you will both win.
Scenario 1: The Home is Overpriced
If the home is overpriced you will probably not be in a multiple-offer situation and you will be attempting to negotiate a reasonable price for the home, especially if you are getting a loan. The property has to appraise in order for you to get that loan. Listen to your Realtor®’s advice on where to start your offer. Too low an offer and you may not encourage a counter-offer. You want to keep negotiating until you reach an agreement with the seller where you are both happy.
Scenario 2: The Home is Well-Priced
If the property is well-priced and you are competing with others, you most definitely do not want to be starting your offer below the asking price. If so, others may receive a counter-offer and you may be left out. You might even consider offering a little above the asking price, but giving yourself some room to go higher should you receive a counter-offer.
Ways You Can Make Your Offer Stand Out:
Lower the contingency period on your inspection. The standard period on the contract is 17 days. You can easily lower that to 7 days. All that means is you have to complete all your inspections during that time period. If there are problems and you ask for repairs, the clock stops.
Don’t ask for things over and above what is already in the contract, or options in it (termite clearance, home warranty, etc.), i.e. keep the offer as clean as possible.
You’ve Received A Counter-Offer
Don’t be offended by a counter-offer. You should be pleased that you received one because it means that the seller is taking your offer seriously. Look at the terms being requested and consider them carefully. The seller may require a longer escrow period, they may not agree to the amount of the home warranty you requested, maybe they will do the termite inspection but not the clearance. More than likely, they will be asking you to meet a specific price, or for your “best and final” offer. If a counter is presented a buyer can either accept the terms of the counter or negotiate their own terms with a counter of their own.
How Do I know if They’ve Received Multiple Offers?
You will know that other parties are involved in the negotiations by the type of counter-offer you received which divulges that fact.
Ask yourself, how much do you want this home? At what price are you willing to lose it? It’s not only important to know what your limit is but also discuss this with your realtor. You and your realtor absolutely must be on the same page so that together you can pull out all of the stops to get your offer accepted. In order to simplify here, we will assume that if you increase the price of your offer, that the home will still appraise for.
The entire process of buying a home in Los Angeles is a negotiation, from the time you make an offer, all the way to the close of escrow. It’s is about give and take. It is about reasonable people coming together to make things happen. A seller wants to sell and a buyer wants to buy. Each side has its own representative, the real estate agent.
Your realtor is going to help you navigate through this stage so that you end up with the accepted offer. If you can put your ego aside, put yourself in your real estate agent’s hands and trust their negotiating powers, you may be surprised at the outcome. Trust the process and you will end up buying the Los Angeles home of your dreams.
Above all, be prepared to negotiate.
** In order to simplify, this article is assuming that the buyer has been pre-approved for a loan and that all the competing offers are from buyers requiring a loan. Competing with all-cash buyers can be challenging and you can read more about some of these strategies here.
More from Buying a Home in Los Angeles:
Step 2: Finding a Realtor
Step 3: Define your criteria
Step 4: Starting Your Search
Step 5: Making the Offer