The Buyer that Wins Seller Acceptance in Northern Virginia is Often Not the Highest Price. What Else Matters?

Present & Evaluate Home Offers Like a Billion Dollar Procurement
Procurement is the process of buying goods, works or services. The U.S. federal government alone procures over $500 billion annually. A government, company or organization (client) wishing to obtain goods or services organizes a bidding process known as tendering. The underlying objective of the tender process is to ensure open and fair competition and produce the most value for the client. Interested bidders submit their offers to meet client requirements with the goal of winning the procurement. The client evaluates the offers and decides which bidder best suits its requirements while producing the most value. This is generally the process whether the client is the Department of Defense soliciting a multi-billion dollar contract to supply a new weapons system, or a private company soliciting general contractors to build a new manufacturing facility. The process is transparent, orderly, fair and one that produces the most client value.

This tender process has many similarities in residential real estate when a seller offers their home for sale to the public market. Exceptional real estate agents understand this and skillfully manage the process to extract the most value and benefit for their client. I treat the home selling process like a billion dollar procurement, because that’s usually how important the outcome is to my client.

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Competition Creates Value for Sellers and Angst for Buyers
In the capacity of a Listing Agent, I work with my seller to represent them in the sale of their home. My guiding principle is to fulfill all their objectives whatever they may be. I never lose sight of that principle from beginning to end of the process, which completely envelopes the listing, selling and settlement phases. Everything I do is to extract the most value for my seller while protecting their best interests. Like the tender process, the underlying objective when selling a home is to ensure competition, but more than that my goal is to maximize competition and leverage it to my seller’s benefit. I do this in several ways and leading among them is showcasing and pricing the home for maximum seller proceeds. Both of these techniques amplify buyer interest.

Components of an Offer – Technical, Financial & Contingency Risk
My seller’s home is listed for sale and active on the market. The condition is fantastic with the correct price to ensure the home is being positioned in the strongest manner possible. My marketing strategy has produced maximum buyer awareness, yielding abundant buyer showings. I begin nurturing a process to produce offers. Offers for my seller’s home are in hand, now what?

Real estate is a business of contracts, addenda and legal documents. There are over 250 legal contracts, addenda and forms available to agents when managing the sale or purchase of real estate. Exceptional agents know and understand these documents thoroughly to be able to properly protect a client’s best interests. When evaluating an offer for my seller, there are over (25) parts of the offer that I review which can have serious financial, legal impact or risk to my seller. It’s my job to know each element and exactly how they differentiate among the offers. I evaluate an offer for my seller’s home like the multi-billion dollar tender evaluation.

The Technical Offer (Agent Controlled)
The technical component of the offer is controlled by the Buyer’s Agent. The level of experience demonstrated by the Buyer’s Agent is important. Working with a full-time, professional agent with deep experience is valuable to my seller, because it’s the Buyer’s Agent who is responsible for managing buyer expectations and ultimately leading the buyer to closing. Many buyers don’t realize how important agent strength is to their offer, and likewise, don’t properly weigh the possible consequences of selecting the wrong agent when first seeking representation in the purchase of a home. Buyers are unaware that a Listing Agent can advise a seller to disqualify an offer from consideration for numerous reasons without the buyer even knowing it. Examples include an incomplete or poorly written offer, one that doesn’t follow instructions, contains conflicts in contingencies or dates. Offers containing these types of defects from the Buyer Agent can be a clear indication the offer and buyer may have a relatively high risk of not closing, wasting the seller’s time and money.

The Financial Offer (Buyer Controlled)
The financial offer is typically the most important to a seller. The elements comprising the financial offer run directly to the seller’s net proceeds and the level of financial risk being assumed by the buyer. The financial criterion are multi-faceted and I carefully evaluate the complete package for my seller. It includes sales price, seller subsidy, down payment, deposit, loan type, closing date, financing and lender strength. The sales price is paid by the buyer with a combination of cash (down payment) and a loan from a bank – 90% of home purchases are financed using a lender. Given the lender is typically the largest source of funds, it’s imperative the buyer has a well vetted loan pre-approval from a strong, reliable lender. One who has a predictable and high closing rate. Earnest Money Deposit (EMD) is different than down payment. The EMD technically becomes part of the down payment at settlement, but more importantly, it’s the financial risk assumed by the buyer in the event they do not close on the home purchase when they are legally obligated to do so. The EMD is the liquidated damage lost to the seller. Time is money, so a settlement date that is materially different than another bidder can also be meaningful to the seller.

The Contingency Offer (Buyer Controlled)
When a buyer makes an offer with a contingency it means the purchase is contingent on, or subject to (i) a specific activity taking place, and (ii) achieving an acceptable outcome in that activity. A contingency is generally viewed as a measure to lower risk for a buyer, but conversely elevates risk for a seller. I carefully measure my seller’s contingency risk from offer to offer. Contingencies are complex, often with many moving parts and deadlines. Contingencies are so important that they are negotiated through separate addenda. The home inspection in an example of a contingency and there are (4) different types of home inspections all with different levels of contingency risk between seller and buyer. The radon inspection is another contingency. The buyer’s ability to successfully secure financing with the lender and receive an appraisal at contract value are examples of other contingencies. If a buyer should bid up the sales price over the seller’s asking price, then how the appraisal contingency is handled becomes crucial to my seller. Another popular contingency, especially in move-up purchases for buyers, is a home sale contingency. This means the buyer’s purchase of my seller’s home is contingent on first consummating the sale and closing of their home. This can be a tremendous risk to my seller if not carefully negotiated and managed.

The home selling process, subsequent evaluation of buyer offers and the selection procedures that ensue can be complicated. It requires the most experienced and skillful agent to properly counsel a client and guide them to the most valuable outcome. I do this whether I’m representing a seller as a Listing Agent, or buyer as a Buyer Agent. I have a fiduciary responsibility to protect my client’s best interests at all times. Not all agents are created equal – ordinary agents will produce ordinary results. However, exceptional agents produce exceptional results and deliver extraordinary value to a seller or buyer. I find these are the results most desired by my clients.

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