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There isn’t anything worse than waiting for an answer.

Yes or No. Come on man, just let me know!

The tip that I give my Northern Virginia real estate clients is to respond to any type of offer quickly, and to take every one seriously. Speed is very powerful when negotiating.

In real estate, a quick response is powerful

If that answer is too vague and you need just a little more structure, then maybe these guidelines will help:

• in by 10:00 a.m then respond by noon
• in by 1:00 p.m. then respond by 5:00 p.m.
• in after 6:00 p.m. then waiting until 9:00 a.m. is okay (you can sleep on it)
• Communicate if there is a delay… and stick to that time frame

Problems happen when an offer comes in and then one party doesn’t respond back in a reasonable amount of time. In the Cold War days, it was acceptable to be a slow responder like if you were behind the Iron Curtain or if you were on the QE2 sailing to Sydney.

Here is the warning: When the submitting party has to wait,  festering begins. Are they “shopping my offer?” they ask. Are they using it to “leverage some other offer?” they ask. “Did they even get our offer?” they ask. Recently, clients negotiating on a house in Vienna broke off negotiations because the seller was dragging his feet and they, justifiably, were insulted.

Today it is just too easy to respond quickly using secure digital signatures on any laptop or iPad. A few years ago I started to use DocuSign after a client couldn’t fax his paperwork to me from Austin. This service alone has helped my clients respond quickly in competitive situations, and it actually comes across as much more professional considering so many companies have adopted digital signatures too.

DocuSign uses e-mail to secure your signature and “the cloud” to merge the completed document then delivering it back to me. Even if you are in your office in McLean, it is so easy that you will be able to respond instantly.

Remember, respond to real estate offers quickly for the best results.

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Image by Vincent van der Pas via Flickr

If you are planning to make an offer on real estate then remember that real estate offers must be in writing to be enforceable. Period!

Although the real estate sales contract process is different around the U.S., having the terms on paper is the essential first step. The contact price, financing terms, closing date, and contingencies build a framework to achieve the common objective of selling the home.

One addition should be a deadline for the seller to respond to the buyer’s initial offer. In Northern Virginia, the Regional Sales Contract does not have boilerplate language that requires either party to respond during the offer/counter-offer process. The contingencies have time frames, but until the contract is “ratified” neither party feels the pressure of the clock.

Yes, a deadline for your real estate offer is important

Deciding on a deadline will depend on your local real estate market. For example, right now the Vienna, VA real estate market for detached homes is “hot” (March 2011) with home buyers competing for homes. This is because of a supply shortage in the 4 bedroom, 2 bath, 2 car garage category. Yes, we are looking at a “seller’s market” where home sellers have a certain amout of control over the negotiation process.

“Submit Final & Best Offers by 9 PM on Tuesday”

In contrast to my local market, there are real estate markets in Florida where there is an ample supply of attractive homes for sale. This is a classic “buyer’s market” where a well qualified home buyer can call the shots.

In my opinion, common sense requires that any offer should be responded to in a “reasonable” time frame… but that depends on the local absorption rate. If new listing are getting offers the first weekend then getting a response may be withing 72 hours. But this scenario may give the seller an impression he can “shop the offer” to try and milk it for a better one, a real gamble because most buyers hate bidding wars and may pull their offer if they feel exploited. If you feel this case, modify your offer with a firm deadline, like Thursday March 3, 2011 @ 5:00 p.m.

What is the absorption rate in your local real estate market?

In my experience, offer deadlines don’t work for short-sales or foreclosures. Hey, you are dealing with a bank… I think that explains it well enough.

If you don’t put in a deadline and there has been no response from the seller, then ask to get acknowledgment that your offer has been presented to the seller. With so many people traveling these days, you may find out that the seller is on a cruise ship in the South Pacific, or dealing with an ailing spouse or is trying to reach his brother (the joint owner) who lives in Montana. There are many “reasonable” scenarios and you will have to judge the validity of each.

So, consider putting in a deadline depending on your current real estate market or background information that your agent has discovered. You can always adjust dates in an offer, withdraw an offer, or know that once the offer deadline expires you can pursue another property.

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There is more behind every door

Every home buyer tries to figure out what it will take to buy the home that they have decided to make an offer on. Determining the right price, or how much wiggle room there is, is the bottom line here for everyone from the first time buyer to the savvy investor.

If you are sitting at your kitchen table pondering this question, then it is time to consider some subtle nuances that I feel are essential for success. At least in the Northern Virginia real estate market where most sales aren’t foreclosures, having a “global view” will give you a greater opportunity to succeed in your negotiation.

Not every offer gets the house

Doing some homework on the house you want to buy is essential, and it is important you do these things quickly and methodically to help you form a unique negotiating strategy. There are many X-Factors in real estate, so, the more you know about each home you are interested in the better. Some facts a clear, but sometimes you will need to infer or form an opinion of what the seller is hoping to achieve.

Some subtle real estate X-Factors:

• How does the house compare to the competition?
• How long has the home been on the market?
• How long have the sellers owned the home?
• Are there any offers already on the table?
• When do they prefer to move?
• Did you meet the seller?
• Why are they moving?
• Is the house occupied or vacant?
• What is the overall condition of the house?
• Is it owner-occupied or are tenants living there?
• Have they already adjusted the listing or asking price?

Wait, but the comps say this home is worth…

There are always facts that people use to determine values, but facts in real estate sales are only so useful. For example, a seller knows that the market value of her home is $300,000 but prices it at $285,000 looking for a fast offer. It is a nice home with an updated kitchen, two year-old hardwood floors and upgrades that will jump out to any home buyer that has been watching the market. I have seen this type of scenario drive statistics focused clients crazy because that new, under-priced listing just did not make sense.

“Isn’t there supposed to be a negotiation, where I make a low offer?”

“Well, not always.”

“Huh?”

Unless you are buying a new home from a builder (a whole other scenario), it is essential to remember that most folks have never sold a home before or have experience with one, maybe two real estate sales often spread out over decades. The seller may have raised a family there, bought it before they married, or cared for a deceased spouse there. Emotions often come into play for both sellers and for buyers.

So consider more than the cut and dry facts, the assessment, or the Zestimate. More than recent local home-sales data, school information, walk-scores, or location.

And always know that, even when you put together a perfect offer, another eager home buyer may get the house for an unexplainable reason. And that is the real estate X-Factor.

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Image by DougFrancis via Flickr

If you are submitting a written real estate offer to buy a home then you want the sellers to respond in a reasonable time-frame, right? So, is there a set deadline for them to respond to your offer?

Well here is the truth: Unless you put in a deadline in your offer, then your offer is out there until it is accepted, countered or withdrawn by you. In practice real estate agents are trained to encourage their clients to respond as quickly as possible, and communicate that fact back to the other party.

But as much as an agent can encourage his or her client to respond quickly, it is the client’s initials or signatures that are required to keep the ball rolling. A slow response from either party can be the first sign the contract isn’t going to work out.

Communication is essential when negotiating real estate

Just last week there was an offer on a listing of mine in Fairfax, Virginia. As luck would have it, my client had boarded a plane that morning for the 20-hour flight to South Korea while his wife was in California. I communicated this fact to the buyer’s agent because his client had added a hard deadline for a response, and I did not want to miss the opportunity to get the house sold since there was a reasonable explanation for a delayed response.

Making an offer to buy a home is done “in good faith” or with honest intention. I have found that this trust is a fragile especially when one party does not respond within 24 to 36 hours. “Are they jerking me around?” or “are they using my offer to get more money?” or “what is this BS?” are a common question I hear from home buyer clients when we have not heard back from a seller.

People drag their feet for many reasons. I prefer to get to the bottom of things quickly when there is a deafening silence, and then communicate any explanations to my clients. If someone is at 39,000 feet and landing in a foreign country then they really are slightly out of touch, or if they work in a “secure building” like we have in Northern Virginia then they may need to get home before they can respond. And there are variables like a divorce, an estate attorney, a sudden illness, a builder, a bank officer, a snow storm, or a brother who lives in Canada and doesn’t want to sell Dad’s old house!

And I have seen seller clients lose the best offer the ever received because they dragged their feet. Yes, a buyer last summer said “forget it” to one of my seller clients who did not have the same sense of urgency that the buyer had to get a deal together. In his opinion, my client was not acting “in good faith” and he moved on. And when it happened, my client apologized for dropping the ball after not heading my warnings that they buyer was about to walk.

Including a deadline for either party to respond to an offer or counter-offer needs to be discussed. In my opinion deadlines that are “6:00 p.m. tomorrow” sound intimidating and set up ill will, but if it is “6:00 p.m.” two days from now is reasonable. If the deadline needs extending because of a reasonable “variable”, then you can build good will which may come in handy later on if you have an issue.

My client who was on a business trip was able to respond in time thanks to some cutting edge technology that I use for digital signatures from DocuSign. So, add a deadline if you feel it is necessary but remember that you can always withdraw a real estate offer anytime before it is accepted.

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One of the cases involved a town house with three offers, all below the asking price, and the seller was holding firm.

Hey, people seemed to be lining up so why not hold out for more money? They were already selling at a loss and the press seems to be reporting a “pick-up” in the real estate market. And isn’t this a real estate negotiation strategy?

Well, not really.

When I took over, the offers were already about ten days old and the buyers were losing interest, fast… and the buyer agents were getting impatient. The story is more involved but I’ll just get to the meat.

The sellers had tried to wheel and deal verbally, but agents know that they need to see counter-offers in writing. And then, one of the buyers withdrew their offer. The two remaining were also threatening to walk. [side note: most real estate offers in Virginia do not have written deadlines unless specified by the buyer or seller]

When the seller decided to take action, I scanned in the paperwork and uploaded it to DocuSign, my digital signature service. The seller was impressed with the ease of the technology, clicked where instructed and the counter was ready. Sent! And promptly REJECTED!

So they countered the second offer, and it was accepted with a minor change and “clean-up”.

“We want it back by 5:30 or it is withdrawn,” said the buyer agent.

Since Mrs. Seller works in Washington D.C. and Mr. Seller works in Fairfax, Virginia, getting the “cleaned-up”, accepted contract quickly signed using digital signatures helped save the best contract of the three. Waiting was a gamble that almost back-fired, and if the technology had not been in place then they would have been back to square one.

It has taken a couple of months, but you are now walking up the stairs and into your new home. It’s actually a little bigger than you thought and you can’t wait to paint the kitchen, replace the carpet, get the FiOS set up, and turn in the keys at the old place. Maybe even take a dip in the pool!

Nice story, but this is the type of mental image that I want my home buyer clients to have in their minds before we start looking for houses. Setting a goal is important and visualizing the ideal or “perfect scenario” makes it  seem a little less intimidating.

Home buying is a rough sport at any level:

• first-timers
• move-up
• retirement (move-out).

The primary complaint that I hear from today’s home buyers is… there is nothing to buy! Well, there are homes to buy depending on the region of the country you are in, and many of those homes may be short-sales (where the seller is asking the bank to forgive his loan for less than he owes) or foreclosed homes (a bank is the owner and seller). In either case, these homes may have issues like needing a lot of updating or fixing up, being sold strictly “as-is”, or the sale is a long-shot to ever get to settlement.

Even with the $8,000 first time home buyer credit, a home that needs all new appliances or carpeting isn’t that attractive. And a first time home buyer may understand why some homes went into foreclosure, like homes overlooking the Beltway or backing to an industrial area. And many people feel uneasy about buying anything for $400,000+ strictly “as-is” – yes, they ain’t fixin’ nuthin’.

Okay, these scenarios may have scared some of you away but for the person looking for a good home at a discount (from even 1 year ago) and a mortgage rate around 5% then this is the perfect opportunity. Yes, the affordability index is off the charts.

I tell clients to not get emotionally attached to any home until we have completed the home inspection. This is always a contingency included in my client’s offers because our contract specifically states that “the Purchaser may void the contract” after the inspection. It is make or break time… we have a contract, is it still worth it? If not, then we submit the notice to the Seller declaring the contract void and the home buyer is back looking for better options.

By having a clear picture of what you want the end to look like, making the decision to move on to another home will be much easier.

Being a real estate agent can spark a conversation almost anywhere, and I wound up answering questions from friends who are considering buying a property in Colorado. The questions are common ones but still very important to anyone who is planning to make an offer whether or not they are in Virginia or Colorado.

• Have pre-approved financing, and an approval letter or letters from your lender to submit with your offer.
• There may be a minimum Earnest Money Deposit required with your offer, so check the MLS listing sheet. If accepted, then this money get deposited in an escrow account and is part of your down-payment.
• Have your agent ask if there are other offers, or if there have been other offers. I feel that it is strategically important to know this fact before submitting an offer.
• Review the typical costs involved in buying a home such as an appraisal, lender fees, points, transfer taxes, title insurance, or other common expenses.
• Understand the monthly payment including principle, interest, taxes and insurance (PITI). With interest rates so low, you may be surprised what it could have been a year ago when rates were closer to 6.5%.
• Ask about time-frames. The mortgage lender may need 30-45 days to close, or the seller may need or prefer to close on a certain date. Again, a key part of your offer.
• Is this home a good deal, and if you don’t get it are there other homes that meet your needs?
• The $8,000 first-time home-buyer tax credit has a deadline of December 1st, 2009, and has an income cap of $75,000 for single filers and $150,000 for joint filers. These numbers are MAGI and are prorated above the income caps. See a tax preparer for advice.
• There are tons of deals out there… not! Home buying has been very active in Northern Virginia and many places around the country due to low rates and a supply of discounted homes for sale. You may have missed the boat.

As I arrived in Rhode Island, I bumped into an old friend and his father as they came up from surf-casting and lugging all their fishing gear. It seems that his parents are selling their ocean-front home, an amazing property, and no one was biting on the $6.7 million asking price. Since I had seen the property advertised in Rhode Island Monthly Magazine and had looked it up on-line, I knew what the listing needed and fast.

• More photos. This home has fantastic flower gardens that are right out of  Martha Stewart Living. This unique feature was not shown but is highly coveted by buyers in that price range!
• Understanding your audience. This home is more than a house; it is a treasure for anyone hoping to own a 19th century home with a 180° unobstructed Atlantic Ocean view.
• Online picture quality. Since 95% of people now house hunt online, make sure that the photo they find is of high quality.

While these were my friends asking me for advice, I was happy to share my experience with them to help them achieve their goals. Vacations are for re-connecting with family and friends, and this vacation gave me an opportunity to give back a little to people who have given me much for 40+ years.

By the way, although I thought that I broke my leg on Saturday, the x-ray technician did not see a fracture. I am still waiting to hear from the doc!

And the paperwork the bank is going to send will strip you of your rights as a human being… take it as-is, bub and you better know now if there are issues. Know now? We haven’t really been in the house…

There are a lot more variables when considering buying a foreclosure…