With the buying frenzies in 2013 so far, we heard ever aggressive, bold and daring offers from buyers and buyer agents. The conditions and situations are unprecedented. By throwing out unconditional offers, some predictable damaging consequences followed. Here are some instances:
1. Non Contingencies Offers - It is the trend in multiple offers world. Use this tactics to allure seller and secure the bid and stand out in among other offers.
Although offer being accepted quickly, the appraisal process may be blundered. Due to offerers swarmed in hitting price 15%- 20%, or more, than the asking, the appraised value may not support it. Since buyer does not have the appraisal contingency protection, buyer will have to come up the differences in order to get a loan, or else, buyer may loose the deposit money. Had buyer had the appraisal contingency as an offer condition, he can reconsider this purchase. But in today’s market, buyers have no time to rethink, because if he does not take as-is in everything, the next person will. It’s just that crazy and practical! (Cash buyer may not have the loan concern, as long as cash buyers put in more cash!).
A regular 3% deposit on a million dollar purchase, it’s $30,000 stake, if buyer did not put down more.
2. By-Pass Inspection - As a responsible buyer, one always performs property inspection as an insurance of the product he buys. But in order to get the house fast, buyer under pressure to forgo this step. He may see everything looks nice and decent from outside but ignore the structural and functional parts of the house. Some may even think since seller has done house inspection already, therefore, I will skip this part. No one house has no crack line, one inspection may not say everything of the house. A second opinion will not kill the deal if no major problem is found. Actually, buyers will sleep better had he perform this process. And this will also avoid any “buyer’s remorse” or disputes in the future.
3. Ignore Disclosures - Due to lack of inventories, buyers are too concentrated in figuring out numbers and ignore another most important process- exam the disclosure packages. (I have seen occasions that disclosures are not yet ready but houses gotten sold already!!!). Spending quality time examining the property is the basic procedure in buying your home, in order not to spend that $10,000 in termite fumigation, the eager buyers better check disclosures thoroughly.
4. Bidding Multiple Properties At the Same Time : In order to get the property, buyers sign numerous contracts at the same time hoping there will be one got accepted. This tactics may add extra pressure on buyers and agents themselves. Buyers may run the risk of getting two offers accepted and have to make decision in a very short time. Or buyer may encounter counter offers with multiples other contenders but loose the chance and timing in getting a better deal with the other offer. Timing is the essence in contract negotiation. Few minutes attention to key details can either get the deal or lose it.
I will continue more bidding war scenes in my next post.