How to Write a Powerful Real Estate Purchase Offer

Summary

In this real estate training video, Robert Rico emphasizes the importance of crafting a compelling offer for potential buyers. He discusses the significance of an earnest money deposit, suggesting 3% of the property's value to signal serious intent. Rico also advises on considering the listing price and the property's days on the market to determine a reasonable offer. He warns about the impact of contingencies on a seller's perception, noting that fewer 'only ifs' can lead to a more attractive offer, ultimately increasing the chances of acceptance.

Takeaways

• 🏡 The importance of making a good offer in real estate, especially for agents working with buyers, is emphasized.
• 🤝 Buyers rely on real estate agents for advice on making offers, highlighting the agent's role in facilitating successful transactions.
• 💰 The earnest money deposit (EMD) is crucial; a larger deposit, such as 3% of the property's value, signals a serious buyer.
• 🏠 The sales price or offer price is a critical component of a good offer, and matching the list price can be beneficial if the buyer wants the property badly.
• 📈 Market conditions, such as whether it's a buyer's or seller's market, influence how an offer should be structured.
• 📅 Days on the market (DOM) is a key factor to consider; a property that has been listed for a long time may have more room for negotiation.
• 🔍 Real estate agents should be knowledgeable about the property's DOM to advise buyers effectively on making offers.
• 📉 A property that has been on the market for a short time may not have much room for negotiation, making a full list price offer more appropriate.
• 🔗 Contingencies, such as selling the buyer's current home first or an appraisal contingency, can make an offer less attractive to sellers.
• 💼 Fewer contingencies in an offer make it more appealing to sellers, increasing the likelihood of acceptance.
• 📝 When advising buyers, real estate agents should consider the earnest money deposit, the property's price based on DOM, and the potential contingencies involved.

Q & A

What is the main topic of Robert Rico's video blog?

The main topic is 'How to Make a Good Offer' in the real estate field, specifically focusing on writing effective offers for buyers.

Why is it important for a real estate agent to know how to write a good offer?

It is important because buyers want a realtor who can help them make offers that are more likely to be accepted, which can lead to successful transactions.

What is the significance of the earnest money deposit (EMD) in making an offer?

The EMD shows the seriousness of the buyer's intent to purchase the house. A larger deposit can make the offer more attractive to the seller.

According to the script, what percentage of the purchase price is typically considered a good earnest money deposit?

A good earnest money deposit is typically 3% of the purchase price.

How does the listing price of a house influence the offer amount a buyer should consider?

If a buyer wants the house badly enough, they should consider offering at least the list price to show their serious intent.

What does DOM stand for in the context of real estate, and why is it important?

DOM stands for 'Days on the Market.' It is important because it can indicate how quickly a house is likely to sell and whether there is room for negotiation on the price.

Why might a seller be hesitant to accept an offer with a contingency?

A seller might be hesitant because contingencies, such as the buyer needing to sell their current house first, can create uncertainty and delay the transaction.

What is an appraisal contingency and how does it affect a buyer's offer?

An appraisal contingency is a condition in the offer where the buyer's purchase is contingent upon the property appraising at a certain value. If it doesn't, the buyer may have the right to walk away.

How can a real estate agent use the information about a house's DOM to advise a buyer on making an offer?

An agent can use the DOM to gauge the urgency of the seller and the potential for negotiation. A longer DOM might suggest more room for negotiation, while a shorter one might indicate less flexibility on the price.

What is the general advice given by Robert Rico for making a good offer without too many contingencies?

The advice is to minimize the 'only ifs' or contingencies in the offer to make the seller more comfortable, which increases the chances of the offer being accepted.

What are the key factors a real estate agent should consider when advising a buyer on making an offer?

The key factors include the earnest money deposit, the offer price in relation to the list price and market conditions, the DOM of the property, and the contingencies attached to the offer.

Outlines

00:00

🏡 Writing a Good Real Estate Offer

In this video segment, Robert Rico from California Realty Training introduces the topic of writing a good real estate offer. He emphasizes the importance of understanding how to make a compelling offer, especially for real estate agents working with buyers. Buyers expect their agents to be knowledgeable about crafting offers that have a high chance of being accepted. The video discusses the emotional aspect of buying a house and the role of the agent in guiding the buyer through the process. The first step in making a good offer is determining the earnest money deposit (EMD), which is a significant factor in showing the buyer's seriousness. A typical good EMD is suggested to be 3% of the property's value. The sales price or offer price is also crucial, and Robert suggests starting with the list price if the buyer is very interested in the property. Additionally, the days on the market (DOM) is a key factor to consider when determining the offer price. If a property has been on the market for a long time, there might be more room for negotiation.

05:01

💼 Understanding Contingencies in Real Estate Offers

In the second paragraph, Robert Rico continues the discussion on making a good real estate offer by focusing on contingencies. He explains that contingencies can make an offer less attractive to sellers. For instance, a buyer might offer the full asking price and a substantial earnest money deposit but add a condition that the sale is contingent on selling their current house first. This type of contingency can deter sellers who may not want to wait for the buyer to sell their property. Another common contingency is an appraisal contingency, where the buyer's offer is contingent on the property appraising at the offered price. If the appraisal comes in lower, the buyer has the right to back out of the deal. Robert advises that fewer contingencies make an offer more appealing to sellers, increasing the likelihood of acceptance. He concludes by summarizing the key points to consider when making an offer: a substantial earnest money deposit, a competitive price based on market conditions and DOM, and minimal contingencies.

Keywords

💡Real Estate Agent

A real estate agent is a licensed professional who assists clients in buying, selling, and renting properties. In the context of the video, the role of a real estate agent is crucial in helping buyers make a good offer on a property. The agent's expertise is needed to navigate the complexities of the real estate market, ensuring that the buyer's offer is competitive and acceptable to the seller.

💡Good Offer

A good offer in real estate refers to a proposal made by a buyer that is likely to be accepted by the seller. It typically involves a fair price, a reasonable earnest money deposit, and minimal contingencies. The video emphasizes the importance of making a good offer to increase the chances of successfully purchasing a desired property.

💡Earnest Money Deposit (EMD)

The earnest money deposit is a sum of money given by the buyer to the seller to show serious intent to purchase a property. It is held in escrow until the transaction is completed. In the video, a larger EMD, such as 3% of the property's value, is suggested as a way to demonstrate a buyer's commitment and seriousness, which can be appealing to sellers.

💡Sales Price

The sales price is the amount a buyer is willing to pay for a property. It is a critical component of any real estate offer. The video discusses the importance of setting a competitive sales price, often starting with the list price, especially if the buyer is highly interested in the property.

💡Days on Market (DOM)

Days on market (DOM) is the number of days a property has been listed for sale without being sold. It is an indicator of how quickly a property might sell. The video uses DOM to illustrate how the length of time a property has been on the market can influence the buyer's negotiation strategy and the likelihood of making a successful offer.

💡Contingencies

Contingencies are conditions that must be met for a real estate transaction to proceed. They can include the sale of the buyer's current home or the property appraising at a certain value. The video explains that fewer contingencies make an offer more attractive to sellers, as they reduce the risk and uncertainty associated with the transaction.

💡List Price

The list price is the amount at which a property is offered for sale by the seller. It serves as a starting point for negotiations. In the video, the list price is highlighted as a key factor in determining the initial offer a buyer should make, especially when they are very interested in purchasing the property.

💡Seller's Market

A seller's market is a real estate market condition where demand for properties exceeds supply, giving sellers the upper hand in negotiations. The video suggests that understanding the type of market (buyer's or seller's) is crucial for a real estate agent when advising buyers on how to make a good offer.

💡Buyer's Market

A buyer's market is the opposite of a seller's market, where there is an abundance of properties for sale and less demand, allowing buyers to have more negotiating power. The video implies that in a buyer's market, buyers might have more flexibility in making lower offers.

💡Appraisal Contingency

An appraisal contingency is a condition in a real estate contract that allows the buyer to back out of the deal if the property does not appraise for the agreed-upon purchase price. The video uses this concept to illustrate how contingencies can affect the attractiveness of an offer to a seller, potentially making it less appealing.

💡Escrow

Escrow is a legal arrangement where a third party holds the funds and documents for a transaction until certain conditions are met. In the video, the earnest money deposit is placed in escrow to secure the property for the buyer, demonstrating the buyer's serious intent to purchase.

Highlights

Introduction to the importance of making a good offer in real estate.

The necessity for real estate agents to be skilled in writing compelling offers, especially when working with buyers.

The emotional aspect of home buying and its impact on the offer process.

The significance of the earnest money deposit (EMD) in demonstrating a buyer's seriousness.

Calculating the appropriate EMD as a percentage of the home's price.

The influence of the list price on the offer amount.

Considering the market conditions when determining a competitive offer price.

Understanding the concept of 'Days on Market' (DOM) and its relevance to negotiation potential.

The strategy of matching the list price for highly desired properties.

The role of contingencies in an offer and their potential to deter sellers.

Explaining the 'only if' scenario in contingencies and its effect on the seller's decision.

The impact of an appraisal contingency on the offer's acceptance.

The importance of minimizing contingencies to increase the appeal of an offer to sellers.

Strategic advice for realtors on advising buyers on making offers, considering EMD, price, and contingencies.

The potential for negotiation when a property has been on the market for an extended period.

The importance of a good EMD in signaling a serious buyer's intent.

The role of the real estate agent in guiding buyers through the offer process, especially in emotional situations.

Transcripts

Thank you for coming to this week's video blog.

My name is Robert Rico here at California Realty Training.

Hey, thanks for coming and visiting us today.

We're going to bring some more great information for us, particularly of course in the real

estate field.

Hope you've been doing great.

Listen, today's topic: How to Make a Good Offer.

How to write a good offer.

Do you want to be an agent?

You've got make sure you're familiar with this kind of stuff, huh?

And you've got to make sure you're familiar how to write a good offer, especially if you're

planning on concentrating with buyers because buyers want a realtor who know how to write

good offers.

And not just your typical offer, but a good offer.

An offer that's going to get what?

That's right.

Accepted.

Right?

Now this is how it works.

As a real estate agent, you're going to hope to work with a lot of buyers in your real

estate career.

Now, in my career, I've worked with tons of buyers.

Of all the transactions I've done, I would say approximately, I don't know, 75% have

been dealing with buyers.

And it's fun with the buyer's emotional.

Emotional meaning once they get into an escrow, they really want this house.

They can feel the joy.

They can see the future in this house.

It becomes pretty darn emotional.

That being said, many a times when they see the house for the first time, they're depending

on you, depending on you the realtor, to make it happen, which means you've got to make

a good offer.

It all starts with the offer.

And guess what?

I hate to tell you this, but they're looking at you for advice.

They're saying, "Hey, Mr. Realtor.

What kind of offer should we make?"

And looking at you, looking eye to eye with you saying, "What do you think?"

Now, let's talk about the basics on how to write a good offer.

Let's start with the most basics of the basics.

If your buyers want this house badly, I mean, they've got to have it they've been dreaming

about this for years, number one: Let's talk about the earnest money deposit, the EMD,

the earnest money deposit.

Now, that's the buyer putting down money to have this house taken off of the market.

That's the buyer saying, "Hey, Mr. Seller.

How you doing?

Listen, I want to make you an offer and if you accept my offer, I'm willing to give this

amount of money."

Boom.

And give it to an escrow company to take your house off of the market.

Now, of course, the bigger the deposit, the more serious the buyer.

Sellers like that.

If you have a buyer that wants something really bad and they're only willing to give $1,000

up, they're only willing to sacrifice $1,000, does that sound serious to you?

Of course it doesn't.

Let's assume a house is $1,000,000.

"Hey, we want to buy this house.

It's $1,000,000."

And the buyer only wants to put $1,000 as a deposit?

No, that's not good at all.

Now, typically a really good, good deposit, a really good EMD, earnest money deposit,

is 3%.

Now, what's 3% of $1,000,000?

Do the math.

Well, 3% of $1,000,000 is $30,000.

This guy's willing to give $30,000 and put it in an escrow account, he must really want

my house.

This is a serious buyer.

That's step one.

Step two of course would be the sales price, the offer price.

What is the buyer willing to offer?

Now, let's assume this house is listed at $1,000,000.

$1,000,000.

We'll have to decide what would be a good offer?

What is not a bad offer?

What offer would be completely, completely unreasonable?

And in my point of view, of all the offers I've made, if you want something bad enough,

you better at least give, what?

That's right.

List price.

If you want $1,000,000, give them $1,000,000, if you want it bad enough.

Of course, there are other factors we have to consider.

What kind of market are we in?

Is it a buyer's market?

Is it a seller's market?

We have to consider tons of stuff.

But at the end of the day, when you have the whole transaction right here in front of you,

there's something that they want and they want it bad enough, if the sellers want $1,000,000,

what should you offer?

That's right.

$1,000,000.

Now, let's assume that this house that they really want, because you as a realtor are

going to have access to all the information, let's assume that this house that they want

has been on the market for a long time.

Ready?

We call that DOM.

D as in dog.

O. M as in Mary.

We call that DOM.

Days on the market.

You as a realtor need to know what is the days on the market on this property.

You want this house?

They're asking $1,000,000 for it.

You as a realtor will know that the days on the market is, I don't know, seven.

This house has been on the market for seven days.

Now, that's pretty darn fairly new.

This house has only been on the market this amount of time.

That's nothing.

Do you think there's wiggle room to negotiate with this price?

It being only the market for seven days?

Probably not.

Let's retrack on the example.

Let's assume that this house, which they want $1,000,000 has been on the market, DOM, two

months.

Hell, let's go worse.

Let's go four months.

Four months.

This house has been on the market four months, no action.

Now, you as a realtor, think about this.

Do you think there's going to be wiggle room?

Do you think these sellers are going to be willing to negotiate?

They've been wanting $1,000,000 for four months.

No one has bitten.

Nothing's gone on.

Is this a good chance for the buyer to negotiate and possibly offer less?

I mean, that's logic.

Of course that would be a reasonable, so you come in with a lower offer, unless the buyer's

what?

Want it bad enough.

All these you have to consider as a realtor when you're going to give your advice to the

buyer.

Another thing that you might want to consider to make a good offer is what we call contingencies.

Here's the deal when it comes to contingencies.

The buyer says, "Okay, Mr. Seller.

I willing to give you list price of $1,000,000.

I'm willing to give you 3% for the earnest money deposit."

So far, so good.

"But I'm only willing to give this to you if I sell my other house first.

I've got to sell my other house first."

Now, that's called a contingency.

That's our contingency sell of my private property.

"Mr. Seller, how are you?

I'd like to make you this offer.

I want to give you exactly what you want, $1,000,000 and I want it so bad, I'm wiling

to put 3% down, which is $30,000.

Here you go.

All of this means nothing, Mr. Seller, if I can't sell my house over here first.

I've got to sell my house over here to buy your house."

That's called a contingency.

That's called and only if.

That's called what I say only if.

"I'll buy your house only if I can sell my house over here."

Now, would a seller get trapped into an offer like that?

Would a seller be willing to wait on the sideline, to wait and sit and wait in hopes of you selling

this house?

I mean what if this house never sells?

Well, then he never gets his money over here.

That make sense?

That's called a contingency.

That's a only if.

"I'll buy your house only if".

These contingencies can bother.

These contingencies can get under the seller's skin and have them say, "You know what?

Uh-uh.

Your offer is just too darn ugly."

Another contingency that many buyers come along, just as an example, an appraisal contingency.

"Hey, Mr. Seller.

How are you?

I'll give you $1,000,000, just like you want."

That's good.

"I'll give you your 3% earnest money deposit, just like you want.

I don't have to sell my house to buy your house, just like you want.

But I want to make sure this house appraises at a $1,000,000, Mr. Seller.

Mr. Seller, this is the deal.

I'm going to send an appraiser out to your house, this house that I want to buy, this

house that I'm interested in.

But if the appraiser, who's job is to come look at this house and give me a value."

This appraiser's job and that's all he does all day long is to come to this house and

say, "Hey, this house is worth $1,000,000.

This house is house worth $950,000.

This house is worth two" ... whatever it is.

This appraiser's job is to come in and say, "This house is worth" boom.

It's value was this amount.

And that buyer's saying, "If my appraiser goes in there and says this house is not worth

the $1,000,000 I offered you, I have the opportunity, I have the right to walk away.

Give me back my 3%."

Now, that's very typical when there's a loan involved.

That's a whole other can of worms.

Don't worry about it.

But that's called a contingency.

That's the only if.

"Hey, Mr. Seller.

I'll buy your house only if".

The less only ifs, the less contingencies we have, the more comfortable the seller.

The more comfortable the seller, that means it's a good offer.

You with me?

These are just a few of the items you might want to remember when making an offer: Give

a good earnest money deposit.

Think about the price, of course the price if crucial and you can base the price on the,

that's right, the DOM.

And last not least, I want you to consider the contingencies involved.

"Hey, Mr. Seller.

I'll buy your house.

We'll make an offer on your house only if".

Now, these only ifs, if they are included, you might scare the seller.

And the seller might say, "You know what?

Go away.

Go find yourself another house."

You with me?

Good.

You want to make a good offer?