If you are in the market to purchase a home, the value of working with a professional real estate agent is the strategy and the negotiation behind the offer to the seller. In other words, presenting an offer that wins requires an understanding of how you arrive at a bottom line that is acceptable to both buyer and seller.
Following are five considerations a professional real estate agent will evaluate in providing advice in regards to your purchase offer:
You must include the type of financing you are securing to the seller in your offer. If the loan to finance your purchase is a VA or FHA loan, you will need to recognize the additional financial and performance obligations this places on the seller.
VA and FHA loans have what is called “non-allowable fees.” These are typical loan fees that are charged by lenders and title companies. They are called “non-allowable” because you as the buyer are “not allowed” to pay them. The result is that the seller ends up paying them instead of you.
To assist your real estate agent in presenting the best offer on your behalf, you should ask your loan officer to provide you with the amount, as well as an itemized list of the lender’s non-allowable fees so that this can be considered when making your offer. If you are working with a professional real estate agent they should also have an idea of what non-allowable fees will be changed to ensure a good offer is presented.
Since these are fees the seller would not have to pay with conventional financing, this information must be included in your offer. You should also be realize since the seller will be paying these additional fees, you will need to consider this in your offer.
2. APPRAISAL AND INSPECTIONS
FHA and VA loans require more stringent guidelines with regards to the appraisal and home inspections. In addition to determining the estimated market value of the property, the appraiser is required to perform certain minimum inspections. These are not as detailed as a professional home inspection, nor are they a substitute.
The value of working with a professional real estate agent is the knowledge that agent brings to helping you have a heads up as much as possible to probable repairs that could be required by the appraiser. A good rule of thumb that an appraiser uses to determine necessary repairs is: is it safe, is it sound, and is it sanitary. If it fails that criteria, it will likely become a required repair prior to closing and funding of your loan. This means there is some artful negotiation between the agents representing both parties as well as a good idea of what possible repairs and cost could arise so that this is handled in your offer.
3. DATE OF CLOSING
Your real estate agent will likely have a good idea of what the seller is looking for in regards to the closing date so that this does not become an obstacle to the closing. If the current owner has an FHA or VA loan they definitely will want to close and fund by the end of a month to avoid being charged a full month of interest by their lender. This should be considered in the offer presented.
4. SELLER CONTRIBUTIONS
If you are using conventional financing, the amount of your down payment will determine the amount of contributions you can have the seller contribute to your closing costs and prepaids (hazard insurance and interest for the month). This typically ranges from three (3%) percent to six (6%) percent of the sales price. Your loan officer should be able to provide this to you. If you do ask for the seller to contribute this amount, you will want to be sure you consider this in the seller’s bottom line.
5. FINANCING APPROVAL
If two identical offers are presented and one offer shows the buyer approved and the other shows pre-approved
- the approved buyer just won. It is highly advantageous to provide your real estate agent with an approval letter from your lender. The approval letter should only be conditioned based on an acceptable appraisal, verification of funds to close, verification of employment, and clear and acceptable title of the property.