In addition to the financial part of your offer and your contingencies and timeframes, there are other terms that may help you to be more competitive when writing an offer in a multiple offer bidding situation in Silicon Valley.
What other terms could matter, beyond price and contingencies? Lots – they will matter to the seller and they’ll matter to you.
As Is Offers
Sellers always want to sell “As Is” if possible. They don’t want to have to do repairs, to spend the time or the money to fix what may not be perfect. This is an extremely important area to research, weigh, and understand prior to drafing your real estate purchase agreement, particularly if you are not the only one trying to buy that real estate. When it’s a seller’s marker (and with multiple offers, it IS a seller’s market), the seller can request and will usually be able to sell As Is.
Buyers always want every imaginable repair done, if at all possible. Buyers don’t want to have to do termite, roof, electrical or other work on the home. They want a “red ribbon deal” where the home’s been or will be in very good to excellent shape. They want a section one clearance from the termite & pest company. They want a leak free roof warranty. When it’s a buyer’s market, and you’re the only one attempting to buy the house or condo, you can usually request and get the seller to do all the basic repairs.
The important point is to understand which of these two markets you’re dealing with – buyer’s or seller’s – if it’s a seller’s market and you’re behaving as though it’s a buyer’s market, you will hurt your odds of getting the property if you request repairs or if your contract provides a seller’s warantee.
In this series of posts on multiple offers, I keep mentioning the two contracts in use, but this is exactly where the As Is issue comes into play. The CAR contract is “As Is” unless areas of concern are added. The PRDS purchase agreement specifically requires that the seller do certain repairs or provide the home at close of escrow in a certain condition: there shall be no leaks (roof, shower enclosures, faucet on sink in garage), there shall be no cracked glass, all systems shall be operative (understand systems to mean furnace, water heater, oven, doorbell, etc.) , no structural issues with the chimney. You get the idea. In a buyer’s market, these are great clauses to have. But in a seller’s market, or if you’re slugging it out against a bunch of other offers, this is viewed as a giant negative by the seller and the listing agent. It could kill your odds!
As Is sounds like a horrible situation to buyers. In many cases, though, the sellers provide pre-sale inspections (and sometimes even do some of the work that was noted in the reports) so you can often understand the property’s condition prior to writing your contract to buy the home.
The PRDS contract does have an AS IS provision, if you elect to use it. The CAR form is an “AS IS” agreement unless the buyer requests certain things and the seller agrees, such as a pest clearance or watertight roof.
So should you never use the PRDS contract if there are multiple offers? I would never say never. First of all, you can make the PRDS an As Is agreement, and then you’ve mostly levelled out the playing field.
Second, your agent should ask the listing agent if there’s a preference in terms of which form to use. In most of San Jose, agents are using the CAR form (except in the westside of Silicon Valley such as in Almaden Valley, Cambrian Park, West San Jose etc.). Many San Jose Realtors use the CAR form exclusively and may be spooked at a PRDS contract. So have your agent find out.
Next, find out, as much as possible, how many offers are expected. If it’s only one or two, perhaps having a PRDS contract will not be a liability.
Having an As Is offer does not mean that you are prohibited from inspecting the home. With an As Is offer, you should still retain a property condition contingency, the right to inspect and research whatever you need. As Is simply means that the seller is not obligated to do any repairs.
Please Note: Do be aware that if you are trying to buy a bank owned home (REO), the bank may have verbiage that limits your rights and alters the way your timeframes and contingencies are handled. If you see bank addenda, DO seek legal advice from a licensed attorney.
Other Terms in Your Real Estate Purchase Offer
In addition to the enormous question of whether or not to write an As Is offer, there are many other terms written into the contract paperwork as well as others that you can insert that may help or hinder your offer’s odds of getting accepted.
A rent back can be very important to homeowners who are not sure where they’ll be moving next. Recently my buyers and I wrote an offer on a lovely Almaden home. The listing agent did not tell me to offer a rentback but I realized that the sellers might have more peace of mind if we provided them the option to rent back for a few weeks while they try to find a replacement home. The sellers appreciated that we would close in 3 weeks and offered another 3 week option to rent back and they accepted our contract without a counter offer. (Rent backs can be free, at the buyer’s daily rate, or another amount.)
Inclusions and Exclusions can be another way to make your offer more appealling or to ease later negotiations. Does the seller want to take a prized rose bush? Keep the stereo speakers? Remove a dining room light fixture or curtains in a bedroom? Those are all inclusions that you might exclude (and allow the seller to take them).
Over the summer I was helping some Cambrian Park homebuyers to get into their first house. We were in escrow and wanted the sellers to do some repairs that they didn’t have to do – but they mattered to us a great deal. To sweeten the addendum, we made our request with the offer that the sellers could take a few items that should have remained with the house but they probably wanted to keep (and hadn’t countered them out earlier). We got what we wanted and gave them something that they wanted.
Sometimes with relocating or senior homesellers, one of the biggest challenges is “debris“: clearing out of the home entirely. When there are multiple offers, under “other terms and conditions” I have sometimes suggested that my buyers offer to take on the seller’s extra “stuff” so that they can be worry free about the items in the garage that they really don’t want, need, or know what to do with. Offering to take over the job of getting rid of the debris can provide some sellers who may be feeling a little nervous a bit of a breather – one less thing to do.
Once I had a listing in the Vendome area of downtown San Jose (near Japantown, off Taylor). The sellers were very attached to some ferral cats which they had been feeding, and they worried about what would happen to the cats after they moved. The buyers offered (again under “other terms and conditions”) to continue to feed the cats. That’s not enforceable, of course, but it meant a lot to my clients and they had peace of mind knowing that the cats would be cared for.
I would advise that when there are multiples, or even a later negotiation in escrow, that you consider the question of “what would make the sellers happy or make their lives easier?” If you can anticipate their needs and provide for one or two of them, even unasked, it will make a good impresssion and that alone can be the reason why you’ll be able to edge out the other bidders.
As always, this post is no substitute for your obtaining professional real estate assistance. You should always strive to work with a highly experienced & ethical Realtor, no matter what kind of market you’re in. Consult with your agent and make an informed decision about how to approach a multiple offer situation so that you can win the bid but not feel like you’ve really lost by giving away all your rights.