You’ve found a Silicon Valley house, condo or townhouse that you like and you have decided to write an offer. What’s next?
Assuming that you are pre-approved for a mortgage and that you are are working with a great Realtor or real estate licensee (those should be your starting point), you’ll have a number of things to address and choices to make involving price and terms. The next is to find out if there will be multiple offers or not – your agent should call the listing agent to inquire. That is a game changer so should be done upfront. Here are a few of the basic considerations.
1. Will you draft your offer on the CAR or PRDS contract? This is perhaps the first “term” to be considered. Some listing agents insist that the paperwork be one or the other. In general, this decision is influenced by geography: the “west valley” communities from Almaden or Los Gatos on the southern end up to Redwood Shores or a bit further north will tend to use the PRDS contract. Most of San Jose, Santa Clara, Milpitas and so on will usually prefer the CAR contract. Some buyers’ agents strongly prefer to use one or the other (sometimes because they know one of them better). Often the best solution may be to use one form but add terms from the other in the “other terms” section since each one has strengths you may want to employ.
2. How much time does your lender require for the loan contingency removal (assuming that yours is not an all cash offer)? You or your agent should get all of the loan terms upfront, plus the number of days reasonably necessary for this contingency removal. Remember, the longer the time frame, the less competitive your offer will be. But you don’t want to ask for too little time and then have to ask for an extension later. It’s a balancing act.
3. How much time will you need for inspections, your personal investigation of the property and area etc.? This is another important question. If it’s multiple offers, you’ll be pressured into less time than if you’re the only bidder. If there are good pre-sale inspections, you may not need as much time. Talk to your agent about this. The boilerplate number of days in the CAR contract is 17, but many in Silicon Valley consider that excessively long. With multiple offers, some buyers (especially in some areas) are writing offers with no contingencies for loan, appraisal OR inspection. Keep that in mind. Also, even if you’re the only bidder, an excessively long property condition contingency time frame is a red flag for most listing agents and sellers.
4. Price offered. This is a multi-teired question, because your offer price may not be the same as the price you’re ultimately willing to pay. Are you going to lowball? Come in at a firm price and then not budge? The price is not the only issue – it always comes down to both price and terms. If your terms are very attractive (say, all cash purchase with a fast close of escrow and free rent back to the seller and AS IS), you will likely be able to get the home for far less than an offer with unattractive terms (offer contingent on another home selling, low down payment, asking for all kinds of property repairs and guarantees, a very long close of escrow or an inconveniently short one, asking the seller to carry back the mortgage, long escrow time frames, etc.). Think of it like a balance – and understand that you are unlikely to have both fantastic terms and low price if you’re the buyer, and ditto for the seller. There’s some give and take.
For sellers who want a wonderful price, you can make your terms better by providing a house with few issues (or worry). You can make your home easy to see and more attractive. Houses that are hard to view will often be passed up. That is also true for homes which have been let go. If your terms are bad, so too will the price be!
There are many, many more questions which are decisions for you to make when writing an offer on a home to buy or when receiving one on the property you are selling. The contract, whether CAR or PRDS, has many clauses and conditions and it is important to read and understand all of it. When you draft your first offer, allow an hour or two, at least, to go through it with your real estate professional. Your agent may give to you a list of some of the big questions to think about ahead of your meeting, too, such as how much of an initial deposit you’d like to put down (and have the check cashed), with your offer, when you’d like to close escrow, etc.
Finally, do not decide an hour or two before the offer deadline that you’d like to write a contract and then spring it on your Realtor. Most real estate brokers and sales people in the San Jose area – at least those who are full time – have appointments set up in advance for at least part of the week, if not most of it, so giving a day’s notice will be a big help to you and to your agent to write a good, strong offer that is not hastily written (and more likely to have errors or be misunderstood by you because of the rush) that will increase your chances of success and happiness with the deal you’ve forged.
