Clock - How long does it take to write an offer?In the current hot seller’s market here in Silicon Valley, most real estate agents representing the seller set an “offer date” for would be buyers and their Realtors to submit their offer packages, also known as their bids, for the property. How long does it take to write an offer? You may be tempted to do it on short notice.

The time commitment it varies – I would say you want to give yourself 2 days for a reasonably comfortable amount of time to read and absorb everything and to write your offer.  It is difficult if you only have 24 hours between when you see and like a home and when the offer is due.  It is possible, but only if you (and your Realtor) drop everything and only focus on this for the next 24 hours.  And let me tell you, that is not fun – in fact, it’s miserable!  Much better is to have several days.

Last week, though, I showed a home at 9 a.m. and turned in an offer before the 4 p.m. deadline. Never again. It was incredibly stressful and there was no way that we could all review everything as much as we should have done. The stress of it was sickening (literally) for me –  I take my fiduciary obligations seriously and felt like I was cutting corners left and right to make a deadline. And I had to ignore all my other clients for a few hours to make it happen. (And no, my clients did not get it. Their offer was far too low, unfortunately.)

Most of the time, right now offers in the San Jose – Los Gatos – Saratoga – Campbell area are due on Tuesday.  Once in awhile they are due on Monday and rarely on Wednesday.   Seeing a potential target on Sunday is possible but it is still really hard (and about impossible if the due date is Monday).  Much better is seeing it on Saturday, or, if possible, before the weekend even begins.  If you can do that, it will be immensely easier and less stressful!

How long does it take to write an offer? What is the breakdown of things to do?

Every Silicon Valley home sale is just a little bit different from any other, but I’ll tell you what usually happens, besides having an offer date. Below is a quick list and rough estimate, and below that is an explanation of each item.

These are the major steps – not always in this order, though usually reading the disclosure package is first.

  1. Read the disclosure package, which is several hundred pages long (inspections, sellers’ disclosures, listing agent’s disclosure, etc.): estimate 3-5 hours minimum for straightforward, simple house, or closer to 5+ hours if there is an HOA or something complicated. These time frames will be longer on the first offer and shorter on subsequent ones.
  2. Buyer letter, if written by you: anywhere from a few minutes to half an hour. (These home buyer love letters are often not used, but sometimes permitted.)
  3. Contract paperwork review: estimate one hour with your agent, but it could be 2 hours or more to go through the unsigned contract and related documents.
  4. Provide your proof of funds (statements showing your name, a date, the balance, and institution’s name) and black out your account numbers:  30 minutes max.
  5. Review the pricing information and market statistics provided to you by your real estate agent: depending on your level of detail, one hour or more to understand the pricing on similar homes.
  6. Discussing pricing and offer terms with your agent: allow an hour on the first offer written.

These listed items represent about 10 hours of your time as a home buyer. Your own time could be more or less. Your real estate agent’s time will be more than this, sometimes double.

Below is commentary on why these take so long all together.

The disclosure package

There will be a disclosure packet, which you are expected to read and fully sign off on, and turn in the signed paperwork with your offer.  It includes hundreds of pages of information: the home or property inspection, a pest or termite inspection, and often other inspection reports as well, such as roof, chimney, and sometimes, if applicable, things like a pool or well inspection. Additionally, there are reports on natural and environmental hazards (about 80 pages) plus all the disclosures that the seller has filled out by hand (c. 20 pages) plus the boilerplate disclosures (probably another 30 pages). If you are buying a property with an HOA, there will also be hundreds of pages in the HOA package.

Reading, understanding, and digesting all of this is crucially important and it does take a few hours for you to do this. Your agent must also conduct a visual inspection of the property and type or write up his or her notes on the form, which you must sign, too. The first time you write an offer, it might take 6 hours for a property not in an HOA.  For subsequent efforts, you will not need to re-read the boilerplate items and it may take you only 2-3 hours or less. Never rush it – it is crucial that you understand what you are accepting. Signing usually is done electronically, using DocuSign.  That may take your buyer’s agent an hour or more to set up for you, but will likely take you less than 10 minutes to sign.

Right now, homes in the San Jose area are selling with few, if any, contingencies.  For that reason, your pre-sale preparation is immensely important and it is wise to give yourself plenty of time to review and investigate before the offer process.

If you are buying a home in an HOA, you’ll want to understand the rules, regulations, issues, and financial health of the community. To understand these means reading the CCRs, rules & regulations, meeting minutes (problems, proposals), newsletters (issues, challenges), the budget and reserve account study, and more.  Recently Jacquie Berry of CADatasource, who analyzes HOA documents, state that most HOAs in Santa Clara have underfunded reserve accounts.

Buyer letter

Most offer situations are multiple offers, sometimes with bidding wars, so a lot of extras go into presenting a complete offer package now.  One such item may be the buyer letter to the seller, which some call the buyer house love letter.  You may be able to whip out a nice note to the sellers in a few minutes, others might agonize over every syllable and take an hour.  Either way, don’t skip this step with multiples.  (Once again, the first one will be tough to do, but if you end up having to write a few offers before yours is accepted, they’ll come much faster after that.) * Please note: some listing agents and sellers do not want to get a buyer letter due to potential risks of fair housing law violation.

Contract review (draft or blank)

Also important is the need to study and go through the contract.  Depending on the client, this can be fairly quick (30 minutes) or it could take an hour or two. I usually estimate one hour to review this with my clients.

Proof of funds

You’ll need to provide the proof of funds for your down payment or all cash offer.  This shouldn’t take too long but the account numbers should be blacked or whited out. DO make sure that you don’t just do a bland screen capture that doesn’t show your name.  Think “proof” when grabbing your documentation.

Review the comps

Most buyers take time to understand why recently sold properties sold as low or high, fast or slow as they did. That will mean looking at the photos and descriptions of each one so that you are comfortable with your pricing decision.

Offer decisions

You’ll need to get a list of the major offer questions and decide how you want to answer them, which collectively constitute “price and terms”, such as what price you want to put on your contract, whether or not you’ll have contingencies (and if so, how much time for each one), who’s paying for what, how long various things can take, whether you want to sign for arbitration and liqudated damages, etc.  A lot of items may be customary but in a deep seller’s market, some buyers may opt to pay for some costs which are traditionally born by the seller for strategic reasons.   Going through the major questions may be easy or hard, fast or time consuming, depending on how new the concepts are to you and how prepared you are.

Meanwhile, your Realtor will need time to do some work too – he or she will need to chat with your lender about timeframes, dates, and particulars for the contract.  He or she will probably also review the disclosures (not the HOA docs), provide the comparables (that is, get recently listed, pending and sold properties which are similar). With more time, your Realtor may be able to phone some of the listing agents of the pending properties and try to figure out the sale price. The offer itself must be drafted (a good amount of data entry) and the disclosures must be tagged for signing electronically.

Once the offer is drafted and signed, the disclosures signed, the buyer’s letter written, the proof of funds submitted, your Silicon Valley real estate agent will need to double check everything to make sure it’s complete, will draft some sort of cover letter and summary, and then assemble everything to be emailed or presented live.  If live, you’ll need to allow a few extra hours for printing, collating, and driving.

It is extremely important to do your due diligence – this is not like buying a car!  Rushing yourself will lead to undue stress and potentially to costly mistakes.  If you are serious about house hunting in the San Francisco Bay Area, do yourself a favor and look at homes as soon as they come on the market instead of just before the offer is due.