After my quick trip to tour some homes, I decided to make an offer on my first property. I was lucky and I got my property under contract quickly! Let me walk you through how I did it.
The Offer
After my drive home from seeing the property, I quickly reconnected with my agent to draw up an offer. Here is where a good agent is worth their weight in gold. My agent had reached out to the seller’s agent to indicate our interest. Not all agents are willing to share, but the two of them had a very honest discussion about the offers on the table and what the seller valued most in an offer.
We had planned a full priced offer, but found that there were already three other offers on the table.
The Other Offers
One offer was full priced with conventional financing.
The second was about $12.5k over ask with a contingency for appraisal. The contingency meant the buyer could walk away from the contract if the appraisal came back lower than the settled price. A buyer may want to walk away in this case because their lender would require them to make up the difference in appraised vs. contract value with money down.
The third offer was about $15k over ask, but came with an FHA loan. The seller was not comfortable with being dependent on an FHA appraisal, especially (I’m guessing here) because the offer was pretty far over ask.
My Offer
We decided to go with an offer about $10k over ask and waive the contingency for appraisal. After running the numbers, my agent was pretty confident we would appraise at the deal price and so was I. Even if we appraised a bit low, I had the cash in the bank to cover a small discrepancy with additional money down.
We were able to offer less than two of the offers thanks to a good understanding of what the seller valued. A higher price but with a low probability of success wasn’t something they wanted to risk.
The Seller’s Choice
The seller had four offers on the table after just one weekend on the market. Mine was the last to come in on Sunday night, so after a full day of consideration (and me waiting impatiently) they got back to us with some proposed edits to the contract.
Setting a New Close Date
Our offer had a close date set for the end of the following month. Most sellers are interested in a quick close so they can get their money and move on. My seller actually came back asking for an extra week. I did consider that we were getting outside of the ideal rental time period on the calendar. Though with COVID, that may not be as strong a cycle as it once was thanks to remote, well, everything. I agreed to the extension.
Shortening the Option Period
The seller wanted to get the contract signed quickly. I asked for an 8 day option period knowing that inspectors and service providers were slammed. They asked to cut the option period to 4 days.
I had no issue with them wanting to get under contract quickly, but I also needed to make sure I was covered. I needed an inspection and any follow up taken care of without risking my earnest money. The first thing I did was call an inspector to schedule an appointment. They could be there in three days.
I compromised by offering a 4 day option period with the ability to extend a second option period for 4 additional days. I did not expect to find issues so was comfortable with the risk of an additional $200 out of my pocket. It was a nice safety blanket to have just in case.
The Inspection
The seller accepted my proposal as reasonable. We both wanted the contract completed, and he recognized my need to take a thorough look. There was also a lack of service professional availability at the time.
The inspection happened 3 days after we went under contract. I had the report in hand by 10am the next morning, the same day my first option period expired.
The inspection itself uncovered very few issues, none of them major. The water heater will probably need replacing in the next couple of years, but that’s normal wear and tear. One window was cracked and another had a ripped screen. The cracked window could get pricey. There was also a shower diverter that didn’t work property in one of the tubs, a minor electrical issue, and a bit of mold/mildew on the indoor AC condenser.
None of these issues were really major, but each would get expensive to call out a service provider to fix. I asked them to repair those items or to pay $900. They (I think wisely) chose the $900 toward my closing costs.
We are Under Contract
My property is now officially under contract and outside of the option period. Now I get to move on to getting my ducks in a row for a loan and planning what I need to accomplish to make the property rentable. I am working with Better.com for my loan, and I will review that experience in probably a few weeks.
