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What are the steps involved in receiving and
analyzing an offer?
By Shayne Bowen
When one is selling a property, the offer process
begins when I receive a phone call from the buyer's agent, indicating that we have an
offer on the property.
Here are the steps I follow when receiving and analyzing an offer on a
property:
- Once I have received a phone call from the buyer's agent indicating that they have an
offer on the property, my first step is to ask the buyer's agent to fax me an advance copy
of the offer.
- I ask the buyer's agent several questions relating to the financial qualifications and
needs of the buyer. Some of the questions I ask the other agent are:
 | How did they meet the client? |
| Has the client been pre-qualified? |
| Has the client been pre-approved? |
| Who is the buyer's lender? |
| Is this lender someone that the buyer's agent knows and thoroughly
trusts? |
| Is the offer contingent upon the sale of another property? |
| If the offer is contingent upon the sale of another property, has
that other property been listed? If yes, is it already in escrow? How long has the
property been in escrow? What is the address of the contingent sale property? |
| If the contingent property is already in escrow, what specific
contingencies have been removed (inspection and loan contingencies are the most
important)? Also, is the contingent property contingent upon yet another sale? |
Once I receive an advance copy of the offer by fax, I thoroughly review each clause before
presenting it to my client. I note each of the positive aspects of the offer, as well
as the aspects that are of concern.
I then draft a tentative response on my computer, anticipating the items that may be
positive, as well as the aspects of the offer that are of concern.
I note those clauses in the offer that may not seem like matters of concern to the
client, but that represent technical issues that could be of importance.
Once I thoroughly review each clause in the offer and draft a tentative response on my
computer, I then phone my client to present the offer to them.
I explain to my client the contents of the offer, taking care to note the positive
aspects of the offer, and those that are likely to be of concern.
As I explain the contents of the offer, I identify "homework items" that I
will need instructions from my client on.
| These "homework items" include (but are not limited to):
 | Shall we change the price that the buyer offered? |
| Shall we ask for an increase in the buyer's deposit at a certain point in the
transaction (typically upon removal of inspection contingencies, or upon removal of loan
contingencies)? |
| What title company and escrow officer shall we use?
 | The buyer virtually always pays for the services of the title company. However,
it is important that we choose the title company carefully. |
| I have seen too many clients inconvenienced, and too many transactions imperiled
by inadequate service on the part of some title companies. |
| It is important that we avoid these problems. |
| I will recommend a title company and escrow officer on the basis of competence
and top notch service, to avoid these problems. |
What date shall we set for closing the transaction, and moving out of the
property?
| Think about your move out date in terms of:
| Availability of moving trucks |
| Availability of friends to help with the move |
| Time off from jobs, for moving |
| Proximity in date to a weekend (for ease of moving). |
| Availability of funds for the possible purchase of a new home (such as funds from
a 401K, or other sources that may take some time to be made available). |
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Shall we have a "rent back" of the property, allowing the seller to
stay a few days after the transaction closes, as a "renter?" There are important
reasons for sellers to include a "rent back" clause!
| A rent back allows the seller the time to close escrow on their current home one
day, then close escrow on their new home the next business day, and then allows 3-4 days
(or more, if set up that way) to move into the new home, without having to be out of
one's current home! |
| The "overlap" which is created by the rent back is quite important.
Without it, one would be forced to close escrow on one's current home in the morning of a
given day, and would need to close escrow and move into the new home that
same morning. This is not easily possible, and it causes the seller a large amount of
unnecessary stress! |
| A rent back allows one time to close one's current home, close on the new home
the next business day, and still have a few days to move into the new home and clean the
old home, before delivering possession of the old home to the buyer. |
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| What "fixtures," if any, will be excluded?
| "Fixtures" are items that are permanently attached to the
property, and they must stay with the property. |
| Examples of "fixtures" are attached light fixtures, carpeting,
drapery, valences, screens, doors, awnings, antennas, burglar alarms, smoke alarms, pool
and spa equipment, solar systems, attached fireplace screens, electric garage door openers
with controls, plants and trees (other than in movable containers). |
| These items, and other items that are "permanently attached to the
property" must stay with the property, unless the item is excluded in a counter
offer. |
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| Shall we leave in the normal "Condition of Property" clause, or take it
out, and offer the property in "as-is condition?"
| The normal "Condition of Property" clause contained in the purchase
agreement warrants that several items shall be in "working order" at the time
the property is delivered to the buyer. |
| These warranties cover several items. These items must be in normal working
order, unless they are countered out in our response:
| Built in appliances |
| Electrical, plumbing, heating and cooling systems |
| No leaks anywhere in the property. |
| Roof shall be free of leaks. |
| No broken windows or glass anywhere in the property. |
| No damaged screens. |
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| If we wish to exclude some of warrantied items above, we must note this in our
response to the buyer. |
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| How much time shall we give the buyer for their physical inspections of the
property?
| A typical time is 10-14 days from date of acceptance. |
| The shorter the time frame, the sooner the seller knows whether the transaction
is going to move forward or not (depending on the results of the physical inspections). |
| It's not realistic to specify less than 10 days. The inspectors are often booked
for several days into the future. |
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| What "personal property" shall we leave the buyer (if any)?
| "Personal property" are items that are easily removed from the property
-- items that are not permanently attached to the property. |
| Examples of "personal property" are paintings, furniture, stereo,
refrigerator, washer, dryer, etc. |
| "Personal property" consists of items that will not deface or damage
the property when they are removed. |
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| Do we wish to offer the buyer a home warranty?
| This is a very important decision. |
| Too often an item in the home becomes inoperable shortly after close of escrow.
Even though a seller had no knowledge of any issues before close, there are
all-too-frequent lawsuits by purchasers who claim that the sellers failed to disclose a
flaw in the property. |
| A lawsuit is an incredibly costly, miserable, and time consuming thing to
experience! |
| The home warranty is paid out of the seller's final proceeds from the home - no
checks are written by the seller. |
| The cost of the home warranty ranges from $230 - $320, depending on which firm is
chosen for this warranty. |
| The home warranty covers the buyer for one year following the close of escrow. |
| The warranty covers many of the most common repair issues that may occur after
close of escrow:
| Built in appliances (not free-standing appliances) |
| Most plumbing problems |
| Most electrical problems |
| Hot water heater |
| Furnace |
| Dishwasher (if built in) |
| Stove (if built in) |
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| The best home warranties also provide limited coverage for roof leaks. I
frequently recommend that my client use a home warranty plan that includes coverage for
roof leaks.
| Even though the seller's roof may not be leaking at the time of close of escrow,
roof leaks can occur at odd times, via wind-driven leaks in severe storms, or other
unanticipated causes in the future. |
| Having to cure a roof problem is potentially costly for the seller. Therefore I
strongly advise that the seller consider the use of a home warranty that includes
limited roof coverage! |
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| Having this warranty coverage can be a very powerful deterrent to help avoid a
buyer lawsuit for alleged defects after close of escrow. |
| Murphy's Law operates in this area! I remember a seller several years ago that
had a BRAND NEW, highly expensive furnace installed in their home. Shortly thereafter, the
buyer discovered that the furnace was not working, and PG&E "red-tagged"
this almost new furnace!! It couldn't even be turned on!
| Without a home warranty in this situation, the seller would have potentially
faced the cost of replacing an expensive furnace!! |
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| Agents do not provide or make
any money from home warranties. They are provided by several different firms. Agents are
required to inform sellers about the availability of home warranties.
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| If the purchase agreement is contingent upon the close of escrow of the buyer's
current property, should we consider their offer?
| If yes, there are many important clauses that I insert into the purchase
agreement to protect my client in this area.
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Final Steps In The Offer Review Process
9. I then write up our response, which is called a "counter offer."
10. I then deliver or fax the counter offer to my client.
11. I go over the offer and counter offer in great detail with my client.
12. If everything is fine, I obtain written approvals from my client.
13. I create a cover letter, to present our counter offer to the buyer's agent.
14. I deliver the counter offer and cover letter to the buyer's agent.
15. I call the buyer's agent, and explain our counter offer in detail.
16. I monitor the negotiations very carefully, and work hard to create a new
transaction that works well for my client.
Conclusion
The items above constitute just the highlights of the offer
analysis process. A great number of other items often need to be considered!
In all cases I guide my client through the various detailed issues
that must be considered in order to respond prudently and professionally to the purchase
agreement.
Attention to detail now will pay significant dividends for the
wise seller of property!
| If you would like a
complimentary, personalized property value analysis, please phone Shayne Bowen at 707
577-8200! (Alternately, you may click here
to make a request for a personalized property value analysis.) |
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| If you are interested in making
a purchase or exchange of a property, please phone Shayne Bowen at 707 577-8200!
(Alternately, you may click here
to request information on potential properties for you.) |
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