Its happening more and more……Sellers are leaving a little money on the table and going with offers that have better terms.
Leaving any amount of money on the table is a tough pill for sellers to swallow. However, in some cases it is probably the most responsible move.
Sellers are putting more emphasis on additional terms these days due mostly to the widespread turbulence in the credit markets. Loans which were once sure-things, are now a little iffy. I am not talking about the sub-prime, zero-down, instantly adjustable loans. I am talking about your run-of-the-mill 20% down, thirty year fixed loans. Many traditional mortgage banks are having a great deal of difficulty finding stability within their own markets. One day they offer a mortgage program, the next day it is gone. This much we do know, the greater the down payment, the greater the stability of the buyer’s financing. Thus, we have our first “term” beyond the purchase price.
Contingencies essentially provide the buyer with several “outs” to a contract. The most common contingencies are the property inspection contingency and the financing contingency. Less common contingencies include the sale of the buyer’s home, environmental testing, soil samples and lead testing. In San Carlos, most contingency periods run between 7 to 10 days. In competitive bid situations, some buyers will waive all of their contingencies in order to have their offer shine above the others. This is a risky move and should only be done under the careful guidance of a trusted realtor. Nonetheless, an offer which has all contingencies removed is bound to be an attractive term for sellers.
The close of escrow is another term which will be examined by the seller. Matching the seller’s need regarding the close of escrow will make your offer more attractive. Sometimes the seller may need a very quick close of escrow. Other times the seller could need a longer close of escrow with a rent-back for a period of time after the close.
Finally, the seller will look for what many call “additional terms”….they should call them “additional headaches”…..many of them are terms asking the seller for cash credits. They can be difficult to deal with because these additional credits can stir up unwanted attention from the future mortgage holder. Banks do not like to see cash credits on loan applications because they hint at the possibility that the buyer may feel somewhat stretched regarding the purchase. The last thing the bank wants to do is end up owning the property. Consequently, the financing could become a liability with an offer asking for additional seller cash credits.
With a tightening a credit market, agents who advise their clients to put more emphasis on the terms beyond the purchase price are doing their clients a tremendous service. San Carlos is still a strong market, but it can turn quickly on sellers who get stuck with an offer that goes south. Even the strongest offers are not sure-things, but you can limit your exposure to risk by having your agent carefully explain all of the terms of the offer and making a decision based on all factors, not just the purchase price.