In today’s hectic market, one may ask what is it going to take to get a contract accepted. Here in Movado Greens, we are reminded often of the anxiety a homebuyer may experience when stepping into our fast-paced market. While we have not had the 10+ multiple offer situations that you hear about, it is common to have two or three buyers interested in the same home at the same time in our neighborhood.
When selling a new home, there are two principles that we follow 95% of the time: 1) Blackrock seeks the highest and best contract with the greatest likelihood of closing on time, and 2) We are not authorized to share with any agent or buyer where we are at with offers and terms. We only share the quantity of offers received.
And what about the other 5% you might be wondering? A distant third principle is that there are occasions when other factors are considered – such as a buyer who has written offers on multiple Blackrock properties and has repeatedly been rejected. On those occasions, Blackrock may make an exception if all terms are agreeable. (We do have a heart!)
As listing agents, we do our best to remain humble, impartial and respectful of everyone’s position throughout these early negotiations. Below are the terms that Blackrock prefers to see in contracts and especially when in potentially competitive situations:
Owner-occupied purchases: Blackrock prefers owner-occupied homes, rather than investor purchases. We realize that the climbing prices and interest rates have made home ownership harder to reach for some buyers. As a result, we are seeing an increasing number of parents stepping in to assist their young adult children qualify to purchase. In these cases, Blackrock prefers to see the children also named on the contract. When this is a sticking point for lenders, we require language in the contract stating that the buyer agrees not to lease the property to a non-family member for a minimum of 24 months.
Strong down payment: This is especially important when Escalation Clauses are applied. Yes, all-cash offers are appealing, but so are well qualified buyers that have larger down payments. When an Escalation Clause is likely to be activated, we strongly encourage selling agents to communicate if their client has access to other funds in the event that the appraisal comes in below the agreed upon price.
Appraisal Waiver language: If seeking financing, keep in mind that appraisers are required to follow guidelines that limit them to only reference “like properties” for sold comparables. They rarely look at trends or pendings, creating an appraised value that is sometimes 30-45 days behind the current selling prices. In these cases when the appraisal comes in below the purchase price, Blackrock does not adjust the price to match the appraised value, nor do they meet in the middle. The buyer needs to close the gap. If the buyer is willing and able to make up the difference, we encourage selling agents to include this language in their contract:
In the event that the appraisal value is less than the purchase price, Buyer agrees to make up the difference between the two numbers.
A few additional thoughts on Escalation Clauses: If a buyer is willing to increase the purchase price in the event of a competitive situation, Escalation Clauses are a great option. They are becoming increasingly popular and a number of brokerages have their own verbiage. Blackrock prefers escalation clauses that escalate the purchase price $2,000 above the next competing offer, up to a pre-determined cap established by the buyer.
If two (or more) offers net the same proceeds to Blackrock, the selling agents are notified to see if they wish to modify their offer. Interestingly enough, only about 50% of the buyers change the terms. And from there, the contracts are reviewed and a decision is made. We do our best to notify all selling agents of the outcome and take the time to let them know how their contract ranked in the decision-making process.
So there you have it – Owner occupied, pre-qualified, Appraisal Waiver, and possibly an Escalation Clause. I hope this information is helpful and always feel free to reach out and ask questions at any time – we’re here to help. Thank you for taking the time to read this post.