RESALE OFFERS

Resale Offers

Buying someone else's home, while they are still living in it, is the most common home buying transaction. This makes showing and viewing the property a bit more problematic. Arrangements must be made in advance with the seller to show the property. The children must be put in the garage and the dog must be put out to play in the backyard. Or is it the other way around?

The good news is that the seller is still around, and must disclose what they know about the condition of the property. Failure to fully disclosure could result in cancellation of the offer, law suits, penalties, or all of the above. Serious stuff. The bad news is that seller/occupants always think their property is worth more than it is and they can be unrealistic if they want to be. They are emotionally attached to the property because, after all, it is theirs.

Offers

No two standard resale offers will be exactly the same because, like snowflakes, no two homes are the same. When making an offer using the following as a guideline might help:

There are very few, if any, perfect properties. Don't waste your time running around looking at everything. Instead go through your REALTOR's® web site to view properties online, eliminating those that don't match your criteria. Have your REALTOR® check to see which are short sales and which are not and give them the chance to provide feedback about taxes, neighborhood and schools. They may have even already previewed the property and can tell, if they've learned enough about you, if this one is for you.
Have your REALTOR® run sales comparables (CMA) for the neighborhood. Evaluate which are better and which are worse than the property under consideration.
In a seller's market, offers should be accompanied by a sob story or good reason why you should get the property. In a buyer's market, not so much. Good offers will be made on a CAR approved Residential Purchase Agreement accompanied by a copy of the good faith check (1%-2% of purchase price) and a lender prequalification letter. Direct lenders are preferred. Sometimes proof of down payment is also a good idea.
Serious offers should be within 5% of comparable value, not necessarily asking price (remember what was said above, sellers ALL think THEIR property is worth more). Offers above that are probably foolish and offers below that insulting. That said, feel free to insult if your heart is not set on that specific property. However, if your heart IS set on that one property or your children will kill you if you don't get it, stay within those guidelines.
In a competative market ask your self, "WIll I be heartbroken if I don't get this house?" If the answer to that question is YES, don't let ego get in the way. Offer what is necessary, but still reasonable, to get the property. Many deals have fallen apart over less than $500. Silly when the transaction is hundreds of thousands of dollars.

Repairs

Do your due diligence. Hire a home inspector to look things over. Your agent may be swell, but they are probably not contractors. Home inspectors know what to look for when inspecting a resale home. If you find something wrong, ask the seller to fix it. That costs nothing and you might luck out. They might fix it, even though they are not required to do so. All properties, by contract, are listed AS IS. Safety and soundness issues are often fixed, but ticky tacky decor or wish list items are not. Just keep in mind, they have no obligation to fix anything that was there when you made the offer.
Instead of asking that things be fixed, set a dollar amount you are willing to accept in lieu of repair and ask for that in the Request for Repairs. If you are in a 30 day escrow it is unlikely that the seller will be able to get a contractor to make a bid and do the repair prior to close. EXCEPTION: The home must be delivered in the same condition as when the offer was made. If the dishwasher was there when the buyer made the offer, but suddenly dissappears prior to close, the buyer can insist that a dishwasher similar in design and qualtiy be installed prior to close. That said the seller can elect to cancel escrow and give the buyer's money back, no harm no foul.
The major problems in most transactions involve lender required repairs and termite work. If the lender requires that repairs be made and the seller is unwilling or unable to do so, what do you do? The buyer wants the house and the seller is uncooperative, very common in REO transactions.

When a buyer is asked to make lender required repairs there are two very important issues:

They do not yet own the house and cannot, therefore, do anything to it without the seller's permission
If escrow cancels for any reason the buyer is out whatever money they invested in repairs as they have no lien rights (unless they are contractors)
So, how can the work be done?

Unfortunately, unless you are working with an intelligent and cooperative lender, the task is very risky for both buyer and seller. The best way to handle this is to put money in escrow to make the required repairs with bids from reputable contractors able to perform the repairs. Immediately after close, when the buyer is in possession, the repairs can be made and the money disbursed by escrow. This prevents the buyer from spending money on a new car instead of doing repairs, protecting the lender. This also protects the buyer from having to invest in a property they don't yet own. A reasonable solution to a thorny problem, but many lenders are reluctant to adopt this resolution.

The other solution is to have licensed contractors do the work WITH THE CONSENT OF THE SELLER. This gives a licensed contractor lien rights if they are not paid.

The bottom line in many cases is that if you love the house enough, you may have to bear the risk. Very sad. Very scary.