Essentials of the offer: how to be the perfect buyer in today's sellers' market. (It's not just about dollars.)

(Part 4 of a series) 

At last, you and your broker have found the apartment of your dreams.

You've seen it at least twice, and so has your partner.  

Your broker has pointed out any negatives as well as the positives. (She's objective.  You may not be.  And not only will this help you make sure it's the right one for you, but it will help in negotiating the price.)

And if you're planning to finance the purchase, you were pre-approved (not just pre-qualified) for a loan of up to 80% of the amount you're planning to spend before you even started looking. 

Before you make an offer:

First, your broker should let the seller's broker know that you're seriously interested, find out if there are any offers currently on the table, and, if there are none, ask to be notified if any are made.  

Your broker should also try to find out about possible negotiability and should ask for comparable sales to support the price.

Second, alert your real estate attorney.

Third, make sure you have a substantial amount of cash readily available.  When you sign a contract, you must accompany it with a check for ten per cent of the purchase price.

At the same time, your broker should be looking for comparable sales in addition to the ones the seller's broker has given her.  She should research the price as carefully as if she were pricing it for the seller.

Now for the offer.  

It's not just a number.

The strongest offers are all cash.  The next strongest are those that include financing but are not contingent on it.  The weakest are those that are contingent on financing.  

Strong qualifications are also a highly motivating factor, particularly if the property is a co-op and the buyer will have to pass the board.  

An all-cash offer from a well-qualified buyer will often trump a higher offer with a financing contingency from someone with less impressive resources.

If the property is new to the market, well priced and likely to attract several buyers, you may want to make a preemptive bid, with a time limit.

A seller who is doing business in good faith will immediately accept an all cash, full price offer (in a sellers' market like today's, circumstances might even warrant a number over the full price), to close at his convenience, from a qualified buyer.

However, there are those sellers who will have another open house to see if they can get a higher number or stimulate a bidding war.  That's why a time limit is a good idea.

If there are no other offers on the table, and the property has been on the market for more than a month, you may be able to negotiate a bit.  

But in today's market, in order to get a response from the seller, your opening offer should be at least 90% of the asking price.  Most actual sale prices are now within two or three per cent of the asking price, either over or under.

If you don't think the property is worth that much, your broker can sound out the seller's broker to see if the seller will respond to a lower offer.

The formal offer should thus include the number, the closing date, the amount to be financed (if any), the pre-approval letter from the bank, and whether or not the offer is contingent on financing.  

It should also include your net worth, liquid assets, annual income (not just salary) and source of same. 

Your broker should present your offer the INSTANT you make it, by phone, and should follow up with a formal presentation by e-mail.

If yours is the only offer on the table and it is less than the full ask, the seller has three options:  she can turn you down flat, she can accept it, or she can make a counter offer.  

The third option is the most likely.  Then there will be some backing and forthing between you and the seller, via your brokers, before you agree on a price and terms.  

Both parties may assume that they'll eventually arrive at the midpoint between the opening offer and the asking price, but this is not necessarily true.  One or the other may refuse to budge at some point.  

A broker is an experienced negotiator and can help you through an impasse.  She will do her best to make sure the seller is the one who blinks.

Once you and the seller have agreed on price and terms, the next step is getting the contract signed.  

Unless, of course...

NEXT:  How to win a bidding war.

The one essential for working with a broker as a buyer. And what you're entitled to in return.

Part 3  If you're buying:

You may be tempted to work on your own.  Don't.

This may well be the largest financial investment you will ever make.  It will affect your life for many years to come.  You won't just have to live with it; you'll live IN it.

Do you really want to do this alone?  Without professional help?

Working with a broker costs you nothing.  And a good broker will save you both time and money.*

Finding the right broker to help you buy is less crucial than finding one to help you sell.  There's no written agreement.  If it doesn't work out, it's easier to change (but don't change lightly--more below on this).

Ask your friends, go to some open houses, walk into an office.  Be sure every broker you consider is a member of the Real Estate Board of New York (REBNY).

Once you find one you like, BE LOYAL.  Don't try to work with more than one broker at a time.  

It will hurt you.

There's nothing to be gained by working with more than one broker.  We all have access to all listings. REBNY requires that we share our "exclusives" with all other member firms within 24 hours of listing them.

If you're not happy with your broker, by all means change.  But it's in your own best interest to practice monogamy--serial monogamy if necessary, but monogamy--with a broker.

How will we know if you're working with another broker?  We are required to give our customer's name when we make an appointment to see a property.  

If the listing broker for that property tells us the customer already has an appointment to see it through another broker, or if the customer has gotten in touch with the listing broker directly, nine out of ten of us will drop the customer.

Here's why:  choosing five to seven apartments for you for an afternoon's tour, reviewing them with you, scheduling appointments with their brokers (which means a meshing of your schedule and theirs, not to mention ours) to see them in some kind of reasonable geographic sequence is extremely complicated and time-consuming.

Also, our firms do not pay for taxis or car services or lunches or snacks. All of those expenses come out of our pockets.  And we are independent contractors, on straight commission, with no salary or benefits.  If we don't sell, we don't eat.

Okay, this is not your problem.  

But we cannot afford to devote time, effort and money to anyone who may wind up buying through some other broker.

If you see something interesting on the web, pass it on to your broker and ask what she thinks.  She may know something about the listing that's not on the website--land-lease, brick wall views, whatever.  

If, in a moment of excitement about a property, you call or e-mail the listing broker directly, make it clear that you have a broker representing you.  

If you go to an open house without your broker, put her name down on the sign-in sheet.

Here's what you can expect in return:

If you don't already have a real estate attorney, your broker should provide you with the names of at least three she's worked with in the past and is comfortable recommending.  Same goes for mortgage providers, if you're planning to finance.

She should be seriously interested in finding you the perfect property and getting the best price, not just in making a quick sale.

(A smart broker knows that this is in her best interest. If she does her job well, you will come back to her when you're ready to sell whatever she helps you buy. You will also send any of your friends who have real estate needs to her.)  

She should listen carefully and TAKE NOTES when you tell her what you're looking for. 

Before she shows you properties, she should send you a list of them with pictures, floor-plans and other information.  Go over the list with her so that if there are some you're not interested in, you can explain why. 

Again, she should listen carefully and TAKE NOTES.

When you actually go out with her to look at properties, it is fair to expect her to pay cab fares and for any snacks along the way.  

If you're spending in the multimillion dollar range, it is fair to expect a car service, especially if your tour will be in the later afternoon when it's impossible to get a cab.

After the tour, stop for coffee to discuss what you've seen.  

If you didn't like something and can't come up with anything beyond "It just didn't strike me," your broker should know how to gently probe a bit, asking, for instance, if the problem was the light or lack of it, or if those white brick buildings that went up in the '60s should be ruled out altogether, or if there was something wrong with the block.

If you're looking with someone who will be sharing the space with you, ask for some time to discuss the properties privately.  But be sure to discuss them with your broker as soon as possible.

She should NEVER pressure you to make an offer unless she sees that you're interested in something, and she knows that other offers are already on the table.  

She shouldn't argue when you point out negatives, and she should point out any serious ones you miss.

If you've looked at a dozen properties and can't see yourself living in any of them, sit down with your broker and try to figure out what the problem is. 

But by this time, there should be at least one you like enough to make an offer on.

Now, more than ever, the right broker is essential. Now's the time to decide what your offer should be, and negotiate the price.

NEXT:  The offer, and beyond.

Any questions so far?  e-mail me at cstimpson@stribling.com or call 917-991-9549.  I'll be happy to answer them.

*For more on this, see previous post, "Don't jump into the pool without a lifeguard:  why buyers need brokers."