Making a weak offer. If you don’t write a strong offer to purchase, the seller may reject your offer or they may not respond at all.
If you write a weak offer, sometimes the seller thinks that you are trying to cheat them or steal from them. Once this happens, they will not want to deal with you at any price.
If your offer is disorganized or has troublesome terms, sellers may dismiss you as someone they just don’t want to deal with. Once people make these types of decisions, they justify the choice to themselves and you’ll probably never have the opportunity to give them a better offer.
Losing the property to another buyer who is more highly motivated. This most often happens because you didn’t make a strong offer.
Motivation is not only about price. Remember, a seller is looking for the winning horse. They want the best price they can get, but they also want a buyer who can and will close the deal. Each failed escrow could cost them months. If you are not willing to offer the most money, remember that a lot can be done to improve an offer by making better terms.
How you are perceived can also be important. I always include a cover letter in the offer which “talks up” my buyer. It just might be that the sellers are hoping the new owner will “love the house the way we do.”
Your letter, which describes exactly why you want the house, might be the deciding factor when the seller chooses between 3 offers that basically look the same.
Failure to include a confidentiality agreement. Without a confidentiality agreement, the seller doesn’t need to treat your offer as confidential.
As you can imagine, you lose a lot of bargaining power when a seller can disclose your offer to the next guy. At that point you will usually become a pawn in someone else’s game. It is just like playing cards. You need to keep your hand to yourself.
Not understanding when a contract becomes legally binding.
The expert dance of negotiating requires an exact understanding of when an offer becomes a contract, and how to keep it that way. If you have a seller tied up in a contract, they can’t sell to anyone else, even if they get a much higher offer the next day. They are locked in. This is important to understand, and it helps explain why sellers are so picky.
If you slip up and give a seller a legal way to opt out of the contract, they are free to take a different offer and you will lose all legal recourse.
Negotiating is a dance. You can push and you can pull, but if you don’t understand what is legally binding and what is just a friendly conversation, you will be in real trouble in no time flat.
Neglecting your due diligence. You shouldn’t enter into an agreement until you’ve checked title records, liens, and other issues. You need to be sure the seller will be able to close escrow on schedule.
You are going to have hundreds of thousands of dollars on the line. You should do everything you can to get the right deal. This is where having expert advice will be essential. You will need a team of pros. Any good real estate agent should hand that team to you on a silver platter.
But even with this team in place, you need to be involved and do your part. This is a big deal for you. Make sure you get it right.
Misunderstanding the legal implications of loan and inspection contingencies and other provisions in your contract.
In your purchase contract, your “contingencies” are your legal way out of the contract. Those contingencies are there to protect you. Your contract will contain deadlines for the release of those contingencies. Should you fail to abide by the contract, you could allow the seller a way to leave the contract and you would lose the deal.
Failing to obtain the seller’s disclosures.
In general the seller should be an expert in the property. They should know things that you will want to know. They are required to disclose any material fact. Even with this legal requirement, you would be surprised how many sellers try to get around their obligation.
You need to protect yourself, and you should have an agent that is able to be a bit of an attack dog when necessary.
Neglecting to conduct your own investigations and inspections as a buyer.
If all goes well, you are going to own the property. It is essential that you take a good look around. You need to see the good, the bad and the ugly.
I usually recommend that a buyer crawl under the house with the property inspector, and stands there as they take the electrical panel apart. Be prepared to get your hands dirty. If it makes you feel better, I will crawl down there too.
Not considering the full legal, tax, credit and other ramifications of home ownership–especially co-ownership
How you “take” title can have a huge impact on your finances for years. You are going to need an accountant to help you answer how you should take title.
Most accountants charge a few hundred dollars a year, and they will save you that much at the very least. Just as importantly, they will usually keep you out of trouble. An accountant can provide valuable advice concerning tax liability, and make sure you are filing all your tax information correctly to avoid trouble with the IRS administrative..
If you don’t already have an accountant, you need to find one.
Mishandling a claim for property defects that are discovered after close of escrow.
This is a legally complex issue, and another place where you will need expert help. You may want a lawyer so that you can understand the facts. However, it is probably best to start off with a friendly conversation. Most people with either be fair because they are honest, or fair because they are scared of what will happen next.
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