Home buyers in Silicon Valley are getting frustrated, discouraged and disheartened as they write offer after offer, only to lose out in multiple bid situations. It’s not just the poor FHA home buyer either – this is happening to those with 20% down and more too.

What can be done to improve the odds of success?

Sometimes the buyer’s agent either does or doesn’t do certain things which can impact how your real estate purchase offer is viewed by the listing agent and seller(s).  Here are 5 important things that the buyer’s Realtor or sales person can do which will help the odds of success:

1. The agent should read the MLS printout carefully to see if there are any instructions regarding offers.  This one may seem obvious. but too many buyer’s agents just draft the offer and send it in, ignoring information that will probably be useful (such as offer deadline, preferred form - CAR or PRDS contracts, availability of disclosures, the request to call before writing the contract etc.).
2. The buyer’s agent should call or email the listing agent before writing the offer (and after reading the MLS!).  Sometimes there are requirements or just preferences that won’t be known unless contact is made.  Additionally, though, the listing agent will simply want to know about the level of interest and not have any surprises – it’s a courtesy call.
3. The agent should ask if it is possible to present the offer in person…and be willing to do it, of course.  Many seller’s agents won’t want a live presentation (most would email), however the fact that your agent is willing to spend the time and make the effort to present in person usually speaks volumes about his or her professionalism. It’s also a hint that the agent is a cut above most.  In my real estate practice, several times I beat out other offers by asking if I could meet with the listing agent and sellers to discuss my clients’ offer, and then doing it.
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In most of California, the purchase agreement form used when writing an offer to buy residential real estate is the California Association of Realtors (CAR) form, the Residential Purchase Agreement (CAR-RPA).  Along the San Francisco Peninsula and in Silicon Valley, though, often we use another form, the Peninsula Regional Data Service purchase agreement (PRDS contract).  Few consumers know that there is a choice of forms to use when buying Silicon Valley real estate.  And too many real estate sales people do not understand the difference between them.

Does it matter which one you use?  It certainly does!

While anything in the boilerplate can be modified (deleted or added to), the basic text is not identical from one to the next, and neither are the ramifications to buyer and seller.  Here are a few examples:

- Property condition: one is an “as is” contract and the other requires that the property be delivered with a warranty of condition (no leaks, no cracked glass, no structural defects in chimneys, all systems operational, etc.)

- Repairs in escrow: one says that repairs must be by a licensed contractor, the other that repairs must be done in workmanlike manner (can be done by anyone)

- Defaulting: one contract has more ”teeth” with buyer or seller defaults than the other

There are pros and cons to each of these two forms. A skilled agent is “bilingual” in both, understands the strengths and weaknesses of each one, and can modify as needed the form to benefit the client. What is tricky, even for Realtors who work with both sets of realty forms, is that they keep changing.  So there can be confusion on what is and isn’t covered, or the way in which various aspects of the contract are addressed.  Let’s look at some examples of why it matters which real estate contract you use in the San Jose area.

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A kick out clause refers to language in the contract which permits the seller, in some cases, to cancel the contract with the current buyer.  The current buyer is “kicked out” of contract.

Another expression for the same idea is a “release clause” – the seller can release the buyer under some situations.

When can the seller kick out or release the buyer? 

• If the contract is subject to the sale of another home, there may be a release clause in the agreement stating that if the seller gets a better offer, the buyer may have 72 hours to perform (sell the home) or be let go.  Normally buyers do not begin spending money on reports, inspections and the appraisal until this contingency is removed, so there tends to be little risk for either party.
• With bank owned homes, several lending institutions want to keep offering the home for sale even after there’s a ratified contract so that they keep open the possibility of the home selling for more. It is understandable that they want to mitigate their loss, but it makes buyers in contract very nervous about spending money on appraisals and inspections!  Most of the “risk” is on the buyer’s side.
• If there’s a short sale, the seller has a contingency for bank approval.  If a better offer comes along while waiting for bank approval, the seller can usually release the buyer without much difficulty.

This concept is not usually automatically found in purchase agreements unless it’s a bank owned, short sale or contingent upon the sale of another property deal

Do you really want to buy a Silicon Valley home, or do you just want to write offers to see what will happen?  Some folks, who appear to resemble serious home buyers, write offers that are riddled with reasons why the seller should reject their offer, or at the very least write a very tough, high counter offer in response.

What kinds of things in a purchase contract make a bad impression on home sellers in the San Jose area?  Here’s  a list of things buyers (or their agents) have done I’ve seen recently which turned the tone negative when it didn’t have to be:

• On the good faith deposit check, don’t write the name of the title company.
• On the memo section of the check, write something vague or possibly nasty, such as “deposit for budget property”.
• On the contract, don’t write the seller’s name anywhere. Instead, write “Owner of Record”. Sounds like a bank owns it, but no matter what, it indicates that you don’t care who owns it.
• On the contract, omit the listing agent’s info in the agency confirmation and offer signature pages.
• Make a low offer, and if you are countered up in price, counter back to your original price.
• If the seller indicates that your offer is being reviewed favorably and that the seller is probably going to take it, ask the listing agent “is there any room still to negotiate?” and promptly cancel and submit a new offer which is 10% lower.
• Write offers on more than one property at once – even though you can only purchase one.  (That’s called “acting in bad faith”, even if it is a short sale.)
• Ask the seller to pay for everything, even items which are normally paid for by the buyer.
• If the MLS says that something is omitted or excluded from the sale, don’t mention it in your contract.
• If the MLS provides information on disclosures, inspections and reports, don’t bother looking at them before you write and submit your offer.

I’ve seen all of these just in the last couple of months.  Buyers and their Realtors need to remember that buying and selling houses, condos and homes in Santa Clara County (and everywhere else) is emotional as well as a business decision.  Being rude, inattentive, uncaring and generally not following instructions is not a good negotiation strategy!

The offer is the courting period.  If you are not polite and professional then, what will you be like in escrow?  Your offer is your first impression. If you want to buy real estate, make it a strongly good impression!