Buyer Preparation Part 4: Preparing the Offer

Buyer Prep Series

Introduction

Insufficient buyer preparation when searching for a property is a recipe for disaster. If you fail to prepare, the process will be long, frustrating, and filled with disappointment. Much of the work I do is with first-time buyers because it gives me great satisfaction to help people achieve their goal of home ownership. Unfortunately, many buyers make the same mistakes which prevent them from achieving their goals. I’ve created this educational series to help my clients improve their chances for success, and to better prepare them to navigate the highly competitive Vancouver real estate market. The real estate industry is evolving, and I will continue adding to this series as necessary.

PART 1 – The Importance of Working with a Realtor is available HERE

PART 2 – Financing Your Home is available HERE

PART 3 – Needs Analysis is available HERE

PART 4 – Preparing the Offer

When you find a home that you like we’ll prepare an offer for the property. Each property is unique, and together we will evaluate its pros, cons, and value when preparing the offer. Below, I’ve created a list of factors that will help you understand the process and increase your chances of securing the property.

How Much Should You Offer?

Every property has 4 values – assessed, current market value, list price, and sale price. Properties regularly sell for above or below the list price so it’s most important to focus on the sale price. The list price on a property is irrelevant unless it sells for that price. Sellers and their Realtors will use different marketing strategies when pricing a home so each property must be reviewed and assessed independently. Together we will review marketing strategies, comparable sales, market statistics, and other factors before you decide on a price to offer.

  • Assessed value is determined yearly by BC Assessment. This value affects how much you pay in annual property taxes – check out my previous blog post or this article for more information
  • Current market value is the dollar figure placed on a property as determined by real estate professionals (Realtors, lenders, appraisers)
  • List price is the number at which the property is offered for sale. Remember, this number is often manipulated for marketing purposes
  • Sale price is the price that a buyer pays for the property

I Don’t Want to Over Pay!

Competition in the Vancouver real estate market can be fierce, and often there will be competing offers for a property. Competing offers will drive up the sale price, which means buyers sometimes need to offer an amount above the list price to secure their desired property. Paying above the list price doesn’t necessarily mean that you’ve over paid. Remember, sellers use pricing strategies to market their properties, and one of the most commonly used strategies is when a property is under priced to encourage competing bids.

Bidding wars are common in a competitive market, but you only enter one if you choose. We will work within your budget and ensure that you offer a dollar amount that you’re comfortable spending.

Timing

  • Timing can be the difference between securing a property or missing out
  • Are you available to view a property as soon as it hits the market?
  • Viewing a property early can give you an advantage and reduce competition with other buyers
  • Waiting until a public open house to view a property may increase competition
  • Some properties will have scheduled times by which offers must be submitted

Writing the Contract

  • Price
    • We will review recent comparable sales and market statistics when deciding a price to offer
    • Be prepared to provide your Realtor with a bank draft for the deposit (usually 5-10% of the sale price)
  • Subjects
    • Subjects are conditions precedent that must be satisfied before the offer becomes firm and binding
    • Common subjects include financing approval, building inspections, and a review of strata documents
    • Strong offers include few or no subjects, but also contain more risk
    • When we prepare an offer, we will discuss your options and ensure that we protect your interests by including all necessary subjects
  • Dates
    • When would you like to have possession of your new property?
    • Are you currently renting, and do you need to give written notice of leave to your landlord?
    • Have you sold your current home, and by which date do you need to vacate?
  • Conditions & Warranties
    • Similar to subjects, these serve to protect all parties involved in a transaction
    • Common examples include assurances about the cleanliness of a property, parking stall numbers, and that all included appliances will be in good working order

Congratulations, Your Offer Has Been Accepted!

Once the seller accepts your offer you enter the subject removal period. The length of the subject removal period will vary depending on the subjects included in the offer, but 3-5 business days is common. During this period, you will perform your due diligence and work towards removing the subjects, if any, that were included in your offer. Your offer does not become firm and binding until the subjects are removed. If any of the subjects are not removed then the offer for the property will expire and become void.

  • Strata documents will be received, reviewed, and approved
  • Your lender may send an appraiser to the property to determine its value
  • You will hire an inspector to look for deficiencies
  • You will obtain a bank draft for the deposit and give it to your Realtor

Once your subjects have been removed and the deposit check has been received by your Realtor you have a firm and binding contract – it’s time to start planning your move! In the final installment of my Buyer Preparation Series, we’ll recap the entire process and I’ll fill you in on the final steps before you get possession of your new home.

Next Week: Part 5 – Final Steps

Chris Lambert | 604.340.6457 | chris@chrislambert.ca | www.chrislambert.ca |

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PART 1 – The Importance of Working with a Realtor is available HERE

PART 2 – Financing Your Home is available HERE

PART 3 – Needs Analysis is available HERE