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That's the way it's kind of way its been seeming right. I'm here to tell you there is no secret, but today we are going to talk about the eight steps to a winning offer.
Hey Everybody its Tristan Emond with mindful living realty, a realtor right here in rapid city, South Dakota, Welcome back to my our YouTube channel where I talk everything about moving to rapid city. And the wonderful things, rapid city and the black Hills. So I'm sure you've seen many of the national articles, real estate bubble is going to collapse.
That's going to have another real estate market collapse, like 2008 and maybe that's true. And in my last real estate market video, I talked about things slowing down a little bit here locally, but I also said, I wonder if it's going to pick back up and guess what? In the past few months I put together a number of offers where all of a sudden.
People were out buying again and quickly. I lost one offer to a cash buyer for $25,000 over asking price. Multiple offers my buyers one, one last week for $15,000 over asking price with six offers on the table. I went to show a property on the Southwest side of town around $458,000. And there was showing after showing, after showing, after showing scheduled,that evening for that property.
So all things might not be selling as quickly as they were earlier in 2021. There's still a lot of buyers out there. Inventory is getting a little bit better, but it's still. And buyers are out there purchasing property. So you gotta be prepared for that multiple offer situation and what you need to know about getting ready for that, doing your homework, and then making that, the offer that best suits your needs, the needs of the seller, and hopefully gets you accepted.
All right. So here we go. Step one is of course the homework phase. Doesn't do any good to go out. Look at properties. If you don't have your approval in place or a bank letter from. Financial institution, Saying Yes. I got cash. We need to have something ready to go. When you're ready to make that offer so that you can just present it and say, Hey, here we are.
We don't need to be waiting a day or two for a preapproval. That's just going to ruin the whole thing. Make sure you got your homework in place. That preapproval needs to be in place. The cashflow needs to be in place. We need to have proof that you can buy the property, however you plan on buying said property.
So here's what I can talk about. Local lending. So rapid city, we're not big, we're small, we're local we're person to person. So your offer is going to be stronger with a local lender attached to it than a national rocket mortgage or lending tree, et cetera, et cetera, et cetera. Now I've worked with some companies that have worked out okay.
But when I have a local lender involved, I know as a listing agent. I know where I can go find this person. Right. We know what we can get ahold of these people. If the national lending company decides to not do their job, we don't have phone calls and emails and they don't respond to them. We're we're just, we're stuck.
We can't do anything about that, but a local person because of our small local community also wants to do good by us because we send them referrals back and forth. The national company. We're probably a dime a dozen. I strongly encourage you to consider using a local lender for your approval for your mortgage, because when it comes to six offers on the table, although your mind's yours might be the highest offer.
If it's a rocket mortgage type corporation. That might sink a few places down. If this offer over here is just, just a few thousand less, but we know it's going to get done because there's a local lender. So in this first homework step, not only do you have your pre-approval, you also have know what you want and know what you don't want at a property that we're not wasting time and things you don't want to look at, but in some cases that know what you want to don't want, might just simply be a house in my price point, right.
That might simply be the criteria. Enough just to get into something that you can live in and make your own. From that point thereafter, the third part of this is having realistic expectations. Consider the fact that prices had gone up considerably in the past year, even in the past six months, I'm seeing properties where I'm like, that's that much really?
So make sure that you understand that, that great kitchen that you think you're going to buy for $300,000 might not be reality in this market. So check those real expectations at the door. So when you move forward with that price point, watever price point. You can say, okay, I understand not going to quite get what I want, but at least wise I'm getting into something I'm getting to that property in the rapid city area in a tight market.
You have to make fast decisions. You have to move forward quickly. And I know it's tough when I'm saying, okay, wait, when do you go to find out right now? What do you want to do? You're doing right now. So here's where you need to trust your gut. This is where you need to make a decision based less upon what's up here and more upon what's down here.
Ask yourself the question. Well, how does this property make me feel when I'm walking in the door and my smiling, am I? Yep. I can make this work or at least wise have the potentiality of saying, yep. This is, this is property. I think we could make this happen. I'm happy with this. And we're making an offer on this property.
Ask yourself this question. If you were to sell for $5,000 more, would you have. Yeah, I had paid $5,000 more. Or would you have said no five? That was it. $5,000. That's it? That is the question to ask yourself before making that offer, if the extra $5,000 it was worth it or not, what does it feel like? How would it feel when I come back to you and say, Hey, sorry, you lost by five grand.
What's that going to be? What are you going to think? What do you think about that? So when we're looking at properties, not only do we need to make sure that the boxes are checked, square footage needed, bedrooms, bathrooms, price, point, all those kinds of things. We also make sure we trust the gut and say, Hey, how does this make me feel?
How do I feel about buying this property? How I feel if I lost this property, or those are good questions to ask yourself, to find out. Yes or no, I'm moving forward on the property that we're looking at and we're in front of us. All right. We've got a pre-approval in place. We've trusted our gut. And we're going to say, yep, this is the property we want.
Now let's tend to write the offer here in South Dakota. That's a three page form that we filled out. We talk about earnest funding. You talked about purchase price. You talk about home inspections, all of these different things that we want to put together. And obviously we're going to try and make this.
As clean as possible. Now, obviously the most important thing here is to put your money where your mouth is in this environment, asking price is basically a low ball offer. So we've got to present your offer in such a way that'll be stronger than the others without being crazy, stupid in the process as well.
For instance Earnest Money, A couple years ago on a $300,000 property, I may have considered $500 being okay for earnest money. Now, maybe you should make that a thousand, $2,000. Give it a little more umph to make sure that your offer stands out a little more. Now, what about home inspection contingency personally, I haven't done a lot of offers without that home inspection contingency.
I know what other places have talked about, just getting rid of that and moving forward, buying the property. Of course, that's a conversation we can have, but generally. The home inspections are pretty, still normal around here and are included in the said offers. Now sometimes timeframes are a little shorter or whatever, and maybe the seller like, well, it's a seller's market and I'm not going to do a whole lot, but you can have your contingency, that kind of thing.
Now, if you have a home to sell, obviously that creates a challenge on multiple offers scenarios, but sometimes you just got to put it in. Submit it and see what happens. It's really important that your home is already under contract. Before we start putting offers in for properties, because least wise, then we know it.
Hopefully it will close versus maybe it will close someday. So having the home sale contingency in place is better. If your home is under contract where you're at in whatever state you're in. So reallym there's no secret here on the general offer itself. Keep it. Don't add any stupid, goofy stuff in there.
If a few of his contingencies as possible and put your money out there, you would have to pay the piper for what you want. All right. Now I wanna talk about the escalation clause, which is a piece of the offer, which I usually like to include when there's a potentiality of multiple offers or when there definitely is multiple offers.
So most of the time, right with this escalation clause is, is it says that you're willing to pay an X amount of money above the highest net offer that the seller has received not to exceed whatever that number is. So if the vs price is $400,000 and you want to offer $400,000 as asking price plus $500 more than the highest net offer not to exceed $425,000.
So if an offer comes in at 410, you're paying for ten five hundred. If we're offering comes in at 420, you're paying for 420,500. So now if it comes in at 425 your done. And as we've mentioned before, if that becomes in at 425, you're like, yep. That's okay. It's as much, I'm going to feel like paying. I'm okay with that.
Then that's good. If it comes in at 430 and you said gah maybe we shoulda offered the 430 is your max right? Now. Not everybody loves these. Sometimes it causes confusion back and forth, but it's a great way though, of being able to find out the spot between the asking price and your top dollar without actually just throwing money at it.
You know, if you just throw an offer, went home was at 400 and you just throw a 425 at it. Well, what if you could have got it for 410 as the highest offer? 405. Right? And of course we can tweak this escalation clause to, to give it more power where we can say, you know, Hey, we'll pay $5,000 a above.
The highest offer up to X or $1,000 above this up to X, all those kinds of things. We can work that based upon your comfort level and how we can make, make it best work for everybody involved. But I always recommend an escalation clause, even if we had the chance of having a multiple offer, just to make sure that.
You could protect it in this whole, present an offer scenario. Now of course, consider the fact that in most mulitple offer situation, the seller pretty much can do whatever they want. So they might just completely ignore that escalation clause and say, Hey, I'll give you a counter and here's your counter for 423.
And it's up to you to say yes or no, or where do we want to do? All right. So that's what I'm talking about. When I'm talking about an escalation clause, it helps you to get a property for the highest amount that you're willing to spend without just throwing it out there and leaving money on the table. All right.
Another addition to writing the offer is the appraisal gap. The appraisal gap is the difference between the actual. And because we're paying over listing price, usually the actual purchase price. So a lot of times there's a 10, 15, 20, whatever that gap is that we're not going to know until the appraiser gets out there and takes a look at the property.
So we want to make sure that we let the seller know, Hey, we understand that we're offering more than appraisal value. And if that appraisal comes in lower, we're willing to pay cash. Between the difference here and here that gives us a clear indication that yes, you understand that if the, if the home does not appraise for the total purchase price, the whole thing is over with.
So if you got five, six offers in a row, the one that does not mention any kind of appraisal gap coverage, maybe the one that one is set aside, because if the appraisal doesn't come in to that full purchase price, you guys might be having an argument about purchase price. And that's not something you want to do at the end of the transaction.
Let's say we're working on buying a property at $400,000. We've escalated that up to 420 and we get accepted at 420. The appraisal comes in at 400. No problem. We'll pay cash above. Everything's fine. But what happens if that appraisal comes in at 350, suddenly the 20,000. Appraisal gap is now 70,000.
Well, that's a bit different than just 20. So we like to define that bottom end, even if it's a little bit lower than asking price to give the Sellers a little breathing room, least wise, we say, Hey, that appraisal contingency is it effect here's the bottom end, but we understand that we're paying from appraisal value to purchase price.
That then gives the seller clear indication about what they can expect. And there's no arguments later on and they understand, okay, these guys got a feel for how things are going. They got cash support. If we need to, this is a clear and concise. We understand this. So that is appraisal gap. Making sure that you're protected on the bottom end as well.
And making sure that you guys aren't paying too much on that appraisal gap, if that appraisal should settle to come in way lower than expected and suddenly everybody's in a tizzy. All right. I think we're on point number six of our eight tips to winning your offer. And that's suppose the question is cash still king.
Does this still roll sometimes? But sometimes it doesn't don't expect that because your offer is all cash, no contingencies, blah, blah, blah. Then it's going to rule the day in every situation, sellers? They like money too. I've seen situations where I said, we'll take another offer. That's higher than a cash offer to get that extra money.
Even as low as $5,000, even though there are other offers, a quick close, no home inspections, et cetera, et cetera. So if you have. And you want to buy the property with cash. You still have to play the game. So you have to play the market. You wasted. So consider an escalation clause, understand you probably won't have the appraisal part of it, but you might want to consider adding that escalation clause maybe to get above that other cash offer or to make sure that your offer is the highest up to a certain point, whatever you're willing to spend, but don't automatically assume because you have cash.
You're the one that's going to get that offer. All right. So let's talk a little bit about buyer love letters. I know you've heard this about the practice of sending a letter with the offer, talking about how you love the property, make it all emotional and everything. And that's how I would tell you to do it, to make it real, make it about how you feel about the property, et cetera.
Tell people, tell the seller how much you love their property. Some people have done videos. They've done music videos it's gone. It's just gone crazy in the country lately. Now they're having some arguments about whether or not that is legal and ethical, etc. On the realtor side of things as realtors, we, of course can't discriminate because of sex nationality, et cetera, et cetera.
But as realtors, we have a code of ethics, which also has rules about discrimination. Gender familial status and marital status amongst some others. So if I'm looking at five offers on the table and one's a single guy, and one is a family, uh, with a, with 10 kids and one is a single mother. Now I really can't discriminate against any one of these and maybe you as a family person, like the big family.
So you want to give it to the family person. And maybe we've got buyer letters from all three of these people talking about who they are and how they want to buy your property. Now, if the seller decides to choose one offer over the other in this scenario, and the single guy decides that he feels discriminated against because they, well, he's a single guy.
And you are discriminated against him. All of a sudden we've got a little lawsuit kind of thing going on. Hence the question continues. Should you, or should you not present a buyer's letter? There are some states that have made it illegal and ban 'em. Buyer letters. So should you present a buyer letter? I'm not going to say no that you shouldn't, because sometimes it may be the thing that takes you over the edge.
I did have one buyer where the seller specifically, he was selling his family home, that he raised his kids and who he was selling it to. And so I had my buyer write them a letter to talk about. They had some kids and they were going to have more kids and how it was going to be a family home moving forward.
And I do think that that helped buy that property. I truly believe that your offer is just down in the black and white or the paper that we present. And a lot of times, as a listing agent, I'm going to say, Hey, look, here's your buyers. Here's your buyer. Let us not cool. Comp it up and throw, okay, here's our offers, right?
That's what I would do as the listing agent. But it was a buyer's agent. I've done it before. It'll probably be done again. And it's probably something I may recommend. If it warrents it based upon the situation, what's it going to take to make your offer more appealing to the seller in every phase of the transaction?
Number eight does simple. One more money still wins nine out of 10 times. That's just the way it is. All right, everybody, the secrets out without paying $184.108.40.206, Is that what I said whatever. Thanks for watching these eight steps to winning offer here in rapid city, South Dakota. If you like what you've been seeing, please don't hesitate.
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