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8 ways home buyers can make their offer stand out - San Francisco Chronicle 3/16/16, 10:43 PM Biz & Tech 8 ways home buyers can make their offer stand out By Kathleen Pender | May 29, 2015 | Updated: June 16, 2015 12:25pm 2 Photo: Liz Hafalia, The Chronicle IMAGE 1 OF 5 Home buyer Susan Giddens (right) views a home with her agent Linnette Edwards (left) which she recently bought in http://www.sfchronicle.com/business/networth/article/8-ways-home-buyers-can-make-their-offer-stand-out-6295524.php#photo-8059598 Page 1 of 8 8 ways home buyers can make their offer stand out - San Francisco Chronicle 3/16/16, 10:43 PM Oakland, California, on Wednesday, May 27, 2015. Giddens toured the property two weeks ago for ... more Gone are the days when offering top dollar was enough to buy a house. In today’s hypercompetitive market, buyers are going to great lengths to make their offers stand out. They are making an impression at open houses, paying for inspections before they make an offer, submitting offers without loan or appraisal contingencies even if they need a mortgage, and romancing sellers with letters, photos and even videos of themselves, kids and pets. “If you really want the property and aren’t walking up with a briefcase full of cash, you need to find little ways to make a big impact,” said Zephyr Realtor Joel Schilperoort. When a house gets 10 or 15 offers, Pacific Union agent Radhi Ahern encourages the seller to choose one that offers the most money with the least risk. “Sometimes we go to the highest offer and ask if they can tighten up their terms,” she said. “Sometimes we take a lower offer because there is no risk — no financing, no inspection, no appraisal contingency.” Here’s a look at tactics buyers are using, MORE BY KATHLEEN PENDER and some of the risks involved. Make a good impression at open houses. “Be sure to introduce yourself to the agent, California’s paid sickleave law: what you should know make yourself known. Don’t assume you can bring your dog or double stroller into the house without asking. Don’t sit on the http://www.sfchronicle.com/business/networth/article/8-ways-home-buyers-can-make-their-offer-stand-out-6295524.php#photo-8059598 Page 2 of 8 8 ways home buyers can make their offer stand out - San Francisco Chronicle furniture,” said Zephyr Realtor Diane Hourany. If there’s more than one open house, go back. “If they show their face every time the place is open, and the seller gets an offer from them, they know they are committed.” Get a pre-offer inspection. Linnette Edwards, an associate broker with Better Homes and Gardens in the East Bay, encourages buyers to get a verbal 3/16/16, 10:43 PM IRS announces new measures to fight fraud Ignoring rising interest rates, investors still buying bond funds Answers to questions on title insurance One risk when transferring a home to a trust Where to find high-yielding bank account s in S.F. and elsewhere inspection before making an offer. Because it’s not in writing, it does not go into the disclosures sellers must provide potential buyers, Edwards said. It’s also cheaper than a written inspection. If the offer is accepted, the buyer can follow up with a written inspection. Getting an early inspection lets buyers present an offer without an inspection contingency. Susan Giddens, a client of Edwards’, paid for verbal appraisals on about 10 places. She ended up making three offers. The first two were rejected but the third was accepted and she will close on a condo in Oakland’s Temescal neighborhood this week. On that home, she didn’t have an inspection done because the seller had provided one from an inspector that Edwards knew well and respected. Giddens made the offer without an inspection contingency. In some parts of the Bay Area, many sellers are paying for home, sewer line and pest inspections and disclosing them up front, “so buyers can make an informed decision in this chaotic market,” Ahern said. Remove or pad the appraisal contingency. Removing an appraisal contingency might be necessary, but it’s dangerous. If the home appraises for less than the purchase price, the buyer might have to make a bigger down payment, switch to another (probably higher-cost) loan or cancel the contract and forfeit a deposit. http://www.sfchronicle.com/business/networth/article/8-ways-home-buyers-can-make-their-offer-stand-out-6295524.php#photo-8059598 Page 3 of 8 8 ways home buyers can make their offer stand out - San Francisco Chronicle 3/16/16, 10:43 PM Some buyers are doing a “soft appraisal” that says, if the house appraises for a certain amount below the purchase price, they can back out of the deal and keep their deposit, Edwards said. Giddens originally offered $714,000 with a $20,000 appraisal contingency on her condo, which was listed at $535,000. But there were multiple offers and she raised hers to $751,000 with a $30,000 appraisal contingency. That was the most she could risk. If she removed the contingency and it appraised for less than $751,000, she could not get her loan and would lose her deposit. The seller said he would take someone else’s offer unless she dropped the contingency. After talking with her lender and agent, she felt confident enough in the home’s value to drop the appraisal contingency and her offer was accepted. (It appraised Thursday at $755,000.) If you need a loan, get a letter. The first step in getting a loan is getting prequalified, which means telling a loan agent how much you make and getting a general idea how much you can borrow. You can get a prequalification letter that shows this amount, but it won’t get you very far with sellers. The next step is getting a preapproval letter, which can mean very different things depending on the lender. At a minimum, the loan agent pulls the customer’s credit report and puts information supplied by the customer about income and assets into an automated underwriting system. The customer gets a letter saying he or she is preapproved for a certain amount, subject to certain conditions. The conditions vary depending on what went into the approval process. Bank of America requires customers to fully document their income and assets before they can get a preapproval letter. “We do full-on underwriting,” said senior vice president Scott Lorkis. It does not issue the letter until the loan has been approved by an underwriter. The only conditions in its preapproval letters have to do with the property, not the borrower. http://www.sfchronicle.com/business/networth/article/8-ways-home-buyers-can-make-their-offer-stand-out-6295524.php#photo-8059598 Page 4 of 8 8 ways home buyers can make their offer stand out - San Francisco Chronicle 3/16/16, 10:43 PM Wells Fargo, on the other hand, does not require customers to provide any documentation before getting what it calls a Priority Buyer preapproval letter. Its preapproval is still subject to verification of all information provided by the buyer, as well as property-related conditions and approval by an underwriter. Wells has created a step that requires customers to submit a full application and all the documentation necessary to get a loan except a property address. Then it goes to an underwriter who signs off on it. “We call that a mortgage credit approval letter” and it means the borrower “is fully vetted,” said Brad Blackwell, an executive vice president with Wells Fargo Home Lending. But it is still subject to property conditions, such as a title report, appraisal and, for condos, review of the homeowners association documents. To find out how solid a preapproval letter is, ask if it has been approved by an underwriter, not just a loan agent or automated system. Once it has, there shouldn’t be any borrower-related issues and buyers can usually close quickly, sometime in just 15 days if appraisers are available. Banks have developed this process so those who need loans can compete better with all-cash buyers. Show proof of funds. Even when listing agents do not ask buyers to show proof of funds, “I find it to be a hugely beneficial way to strengthen your offer,” Schilperoort said. It shows the seller “that you have the liquid assets readily available for the down payment.” Write a clean offer. Neatness counts. “It should be legible with all the right boxes filled in so the agent on the other side doesn’t have to come back to me and say, ‘Did you really mean this?’ or ‘You forgot to initial that,’” Hourany said. Sign off on disclosures. Read and sign all disclosures provided by the seller and submit them with your offer, rather than waiting until your offer is accepted. Write (or film) a love letter. Although they are not new, writing a letter has become almost de riguer. Letters tell about the buyers, why they love the property and how they will care for it. http://www.sfchronicle.com/business/networth/article/8-ways-home-buyers-can-make-their-offer-stand-out-6295524.php#photo-8059598 Page 5 of 8 8 ways home buyers can make their offer stand out - San Francisco Chronicle 3/16/16, 10:43 PM Flattery often helps. “We’ve been patiently looking for a home with the old world charm and character that your home embodies,” Linda and Emil Lovely wrote to the owner or a condo in Lower Pacific Heights, which they purchased last year. Zephyr agent Laura Kaufman said she represented a seller who accepted $40,000 less than the highest offer because she was so moved by a letter from a buyer who had lost his wife and was raising two daughters. Jessica Branson, an agent with Alain Pinel in San Francisco, said sellers rarely accept less money because of a letter alone, but if it strikes a chord, they might work with that buyer to come up with a winning bid. Letters can sometimes backfire, she added, if they read like resumes or come off as pompous. “They have made and broken a lot of offers.” Branson said she recently got a video from potential buyers. “They went to locals in the neighborhood and got them to sing a song about what a great addition they’d be to the neighborhood.” They lost out to a higher bid. Although buyers often include a photo, it could pose a problem for sellers. In California, it is illegal to refuse to rent or sell a home to someone based on race, color, religion, sex, sexual preference, age, marital status, national origin, ancestry, disability and family status. Although it would be hard to prove, a potential buyer could claim he was discriminated against because of a protected status disclosed in a letter or photo. “I think it’s asking for trouble, potentially,” said Caroline Peattie, executive director of Fair Housing of Marin. “It’s more problematic if you submit pictures. It’s not a dating game.” Lotus Lou, a spokeswoman for the California Association of Realtors, said her group “has not addressed this specifically, but we would discourage the practice.” Kathleen Pender is a San Francisco Chronicle columnist. E-mail: [email protected] http://www.sfchronicle.com/business/networth/article/8-ways-home-buyers-can-make-their-offer-stand-out-6295524.php#photo-8059598 Page 6 of 8 8 ways home buyers can make their offer stand out - San Francisco Chronicle 3/16/16, 10:43 PM Blog: http://blog.sfgate.com/pender Twitter: @kathpender Why I love your house Like many buyers, Susan Giddens submitted a letter with her offer. Knowing that the owner had also developed the condo complex, she emphasized “his design aesthetic and the layout,” she said. Here is her letter: Dear Home Owners, Hi! My name is Susan Giddens and I just wanted to write you a quick note, introduce myself and tell you how much I love your home. I am literally doing a dance inside with the hopes that it becomes my home. I’ve seen many, many places across Oakland, Emeryville, Berkeley, and San Francisco and there are a ton of great places on the market. However, when I walked into your home, it took me all of 3 seconds upon entering to know “This is the one!” I would be so happy here for many years to come. I love the design and layout of the entire space. I feel like the builder was really thoughtful about how the space would be used. I love that the space has the open concept yet at the same time the kitchen is a little closed from the living space. I love that the deck is an open space that is an extension of the closed space. It reminds me of how homes are built in tropical areas. The size of the bedrooms with the high ceilings is fantastic. Just a little about me, in case you’re curious about who is requesting to take over the love and care of this amazing place. I’m a first time homebuyer (very exciting). I work at, what I think, is an amazing company, a Bay Area biotech firm. I love what we do for patients across the world. I feel like I get to contribute to the world in a way that really matters. I’ve lived in the same place for 19 years in Noe Valley area of San Francisco but recently started thinking its time to put down roots and purchase my first home. When making the decision to purchase a home, I really wanted to find something that gives me the same feeling as my current rental home. That is, a home that brings me comfort and peace; a home where I can invite friends and family over for wine and cheese on a warm Sunday afternoon; a home that will keep me http://www.sfchronicle.com/business/networth/article/8-ways-home-buyers-can-make-their-offer-stand-out-6295524.php#photo-8059598 Page 7 of 8 8 ways home buyers can make their offer stand out - San Francisco Chronicle 3/16/16, 10:43 PM in the “cool aunt” category for many years to come. The environment, space, design and layout of your home definitely meets and exceeds all my desires. I also make for a really great neighbor. Over the 19 years in my current location, many of the people that moved into the building have become good friends of mine. In my spare time, when I’m not with family and friends (and sometimes with family and friends), I love to travel! I’ve been to over 15 countries, which doesn’t even make a dent in all that there is see and explore. I dabble in photography and hula hooping (I know, crazy!). I also run half-marathons and crazy races (such as ROC Challenge - similar to WipeOut). I appreciate you giving me a few minutes of your time to read my letter. I really do love your home and if I am the new owner, I want you to know that I will love it and care for it. Its really special to be buying my first home and it means a lot to have a place that isn’t just a place to lay my head every night, but a place that has my heart. Warm regards, Susan Kathleen Pender Business Columnist © 2016 Hearst Corporation http://www.sfchronicle.com/business/networth/article/8-ways-home-buyers-can-make-their-offer-stand-out-6295524.php#photo-8059598 Page 8 of 8