Receiving multiple offers on a home is the standard, not the exception, in Boston, where sellers can sometimes see a half-dozen or more offers at the end of their first open house. But not all offers are created equal.
An all-cash offer might have too many strings attached. A buyer might have a long list of contingencies that could drag things out too long. Someone who looks like the right buyer at first might not actually have all of his or her financials in order. A great offer can easily go bad for any number of reasons.
U.S. News spoke with some of Boston's top real estate agents, as identified by real estate technology company Agent Explore (a U.S. News partner), on how to spot a risky offer and how to bounce back. Here's what they say to watch out for.
No Preapproval Letter
Kerry Dowlin, broker and manager with Gibson Sotheby's International Realty, always asks buyers if they have a current and valid preapproval letter from a reputable local lender.
In addition, Dowlin says, "I usually take the time to reach out to their mortgage broker to confirm that the buyer has been properly vetted and already filled out the application, provided tax returns, bank statements, proof of income and essential documentation."
Any good mortgage broker can provide enough information to give a seller confidence in the buyers, she says. "They can speak to their creditworthiness and give our side peace of mind that they can close this deal seamlessly."
Joseph Pollack, a Redfin real estate agent, agrees that preapproval is key, and serious buyers will make sure they are ready with a strong offer. "I love to see a preapproval," Pollack says. "In the Boston area, we are in a seller's market. Properties move quickly."
Curious Contingencies (or Lack Thereof)
Contingency clauses frequently appear in real estate contracts. The most common one is a mortgage contingency, stating if the buyers can't get a mortgage in a specific time or rate, they can back out of the deal with no penalties.
"In this market, we see a lot of buyers who imply that they are paying cash by waiving a mortgage contingency," Dowlin says. "But once they get a deal accepted, they then pursue a mortgage, so what was presented as cash with no hassles still requires the same process" as someone with a preapproval.
She adds, "Cash is terrific and a lot of buyers get help from family to make those offers, but it can be a bait-and-switch."
Christian Iantosca, broker at Arborview Realty Inc., says to watch for the phrase "subject to appraisal coming in at sale price" in the offer.
"In the current market, with each sale seeming to set a new price record, this contingency is used by buyers' agents to make buyers feel more comfortable stretching beyond their comfort zone," he explains. "If you see this, it may mean the buyer does not think the property is worth what they are paying. This could lead to them backing out prior to a purchase and sale signing."
Pollack says, "Buyers can use contingencies as a way of backing out, so buyers who waive a lot of contingencies can offer the least amount of risk."
Dowlin says, "I try to ensure that the buyers do not have any surprises up their sleeve -- like needing to sell their current place. Sometimes asking a simple question like whether they are currently on a lease can help determine how mobile they are and how easily they can close a deal."
If the potential buyers can't close on a home until they sell their house, a buyer with no strings holding them back might have a better offer.
Another thing to watch out for, especially in a town with so many college students, is who exactly has the final say on the purchase.
"Always make sure all decision-makers have seen the unit before signing," Iantosca says. For example, if out-of-state parents are buying a condo for their college student, it can mean trouble if the parents haven't seen the unit. "If that offer has a contingency for an inspection, the parents may fly in for that occasion and decide they don't like the unit for any reason and tank the sale."
When a buyer is from another country, getting the down payment and closing funds can be complicated. "The United States has new guidelines on bringing cash in, including how much and how frequently, so this can cause delays in closings," Iantosca explains.
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So, keep that in mind if you're evaluating multiple offers, he says. "Ask the buyer to prove the funds are liquid and in the country prior to offering acceptance."
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