Now that you've submitted your most recent offer to purchase on your "DREAM HOUSE," what do you think the likely result will be?
By now, you've undoubtedly heard about offers being rejected for no apparent reason. Fortunately, most of the time, the other party (or their representatives) validates rejections.
There are several reasons why your offer to buy a property was rejected!
It's critical to know why your offer was turned down, and knowing why can help you make your next one more appealing!
Chances are, if you've submitted an offer to buy and been turned down before, the answer will be one (or a combination of) of the following:
No. 1. The sellers were given a more lucrative offer than they anticipated.
The thing about home sellers that you should bear in mind while purchasing a house is that:
Most home sellers want to get the most money for their property while avoiding any aggravation.
If you thought this home was your ‘ideal house,' there's a good chance there are other house purchasers who feel the same! This additional interest in the same property might result in a slew of bids.
Aside from the seller's asking price, you may be comparing home purchasers with better terms than yours: lesser mortgage amount required, pre-approved buyer, greater or all cash component, no contingencies, to name a few.
This is the most common reason why purchase orders are rejected, and it's no surprise.
Simply put, if your offer was accepted but the home seller was rejected, it is because theirs was superior in some way. Whether it's due to better terms, more cash, or both, the property owner received a greater bid than yours!
Understand that the seller is not required to provide a reason for the offer to purchase being rejected - most of the time, however, the real estate agent will be able to discover this out and inform you.
In a nutshell, be sure you've completed all of the necessary computations and paperwork ahead of time so that you can put your best offer forward!
No. 2. Your price was lower than the asking amount.
The difference between an offer that is "below-asking price" and one that is "low-ball" is subtle, but important. In the first scenario, you have bids that are just above the asking value, while in the second scenario there are low-ball offers (an offer lower than the property's fair value). So think carefully before doing anything.
Your low-ball offer will be summarily rejected with no mention of a counteroffer, and you run the danger of more defensive behaviour once you do submit a market-related purchase. And how do you think the homeowners who sold their house would feel if they saw your name on that contract? You can't blame the homeowner for being angry and taking.
Low-ball offers are not uncommon, and they're frequently the reason for rejection. Offers that are slightly below the asking price (fortunately!) do happen more often than low-ball offers. Most housebuyers have done their homework (with or without the assistance of a real estate agent) and have a very clear idea of how much your property is worth.
When you start reviewing pricing pages, it's generally hard to figure out which options are better than others. But once you know what they're comparing your choices to, evaluating those offers becomes a lot easier. In fact, a market analysis can go a long way toward preparing you for putting an offer in before negotiations begin.
Obviously, the specific real estate market in which you're looking to invest will determine how much wiggle room there is. In a seller's market, your offer may be swiftly denied; however, in a buyer's market, it has a better chance of being accepted.
No. 3: There were too many conditions in your offer.
The majority of homebuyers are unaware of the fact that the greatest deal does not always win.
Yes, I’m serious!
So, for example, if you're thinking of making an offer that isn't entirely at the asking price but contains multiple contingencies, don't be surprised if the seller rejects your offer since they may choose to accept a lower-priced offer without as many demands.
Source: Toronto Realty Blog
Fair point, no?
What kind of impact would this have on you as a home seller? Take Offer A at 100, but are asked to still fix X, Y, and Z; or take Offer B at 100, in which they've just requested to repair X?
It isn’t uncommon to have multiple offers being presented around the same time (say, over a stretch of a few days heading into the weekend), and then by Monday, the seller will have accepted the offer with the best terms, while rejecting all the other offers flat out.
Are the carpets that bad that you need to refer to them in the offer, on top of some unnecessary repairs to your house or seeking for a tiny chandelier in the guest bathroom, or other unusual requests?
Don't get me wrong: putting a few (reasonable) contingencies in the purchase offer is perfectly acceptable.
As long as you, as the buyer, are aware of any stipulations that you're using, you decrease the possibility that your offer will be accepted.
The local real estate market conditions will determine whether more or fewer concessions are likely to be accepted by the seller once again. In a fast-changing market, more conditions may make your offer to purchase a house less appealing.
No. 4: You haven't figured out how you're going to finance it.
If you're a serious house buyer, you've probably heard about the importance of obtaining preapproval for a mortgage. Don't be fooled into thinking that obtaining pre-qualified is the same as being preapproved!
The latter is significantly more powerful when it's coupled with an offer because the seller can be certain that this buyer has been approved for the required financing to purchase the home. Not only that, but hopefully your real estate agent has highlighted some of the most common mortgage blunders you could make.
Obviously, you as the buyer can submit a pre-qualified letter with your offer, but let's get to the point: it's not certain that the home seller will accept your mortgage.
I like to reverse the scenario: What if you, as a homebuyer, are now the home seller confronted with two excellent bids—the first one being at full asking price but without any approval, and the second one being slightly below asking price but accompanied by a preapproval letter? Which offer would you choose?
Will you take a chance on the first, at the asking price, but who must go through the mortgage application procedure? Will you feel safe as a home seller that this unknown person has the capacity to pay for your property? And let's not forget about the other (preapproved) purchasers whom you'll have to reject; might they be turned off.
No. 5. You haven't figured out how you're going to pay for it yet.
If you're a serious house buyer, you should be aware of the significance of being pre-approved for a mortgage and you can find best brampton realtors here
Don't be fooled into believing that getting pre-qualified is the same as being pre-approved!
The latter is considerably more powerful when paired with an offer, since the seller can be certain that this buyer has been verified by a financial institution for the required funds to purchase the home!
Not only that, but let's hope your real estate agent has informed you of some of the most common mortgage blunders you could make!
Obviously, you as the home buyer have nothing to stop you from putting in a pre-qualified letter alongside your offer to purchase. But, let's get down to business: for the house seller, knowing that your financing is a "done deal" is far from certain!
I like to switch up the scenario: what if, as a buyer, you're faced with two strong offers—one at the asking price without any prior approval and the other slightly below the asking price with a pre-approval letter?
Which offer would you accept?
Will you risk accepting a lower offer, but the buyer still has to go through the mortgage approval process? How secure will you feel as a home seller that this total stranger has the financial resources to purchase your property?
But the biggest disadvantage is that, by slowing down your offer to market, you'll lose out on potential buyers who may have missed it. Plus, you'll need to turn away (pre-approved) purchasers, which might drive them away for good.
Chances are that you'll accept the lesser offer (which you can always counteroffer against), but with the bank's pre-approval letter!
Let's go back to being a home buyer and ask you this: do you think it's essential to have your financing straightened out before looking for houses?
One of the most common reasons purchase offers get rejected is that no pre-approval or pre-qualification letter has been submitted or received. It's understood that obtaining a pre-approval is preferable, yet at the very least a preliminary letter should be enclosed with an offer to buy. Without a mortgage pre-approval or pre-qualification letter, the seller knows nothing about the buyer's ability to obtain a mortgage for their property.
Another benefit of going through the pre-approved process is that you'll know how much you'll be able to borrow beforehand.If you get the feeling that something is wrong with a property, don't be fooled into believing it's still worth buying because you're "overpaying." For example, do not go out and buy some crazy deal on what you think is an incredible house only to find out later that it isn't within your budget.
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