Dear Monty: Should I put a time limit on my offer as a buyer?
Monty’s Answer: A time limit is required for a legal purchase agreement. An offer to purchase calls for a time limit to act on the proposal for acceptance. Most other real estate forms contain a time limit to perform. If the receiving party does not act by the time the document expires, then it is no longer in effect.
To answer your question, consider your circumstances and needs to determine your negotiating stance. When you have the information you need, you can answer the question on your own. You may come up with more options or combinations of the information on your own. Here is a list:
No. 1: The low offer. There are many theories on why people make low offers. Some are uninformed. Some buyers and sellers research the market for themselves instead of trusting a relative, friend or real estate agent. The informed buyer, or seller, does not pull a price out of thin air. When evidence suggests a party is unrealistic, deliver your comparable sales with your offer. Providing comparable sales may also help with a reasonable offer.
No. 2: The reasonable offer. Every home has a range of values. What is the highest price I can expect or pay? What is the lowest price I should accept or pay? Comparable sales that contain the same features and are in the same or similar neighborhoods suggest the highest priced and lowest price comparables.
No. 3: The over-asking-price offer. This tactic has been widespread recently. It boils down to motivation and the ability to pay or sell. The over-asking price has been around for decades to eliminate competition or demonstrate your desire for the home.
No. 4: The full-price offer. The buyer submitting a full-price bid has a reason. They don’t like negotiating and don’t want price to be an issue. They don’t want to offend the seller. They may feel a full-price offer will give them an edge. There may be other reasons for their circumstances.
No. 5: The conditional offer. The vast majority of proposals have one or more contingencies.
Contingencies also have an expiration date. The offer is void if the buyer or seller cannot remove a contingency. There are many different contingencies, and the buyer decides which ones to include. In most instances, they are satisfied before a need to extend or allow to expire and void the contract.
No. 6: The final offer. A take-it-or-leave-it offer. The last offer often comes from exasperation when the other party rejects earlier proposals. Sometimes this offer works, sometimes the final bid fails, and sometimes either party will come back after it fails.
No. 7: The cash offer. Cash is king. Many buyers are not able to make a cash offer. Cash offers often still have contingencies that must be satisfied. Sellers typically view a cash offer as a strong buyer.
You can put a time limit on any of these options. The more you know about the seller’s circumstances and home values, the better you can judge the type of offer and what time limit makes the most sense. Motivation to sell or buy will influence both parties.
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