What does a Real Estate Agent mean by a “clean” offer? …148

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Deerwood Realty and Friends Podcast

When I work with buyers in the current market, we talk early and often about making offers that are “clean”…but what does that mean? I’ll go over that more in detail below.

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Thoughts:

1. A “clean contract” is simply a contract that doesn’t contain too many contingencies. What are contingencies? Basically anything that says something along the lines of this isn’t a completed deal until x, y, or z are done.

Clean doesn’t have to mean no contingencies. It can also be in the structure of your offer. We’ll go over some examples…

2. Date until closing - A clean sales contract would typically have a small closing window. That is the period of time between when your offer is accepted and when the property transfers ownership. In my market, 30 days is considered a quick closing. However, your offer should be crafted to what your seller is looking for. So if the seller requests a 45 day closing or a 60 day closing…a clean contract would then have those time frames.
3. Whether or not your offer is in all cash. An all cash offer will beat a mortgage for the most part. There are two main reasons for this.

1. An all cash offer does not require an appraisal UNLESS it is specified in the contract.
2. An all cash offer does not have a financing contingency.

If you are a seller, the last thing you want to do is lose a buyer at the last moment because the property doesn’t appraise or the buyer is somehow not able to get financing. An all-cash offer beats both of those scenarios as far as a more clean offer.

The most logical thought after learning that an all cash offer beats a mortgage is that you are doomed in the market. That’s not the case. Every buyer isn’t walking around with a million dollars in cash for a house….so there is a strategy here as well.

A lot of times an all cash buyer ends up getting a mortgage.

4. There’s probably going to be some sort of inspection clause, and the seller is probably going to be selling as-is.

5. There are many contract riders

We talked about the appraisal rider previously.

6. The less personal property written into the offer the better.

This doesn’t mean that down the line you couldn’t ask to purchase furniture or personal property. It just means that for your offer to be clean, you want to avoid as much personal property that you can.

7. Earnest money can make a difference

So now that you have a good idea about what a clean offer is, I wanted to kind of show you different scenarios that actually happen.

Two offers

Offer 1
300,000 sale price
5% down in escrow = $15,000
30 day close
Cash offer with proof of funds included
As-is, inspections for buyer benefit only
No appraisal rider
No personal property included in offer
Buyer Love Letter

Offer 2

305,000 sale price
1,000 down in escrow
45 day close
Mortgage with pre-approval
Finance contingency
Appraisal rider
Buyer wants living room couch and one chair in basement
10 days to get inspections, 10 days to negotiate resolution.

Which offer you taking?

A. The one with 5,000 more sales price? MAYBE NOT. The first offer is clean. The chances of that closing without a snag are great. There’s no concern for financing, there’s no concern about personal property, and there’s no concern about leaving furniture.

When seller takes first offer, buyer 2 is going to be mad. They will say that they had the highest offer and therefore they should get the house.

Seller probably isn’t going to tell the buyer what the house sold for…they will probably find out when the house actually closes. But, it’s important to note that sometimes the highest money isn’t the best offer.

8. Understand that if you are in a multiple offer situation, one little concession here or there is going to be the difference in the seller accepting your offer.

This is why I DESPISE the banning of buyer love letters.

Finally, let’s look at a scenario again, this time, both buyers have a mortgage

Offer 1
310,000 sale price
30 day close
Finance contingency
Appraisal rider
Buyer wants living room couch and one chair in basement
10 days for inspections, 10 days to negotiate resolution

Offer 2
307,000 sale price
30 day close
Finance contingency
Appraisal rider
Inspections for buyer informational purposes only

Who wins?

Offer 2. Even though it’s 3,000 less, seller doesn’t have to deal with buyer inspections or personal property.

Keep this sort of thing in mind. When there are 40 offers on a house, there are going to be probably 20 that are exactly the same, so the more clean you can make your offer, the better chance you have to get the house.

Source: ME

media@deerwoodrealtystl.com

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