Offer Related Question - Am I being fooled? Or just a newb?

Question

Hello folks of BP,

I'm a newbie trying to get my first investment property here in southern California. I have been working with a realtor and for every property that is somewhat promising the realtor is suggesting to put an offer in close to asking to get it accepted. Her goal is to "lock it up" so that the seller can't accept other offers and we can then view the property inside and negotiate for any changes if needed.  Does this sound appropriate?  I asked if there were any penalties or down payment that would be forfeit if the seller and I were unable to successfully negotiate costs for repairs and whatnot after the offer is accepted. The realtor was pretty firm that I wouldn't have to pay anything unless we opened escrow, and that the initial deposit would be refundable 17 days from the opening of escrow.

It just doesn't seem right because if an offer was made and accepted I feel that both parties are committed or am I just a newbie and these things are normal in which offers which are accepted can be rescinded if needed without issue.

Thanks in advance for the advice!

Jonathan Chai · Answer

Thanks for the advice guys. It is meant to be an investment property and there had been multiple interests/offers on these different properties. I definitely understand and can appreciate the ethical issues some of you have mentioned regarding submitting an offer in bad faith, and would not like to begin an investing career in that manner. I was rather looking for clarity if that type of strategy was even heard of or if I was getting played just so the realtor could tie me up in a deal.

Russell Brazil · Answer

Im not familiar with the California contract, but that is a strategy a number of agents use. If your offer is made in bad faith though, I could see a seller being upset and tying up your EMD.  I however do not think it is a good way to operate in the market place.  I prefer to negotiate openly and honestly on price before getting a property under contract.

Account Closed · Answer

Are you buying for an investment or personal? Is the market very hot right now? How fast are homes selling ? Your realtor is correct you due have a 17 day window to get your money back. Are you actively scanning your market everyday to gauge the flow of sales? In very hot markets this is a good idea plus you can drive by the property see if you can view it with your agent (that day )and shoot an offer right away.

Mike Cumbie · Answer

Hi @Jonathan Chai

Legal disclaimer:I am not a lawyer and do not practice law or contracts in your area, I'm just some dolt on a message board giving his opinion. The opinions expressed may or may not be rooted in truth or just my random thoughts. In no way are they meant to be legal advice and to be honest should most likely just be ignored :)

You most likely could do it that way and could easily be within the contract to do it, but it may cost you some reputation in the future (or your realtors reputation).

Think if you had a house for 100K and got an offer for 98K that day and said "Sure works for me" sign away. Then the buyer came back 2 weeks later after actually taking the time to look at the house and said "Well with my calculations it needs 15K of work and I don't pay over 70% of ARV minus repairs so I want to adjust the offer to 55K. Sign here.

They would most likely get their EMD back, but if that guy is an investor and sells a lot of houses or his realtor sells tons of houses in the area, it could come back to bite him. If an offer came in from the same guy on your next house would you even entertain it? Would you trust an offer from a totally different seller using the same realtor? If you were the selling realtor would you tell your client about a past experience with an offer from that person?

If someone comes back after the inspection and says "Oh there are termites" or "There is a joist that needs repair" that is one thing to revisit. If they come back with "The kitchen needs updating" or "The carpet needs to be replaced in the hallway"... Well yeah you should have seen that with your offer.

Just my thoughts and everyone does it different. Good Luck with your investing!

Jo-Ann Lapin · Answer

Make sure you read thru the contarct thoroughly  for all the clauses. It does sound okay.

Wayne Brooks · Answer

Read the standard purchase agreement you'll be using, and you will understand the clauses.

George P. · Answer

that can be done. a few yrs ago when there were tons of houses i couldn't see at once i was putting bids blind. then i'd go in after they were accepted and tried to adjust the price a bit. sometimes it works, sometimes it doesn't.

make sure you have "inspection pending" in your offer.

Offer Related Question - Am I being fooled? Or just a newb?

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