Course Process
Part 1Introduction
Part 2Listings
Part 3Marketing
Part 4Acquisitions
Lecture 27Find Investments
Lecture 28Analyze
Lecture 29Investment Financing
Lecture 30Purchase Offer
Part 5Escrow Process
Part 6Close

The Purchase Offer

Preparing and Submitting a Purchase Offer for Residential Income Properties

Introduction
Preparing and submitting a compelling purchase offer is a critical step in securing a residential income property for your client. A well-structured offer not only meets the client’s needs but also positions them as serious and reliable buyers. This lesson will walk you through the process of creating and submitting a purchase offer using the WE ARE REALTY system, along with key considerations like price, contingencies, escrow terms, and earnest deposits.

Step 1: Using the WE ARE REALTY System to Create an Offer

The WE ARE REALTY platform simplifies the process of preparing a purchase offer. Start by adding the details of the offer in the system, which will guide you step-by-step and ensure all critical information is included.

Video Tutorial: Watch the included tutorial for a full walkthrough of how to:

  1. Create a new offer in the system.
  2. Input property details, buyer information, and offer terms.
  3. Generate an official purchase agreement document.

Key Features of the System:

  • Customizable Fields: Tailor terms such as price, contingencies, and closing dates.
  • Automatic Calculations: Ensure accuracy for items like prorated rents or financing terms.
  • Approval Workflow: Send the draft offer to your client for review and approval directly through the platform.

Step 2: Key Considerations When Preparing an Offer

1. Price

  • Market Analysis: Base the offer price on comparable sales, market conditions, and the property’s investment potential (e.g., cap rate, ROI).
  • Competitive Offers: In a hot market, consider offering closer to or above the asking price to increase chances of acceptance.
  • Negotiation Room: Leave room to negotiate, if appropriate, while remaining attractive to the seller.

2. Earnest Money Deposit (EMD)

  • Purpose: The EMD shows the buyer’s commitment to the transaction.
  • Standard Amount: Typically 1-3% of the purchase price, but this may vary by market.
  • Refundability: Ensure the EMD is refundable if contingencies are not met (e.g., inspection or financing issues).

3. Escrow Length

  • Typical Timeframes:
    • 30 days for financed purchases.
    • 15-21 days for cash transactions.
  • Considerations: Shorter escrow periods can be appealing to sellers but require assurance that financing or inspections can be completed within the timeframe.

4. Contingencies

Contingencies protect your client’s interests and provide an exit if certain conditions are not met.

  • Inspection Contingency: Allows the buyer to withdraw or renegotiate if significant issues are found during property inspections.
    • Typical Period: 7-14 days.
  • Financing Contingency: Makes the offer conditional on the buyer securing a loan.
    • Typical Period: 14-21 days.
  • Appraisal Contingency: Ensures the property appraises for the purchase price, protecting the buyer from overpaying.
  • Additional Considerations:
    • Review leases and tenant history.
    • Ensure income and expenses align with stated financials.

5. Closing Costs

  • Negotiate whether the buyer or seller will cover specific costs, such as title insurance or transfer taxes.
  • Use the WE ARE REALTY system to calculate estimated costs and include this in your offer summary for the client.

Step 3: Finalizing the Purchase Agreement

Once you’ve entered all offer details in the WE ARE REALTY system:

  1. Generate the Purchase Agreement:

    • The system will create an official purchase agreement that includes all property details, terms, and contingencies.

  2. Review with Client:

    • Send the document to the client via the system for review and approval.
    • Highlight critical terms like price, deposit, and contingencies to ensure they understand the offer.

  3. Ensure Accuracy:

    • Double-check all legal names, property descriptions, and financial terms.
    • Confirm that deadlines for contingencies and escrow are clearly stated.

Step 4: Submitting the Offer

Once the client approves the offer, use the WE ARE REALTY system to send it directly to the listing agent.

Steps to Submit:

  1. Attach all required documents:
    • Purchase agreement.
    • Proof of funds and/or pre-approval letter.
    • Additional supporting documents (e.g., financial analysis or 1031 Exchange documentation).
  2. Add a personalized email message highlighting the buyer’s qualifications and flexibility.
  3. Track email delivery and confirm receipt with the listing agent.

Best Practices for Submitting Offers

  1. Present a Strong Offer:

    • Include proof of funds and pre-approval letters to demonstrate the buyer’s financial readiness.
    • Consider adding a cover letter explaining why the property is a great fit for the buyer.

  2. Be Responsive:

    • Maintain open communication with the listing agent to answer any questions about the offer.

  3. Follow Up:

    • Use the WE ARE REALTY system to track the offer’s status and send follow-up emails if necessary.

Case Study: A Competitive Offer Wins the Deal

Scenario: A client is competing for a fully-occupied 8-unit property in a high-demand market.

Approach:

  1. Prepared a competitive offer at the asking price with a 5% EMD and a 21-day escrow period.
  2. Included a pre-approval letter and proof of funds to reassure the seller of financial readiness.
  3. Used the WE ARE REALTY system to ensure the offer was error-free and delivered promptly.
  4. Followed up with the listing agent to confirm receipt and address any concerns.

Result: The seller accepted the client’s offer, citing the thoroughness and professionalism of the submission as key factors.

Conclusion

Preparing and submitting a purchase offer is a critical step in helping your clients secure residential income properties. By leveraging the WE ARE REALTY system, you can simplify the process, ensure accuracy, and present a professional offer that stands out to sellers. With careful attention to price, contingencies, and financial preparation, you position your clients for success in competitive markets.

Next Steps:

  1. Watch the tutorial video to familiarize yourself with creating offers in the WE ARE REALTY system.
  2. Practice preparing an offer using a hypothetical property.
  3. Review a recent client transaction to identify areas where the offer process can be streamlined or improved.

In the next lesson, we’ll explore how to negotiate terms and address counteroffers to close deals successfully.

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