One of the most difficult things for a duplex buyer to understand in how, when in multiple offers, the winning buyer may have offered less for the property than they did.
What’s important to remember is there are two components to any purchase agreement: price and terms.
Sometimes, the terms of an offer are more important to a seller than a few thousand dollars in price. Those might include one or more of the following:
Cash – Most sellers, including banks, would rather get their money sooner, rather than later. Financed offers usually take around 30 days to close. Cash offers, on the other hand, can close as soon as the title work is finished. More importantly in today’s market however, is the sale is not contingent on an appraiser determining the property’s value and therefore, the amount a bank will lend on it.
No Inspection – Inspections are a great idea for a buyer. After all, major health and safety defects can cost a duplex owner thousands of dollars. That’s the problem, however. Sellers often recognize the results might also cost them thousands of dollars in either the sales price or repairs.
Conventional Loan – FHA insured loans are approved only if a property meets a certain set of minimum criteria when it comes to condition. Sellers can either make these repairs, or risk losing the sale. Many duplex owners aren’t willing to take that risk.
Quick Closing – Most sellers, including banks, prefer to get their money as quickly as possible. Financed offers usually take at least 30 days to fund, while a cash offer can close as soon as the required title work is done.
Non-Refundable Earnest Money – To demonstrate their commitment to buy a property, a buyer’s Realtor may write an offer in which, in the event the buyer doesn’t move forward with the offer, the seller may keep their earnest money.
More Earnest Money – A buyer may not only make their earnest money non-refundable, but may also make that amount so substantial that all other offers pale in comparison. A seller may be enticed to accept an offer, for example, because if the buyer doesn’t move forward with the purchase, the seller gets to keep $10,000.
Today’s Minneapolis duplex investors market is extremely competitive, and buyers are doing everything they can to make the winning offer on hot properties. If you find you’re losing more often than winning, you might want to change your terms!