Placing Back-Up Offers on Properties In Escrow
In normal real estate markets, about 10% of escrows fall through. So, when a prospective home buyer places a back up offer, it generally has less than a 10% chance of success. During a financial panic and pandemic, the chances of back-up offer acceptance goes much higher because more than 30% of escrows fall out during a time of economic crisis like today. This makes back-up offers much more significant for sellers, as back-ups grow more feasible for buyers.
Most home buyers must have stable employment or other steady income in order to purchase a property. With recent massive layoffs, and as April is expected to bring the highest unemployment rate on record, home buyers are facing instant loss of income, with sudden disqualifications from home purchase. This causes buyers to cancel and leads lenders to re-check employment, and to cancel loans during escrow. As lenders also run low on money to lend, they won’t admit that the money is scarce; they instead merely increase or change their standards, rejecting more buyers and rejecting more properties as unqualified. Cash buyers always have an edge, especially now.
Top 5 Corona-Panic Negotiating Tactics
Like short sale offers, back-up offers should be taken advantage of by promptly placing an offer that makes financial sense for the buyer. The most sophisticated investors are aware of the strategies and tactics to employ to take advantage of today’s hysteria and high failure rate for Los Angeles real estate transactions. These tactics include:
Placing offers on active listings, pending listings, homes under contract, vacant and distressed properties.
Placing offers for lower dollar amounts — Generally 4% to 9% less than last year’s sold prices.
Negotiating for seller to pay more of buyer’s closing costs.
Negotiating for seller to pay more toward repairs based on general home inspection.
Negotiating for a reduced price at any time during the escrow, based on Coronavirus Force Majeure.
Buyer Questions:
Q: What is a Coronavirus Property Entry Advisory and Declaration? A: That is a form that California home buyers are asked sign, before seeing a home for sale or for lease, regarding the risks and protocols for viewing real estate during the covid-19 pandemic.
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