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The Power of Real Estate

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Module 4, Lesson 1
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1: Resources and Strategies for Preparing a Real Estate Proposal

Wilson Mercy December 29, 2023
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Discussion of the Five Big Decisions in a Real Estate Deal
When it comes to preparing a real estate proposal, there are five big decisions that you need to make. These decisions will greatly impact the outcome of your deal, so it’s important to carefully consider each one.

Let’s take a closer look at these decisions:

  1. Pricing: The first decision you need to make is the price you are willing to offer for the property. In the given context, the first buyer assumed that the seller seeks the highest possible price and offered the full asking price. However, it’s important to remember that the seller’s motivations may vary, and it’s worth engaging in conversation with the seller to understand their motivations. This will allow you to make a more informed decision when it comes to pricing.
  2. Financing: The second decision you need to make is how you will finance the purchase of the property. In the context, it is mentioned that the first buyer took two months to close the deal due to financing and inspection processes. If you’re planning to borrow money or sell another property to finance the purchase, it’s important to consider the closing date and ensure that you can provide proof of funds at the time of the offer. This will help establish you as a serious buyer and increase your chances of securing the deal.
  3. Inspection: The third decision you need to make is whether or not to conduct a property inspection. In the context, the first buyer took two months to close the deal due to financing and inspection processes. While inspections can provide valuable information about the condition of the property, they can also delay the closing process. It’s important to weigh the benefits and drawbacks of conducting an inspection and make an informed decision based on your specific situation.
  4. Job Offers or Relocation: The fourth decision you need to make is whether or not you have any job offers or plans for relocation. In the given context, the seller revealed that they have received a job offer in another state and need to move within the next two weeks. This information can be valuable in negotiations, as it may create a sense of urgency for the seller to close the deal quickly. Understanding the seller’s motivations can help you tailor your proposal to their needs and increase your chances of success.
  5. Contingencies: The fifth decision you need to make is the number and type of contingencies you include in your proposal. In the context, it is mentioned that the appraisal contingency is often tied to the financing contingency. Contingencies are conditions that must be met for the deal to proceed, and they can be used as negotiating tools. For example, if an appraisal cannot be obtained for the property at a value equal to or higher than the purchase price, the buyer can request that the seller lower the price. It’s important to limit the number of contingencies and use them strategically to protect your interests and negotiate a favorable deal.

Emphasis on the Importance of Limiting Contingencies and Using Them as Negotiating Tools
One important aspect of preparing a real estate proposal is the use of contingencies. Contingencies are conditions that must be met for the deal to proceed, and they can be powerful negotiating tools.

Here are some key points to keep in mind:
1. Limiting Contingencies: It’s important to limit the number of contingencies you include in your proposal. While contingencies can protect your interests, having too many can make your proposal less attractive to the seller. By carefully considering which contingencies are necessary and which ones you can do without, you can increase your chances of securing the deal.

2. Negotiating with Contingencies: Contingencies can also be used as negotiating tools. For example, if an appraisal cannot be obtained for the property at a value equal to or higher than the purchase price, you can request that the seller lower the price. If the seller refuses, you have the right to back out of the deal. By leveraging contingencies strategically, you can negotiate a more favorable deal for yourself.

3. Appraisal Contingency and Financing Contingency: In the given context, it is mentioned that the appraisal contingency is often tied to the financing contingency.
Lenders typically do not finance a loan above the appraised value of the property. This means that if the property is appraised at a lower value than the purchase price, it can affect your financing options. It’s important to be aware of this connection and consider it when including contingencies in your proposal.

Key Takeaway
The five big decisions in a real estate deal are pricing, financing, inspection, job offers or relocation, and contingencies.

Actionable Step
When preparing a real estate proposal, carefully consider each of the five big decisions and use contingencies strategically to negotiate a favorable deal.