Houston’s bay area is a hyper-competitive real estate market. With more demand than supply, well-priced properties are getting snapped up within days of getting dropped onto the market. Buying a home in the area doesn’t just start and stop with finding a property you like. Once you’ve found the property that suits your needs, your offer still needs to be accepted. Therefore, patience will be your greatest friend. Let’s discuss some of the reasons your offer could get rejected.
You’re Being Outbid
So you’ve found the property you just can’t be without. You and your agent discuss the strategy to move forward. Your agent submits an offer. A day later, the listing agent tells your agent that the property has received multiple offers. This is where you and your agent need to be tactical about how to proceed with an offer. On the one hand, you don’t want to lose out on the property, and on the other hand, you don’t want to grossly overpay because you have a fear of missing out.
You and your agent find a number that makes sense based on neighborhood comps, and maybe throw in a slight premium to give you the best chance of getting the property. However, that slight premium that you threw in might not be enough! After submitting the revised offer, your agent hears back that you were outbid. Don’t let losing out eat you up — it happens. Ultimately, someone bid significantly above comps to get this property. Do you want to buy a property at the top of the market, or do you prefer being strategic about the price point you get in on?
You’re Financing and Others Are Offering All Cash
Cash is king. Leverage and credit are the American way, but cash still rules everything around us. The same thing holds true for real estate sales. You may have provided a higher offer, but because of the amount of time involved in financing a deal, a seller would generally be much more inclined to take an all-cash offer at a lower price. There is simply much more risk involved with financing. Will you get the mortgage? Will the property appraise? Low appraisals do happen, and there is something you can do if your appraisal comes back lower than the contract price.
Your offer is going to be contingent on financing, which means that if for any reason you can’t get financing, you can back out of the deal. For an all-cash buyer, there are no financing contingencies, because they don’t require appraisals or a review from underwriting.
Your Starting Offer Is Way Too Low
Getting an offer accepted at first pass, particularly when you’re bidding under the asking price, does not happen very often. The caveat is that when you’re an all-cash buyer, you may have sellers bending over backward for you because losing out on you is a risk they may not want to take. An offer is often a conversation starter. It gets the dialogue started and begins the back and forth between parties over price and other contingencies.
However, if your offer comes in significantly under ask, it may function as more of an insult than an opener to dialogue. Don’t expect sellers to negotiate themselves down if your offer is so low that it may not be deemed serious. Your offer will get flat-out rejected with no counteroffer provided.