Don’t Make an Offer Without Including These 10 Items (Save Thousands)

17:21Tony J. Robinson:And as you just said, you got to, you got to check it closing because of this credit. Correct. Yeah. Yeah. Yeah. That's crazy.

17:27Ashley Kehr:right and like think about that i mean yeah we have to go and buy a new hvex yeah yeah it's not like it's money i get to shove under my mattress

17:39Tony J. Robinson:but it's still a crazy concept right that you can purchase a piece of real estate that's going to produce cash flow appreciate over time give you tax benefits and that if structured the right way with your loan, your down payment, your credits, that you can actually walk away with money in your pocket. Like, Ash, we interviewed someone, and it was a while ago, I believe his name was Andre, but he used the NACA loan. And I've talked about NACA before, but it's a 0 % down loan that you can use on your primary residence up to four units. And he bought a four unit, was able to negotiate some credits at closing.

18:14Tony J. Robinson:And because it was a zero down payment loan, I think he walked away with like 20 grand at closing for this four unit property that he unable to house hack. So it's like, my mind is blown that more people aren't trying to leverage seller credits to help reduce the cash that needs to actually get into some of these deals, especially if you're doing it for a house hack.

18:31Ashley Kehr:Yeah, because like your loan is like set. So like, especially me getting a credit, like last day, your loan amount is already like fixed. You're approved for that amount for that house. And they're not changing and saying, oh, you're getting a seller credit today. We're going to take that money off of your loan. And now you, you know, have a lower loan or whatever. So that's like part of the reason as to why you walk, walk away with the check. And, but yeah, it can be, so maybe it's even better just to negotiate the seller credit at the last day. No, it's so much better. And even on the loan side, I've been able to use some of those credit because we have a max amount that we can use, but on the lending side, we can use some of that credit to even bring their interest rate down, which reduces their payment as well.

19:15But the credit is always, always great to have, for sure. Yeah. And I've had several clients actually walk away with money at the end of the closing table. They've actually gotten a check because we have so much more. Yeah.

19:29Tony J. Robinson:And that's a great situation to be in, getting paid to buy real estate. All right, Laila. So your fifth point is clear possession terms, right? So move out dates and penalties spelled out in writing. Why does this clause matter? And what does it look like when possession terms are left maybe more vaguely than they should be. Yeah. So, I mean, the nightmare scenario could be on closing day, your seller has not moved out and you, you are now roommates. So you definitely want to, you know, have that written out and have a clear possession date and which is always going to be on closing date for me when I do a contract.

20:05So we need to make sure that we don't have any issues as far as like, you know, come in, they're having completely moved that was their personal items or anything else. Or if they need to, you know, have a lease back agreement, you want to have that clearly written out as well.

20:18Ashley Kehr:One of the actually was the first ever house that I bought on my own without a partner. And it was like, it might have actually been the first house that I bought that didn't have tenants in it, or wasn't already vacant, but it was a family that lived there. And they were moving out and we were doing a double closing. so they had to close on their house and then within that hour they were closing on their new house well when I went to do the final walkthrough inspection they were literally still moving stuff out of their house and this was like I was on the way to closing so like I didn't even get to see the house like completely it moved out so when I actually we went to the like the actual county clerk's office to do the closing.

21:03Ashley Kehr:And we sat down at the table and my agent actually negotiated a credit for me because it was not clean at all. Like it was supposed to be like broom swapped or whatever. And it was not like the fridge. I threw it out. It was so disgusting. And so in like they were kind of their hands were kind of tied because they were they needed to close to close on their new loan. So it gave me a little bit of negotiating power, but that was like one thing I never wanted to do again is like do the final inspection and they're not even completely moved out yet. Okay. So that's five down and we've got five more to go.

21:40Ashley Kehr:And the next batch is where Layla get into the clauses that most rookies have genuinely never heard of. So the appraisal protection clause alone could save you from one of the most common and most painful surprises in a real estate deal. So stay with us. We'll be right back.

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24:29Ashley Kehr:Okay, welcome back to Real Estate Rookie. We just went through the five things that Layla has every buyer put into their offer. Now let's finish the list with five more protections, and these ones get into some territory. most buyers agents completely ignore. So Leila, our next one, number six, is appraisal protection. You're using contingencies or capped appraisal gaps to prevent overpaying if the value comes in low. So walk us through what actually happens when an appraisal comes in under the contract price and how this clause protects your buyers. The appraisal gap scenario that I can think of is you know, you offer$350 ,000 on a property, but it appraises for$330 ,000.

25:14Without this protection, you're going to be owing the difference. And typically I make sure that that is written out for my clients to make sure they're not in that position to have to come out of pocket with that extra money. So we definitely want to have that written out in the contract.

25:32Tony J. Robinson:And what are the different ways that a buyer can go about protecting themselves if there is any sort of appraisal gap? Like what are you writing into the contract to get them some flexibility there? So there is a contingency document that I usually add to every contract that's basically saying that if the house does not appraise it for the offer price, then my buyer can choose to walk or they can choose to renegotiate. So usually that's the option that I have for them. This was like a really big thing.

26:00Ashley Kehr:Have you ever bought a house that didn't appraise?

26:03Tony J. Robinson:The only time I bought a house that didn't appraise, and this is kind of like a crazy story, I think I showed this in the podcast before, we were buying a new construction and it was supposed to be a four bedroom, but it ended up being a three bedroom. Oh, yeah. So that was one where it didn't quite appraise, but luckily, you know, we were able to get the builder to rectify. But aside from that, we haven't bought any property that didn't actually appraise. But it was, you know, I think like coming out of COVID when the market was going crazy, there were so many people buying properties, you know, way above appraised value.

26:34Tony J. Robinson:And it was like you had to almost include in your contract how big of a gap you're willing to cover. But I've personally never done that. Ash, what about you?

26:41Ashley Kehr:The only one was new construction also. And it was my primary. And it was when we did all of our blueprints with the architect, we did a finished basement so that we would have the plans and the drawings for whenever we did decide down the road to finish the basement. And when we went through like our final draw to like close out our loan, they flagged it and said and had sent the inspector out and said, no, like you're not finished. The basement needs to be finished. That was what was in your drawings. and we were like, that was like panicking. Like, Oh my God, we don't have another$50 ,000 to like finish off the basement.

27:21Ashley Kehr:And like it had a bathroom and add a bar, like, you know, all this stuff, all these rooms. And so what I ended up doing was I fought it by saying, here is my contractor's contract, his scope of work that you reviewed and you approved and you set the draw schedule to and nothing in that contract shows any finishes to the basement. So they actually honored it and they agreed and they said, yes, like it wasn't in the contract. It wasn't in the scope of work. You're fine. You're good. We can close out the loan. You're okay. But that was definitely like a really panicky situation there.

28:00Tony J. Robinson:Look at you, Ash, like mini lawyer over here. And this is like pre-AI days. You got to do all that sleuthing on your own. you know? And that was like, I probably only like two properties, investments at that time.

28:13Ashley Kehr:So very, very, and I didn't even, this was my first ever loan that I ever got from a bank. So it made it even more scary, I feel like.

28:22Tony J. Robinson:Well, on that point, let me ask, right? Because I feel like the appraisal gap was a big thing. Like I said, coming out of COVID, are you seeing that as much of a necessity today? Like have market conditions maybe shifted how often you're including this one or is this one that you just always include no matter what? It's one that I always include no matter what, just because, and we don't, we don't have a whole lot of homes that we're dealing with that right now, especially like you said, after with COVID homes were inflated so much. And I think as the market is starting to adjust, we just want to have that for protection because the house that was appraised for, you know, increasing value, a hundred thousand, you know, four years ago, it's not going to be the same today.

28:59So just to make sure that my clients are fully protected. That is something that I always include in every contract. There is also a difference with FSA. It's automatic with the appraisal that it has to meet that. But with conventional, definitely, I always include that into the contract.

29:18Tony J. Robinson:Your seventh protection here is the option period leverage. Now, this is basically an inspection that allows you to renegotiate credits or termination of major issues are found. How do most buyers use the option period and how should they actually be using it? Yeah. So the option period is a paid time that I usually discuss with my client. You're paying for the house, kind of like you're renting the house for X amount of days to have the right to terminate if the inspection does not go the way you want it to go. And there is a difference between the option period and option fee with option money, with earnest money, and also leveraging that as far as how much money they can put down for the option for us to buy those limited amount of days to have enough time to do inspection and then renegotiation after that.

30:09Tony J. Robinson:So let me ask you that because I just want to make sure I'm tracking. When you say it's paid time, what do you mean by that? Yeah, so option period, typically you're paying per day. So it can range, you know, whatever you and your client talk about and feel like it's the best fit for you. So anywhere from$200 to$300, like$50 a day, for example, that you're paying per day for you to do your inspection. So you're asking the seller basically take your house off the market for five days or 10 days so we can do the inspection. We'll pay you$50 a day, as an example, to do the inspection. And if it doesn't work in our favor and we cannot come to an agreement for negotiation on the repairs, then I owe you that money and I can walk away free and clear.

30:53So it's just really buying the client's buyer's protection at that time, but also giving the seller something back just in case it doesn't work out for either parties.

31:03Tony J. Robinson:I've never heard of this before. So what's the timing on this? Is this before you have an actual purchase and sale agreement accepted? because you said take it off the markets are like but if you're already under contract and technically it's still on the market but it's listed as like pending or under contract so like what's the timing of this paid period so the timing usually is this after the contract has been executed um so usually in texas when the contract's executed we have an option period so the option period again it can be depending on how aggressive the the offer is um it can be two days.

31:36It can be, you know, three days. It can be on average, it's about seven days, seven to 10 days that you're technically asking the seller to remove the house off the MLS and say, you know, the house is technically on a contract, like a contingency contract. So you're pulling it off the market. No one else, you know, can put a contract in at that time until the option period is over.

31:59Tony J. Robinson:That's interesting. Ash, is it like that in New York? Because I feel like for me, whenever I sign a purchase agreement, I have my due diligence period, which sounds similar to this option period, but we don't have to pay for it. It's just like an understanding that, hey, we need the opportunity to get into the property and do our inspections. Is it like that for you in New York too, Ash? Or do you have something similar to you?

32:19Ashley Kehr:Yeah, it's the same. You have your inspection period. And sometimes it's actually very vague. It's just like, okay, once the inspection is done, you have to let them know if you're going to make any changes or things like that. Like I, it really depends on the timing as to when your agent thinks that they can get an inspector out there. So, you know, like sometimes it's as fast as like two days. So it's like three days is your inspection period. Um, could be seven days, but I'm usually not over that for single family or small multifamily at all.

32:52Tony J. Robinson:All right. So the eighth thing on your list is survey responsibility. So responsibility for the survey, existing or new, is something most buyers never even ask about upfront. So Laila, what is a survey? Why does it matter for an investor? And what happens when this is left too vague? Yeah. So the survey is basically kind of like you're looking at a map of the property line. So it shows anything like from the encroachment, easements, flood zones, any destination with that property that has to do with it specifically is what the survey shows. As far as for an investor, you can't really build on a lot if you don't have a survey to know how to expand and where your fence is going to be.

33:36You need to know your exact property lines. So the service usually is something that is the seller's responsibility to have it. However, if the seller doesn't have the survey, there could be negotiation as far as them purchasing a new survey for the buyer. And if they cannot purchase it in the buyer, that's going to be the buyer's responsibility. But that is something that a seller usually will always have.

33:59Ashley Kehr:I've done it a couple of times and I haven't done this in a while, but a lot of times I would write into my contract that I would accept an existing survey as long as it was done within a certain time frame. And I can't even remember what the time frame was, but my attorney would advise me on that. But that actually did help me get some offers accepted because they don't have to pay. I mean, now it's like, I think I'm seeing like thousands of dollars to get surveys done. So that is something I've done. And I've also, when I've accepted an offer on a property I'm selling, I also have asked sometimes if they will take an existing survey too, because it's worth asking.

34:42Ashley Kehr:But honestly, in probably in the last couple of years, like every deal I've done, my attorney has just, they take care of hiring the survey or they take care of getting it done. Or if I have an existing survey, I just give it to them and I don't even know if it ends up getting used or they use a new one. I'd have to look at my closing statement. I don't know. Yeah. So the survey in Texas usually have to go through title and everything in Texas, every closing has to be reviewed by an attorney. So we have to, when I put that clause in the document, in the contract, basically I'm saying that if the title company does not think the survey is fit then that's what a new survey has to be purchased so you'll be surprised I had a client that has lived in a home for 26 years and they presented a survey that was in meant condition so we had no issues but then you have people who live in the house for five years and the survey have coffee stains on it right so then it's all ripped up and they have to order a new survey so usually we have to get over to the title company if the survey has if the client has the survey the seller has it and then the title company has to make sure that it has the right stamp on it and has to be reviewed by the attorney and then that's when we determine who pays for it within the contract.

35:51Ashley Kehr:I gotta ask you guys because I think about this all the time and I never actually ask anyone how are you guys storing your title of abstracts in your surveys like because they don't like fit in a standard like filing cabinet or like they don't scan easily like how are you guys storing them like Like, Tony, where do you put all of your title of abstracts?

36:15Tony J. Robinson:Anything I get back from title. Well, first, I always ask to get everything just like emailed to me. Right. But if I ever do get anything that's like physically sent, I don't think I've ever gotten anything that couldn't scan into my scanner before. So I don't know. Maybe it's just like a New York thing. Actually, they blow it up for you too big. That's for me. I just scan it all into Google Drive. Yeah. Same here. I think usually I just get emails on everything. And then.

36:36Ashley Kehr:Yeah. Like this right here. Like.

36:38Tony J. Robinson:It's on legal size. Legal size. Yeah.

36:40Ashley Kehr:yeah that's true i do together and like they want the original yeah when i close on a paper so i just have like tons of them just sitting in a bucket basically that's true i i do have several

36:54Tony J. Robinson:of those and like the legal size paper and yeah i haven't found an effective way to like they're just sitting in my closet actually so um editors if an address or something on that showed if you

37:05Ashley Kehr:could please blur that out. I tried to blur it, but I think they probably showed like the exact parcel or whatever.

37:11Tony J. Robinson:Well, Layla, let's talk about HOA review rights. Again, it's something I never really ask about. I haven't bought too much in HOAs, but like HOA documents, you know, reviewing timelines, termination rights. This is one Ricky skipped probably all the time when it comes to HOAs. What are you actually looking for inside of the HOA documents and what could potentially make you walk away from the deal? So for the HOA documents, I think specifically we want to make sure that the property is in good standing with the HOA. So if I have a client moving into a subdivision where the HOA is also included restrictions as well, but if the HOA have issues with any type of like legal issues, if they have any pending lawsuits, if they have litigation going on, or you know, the HOA is not paying their dues.

37:57Those things can affect, you know, our current buyer, you know, coming into the subdivision. So that is something that we have to make sure that is always covered that we have a clear, kind of like a clear title, but it's like a clear HOA that when the client's moving in, and also looking for any type of restriction. So if the, if the buyer is also thinking about possibly renting this property, we, you know, as an investor, I should say, we have to think about what the restrictions are for an investor. If they're purchasing a property that have really stringent rules as far as how many renters can be in the community at a time, that's something that we want to make sure that we are reading through the contract to make sure that that's not going to affect my investor.

38:39Once the property is purchased, now they're like, oh, I can't even rent the property out because we're over the percentage of renters that we can have in this neighborhood. So we want to make sure that that's also clear too.

38:50Ashley Kehr:Okay. So we're on to number 10, our final one, which is also the final walkthrough and utilities. So this one, you require that utilities stay on through closing, the keys transfer, and a final walkthrough is completed before any funding. Why is this important? And what happens when agents skip this or treat it as optional? Well, the final walkthrough is not more of a courtesy. It is a contractor agreement to protect the buyers, to make sure that everything stays on onto the day of closing. And also that the buyers can be able to transfer it in their name after the day of closing. So things like you want to make sure that things like your, you know, that the water is still, you know, you don't have any leaks in the house the day of closing, or you want to make sure that nothing's wrong with like the units in the house, turning on the HVAC unit, making sure that it does work, make sure that electricity on, that is something that you want to make sure that the electricity or utilities are kept on until the day of closing until the buyer can actually transfer in their name.

39:51Ashley Kehr:And you want to remember to call to switch the utilities in your name too. Oh, so that.

39:56Tony J. Robinson:And when you sell, remember to switch them out of your name because I've had some issues forgetting to do that as well. Now, Layla, we just went through all 10. Now, the last question, because knowing what to include is only half the battle, but how do you put a fully protected offer together and still actually win the deal? So Layla's going to show us exactly how she does it right after a quick word from today's show sponsors.

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43:09Tony J. Robinson:All right, welcome back. Now we've got the full list, the 10 protections all explained. Now let's kind of bring it home, right? Layla, the question everyone's thinking is, can I actually include all of this and still be competitive? Can I actually still get my offer accepted? So we want you to walk us through how you write a winning offer that keeps every one of these protections intact. So you've said that you can offer the highest price and still lose, or you can win and regret that you actually won. So talk to us about what winning and regretting looks like. What is the version of winning a deal that maybe actually hurts a buyer?

43:44Yeah, so I'll just give you some example. I mean, winning with no contingency, what happens with that is an inspection reviews that, you know, there are issues with the housing and now you're purchasing the home. or winning without the appraisal protection. And now you owe 20 ,000 over the appraised value. Those are things that you want to avoid. And just having clear possessions. So winning without that specific language with clear possession with a property, now you're a landlord to your seller. So we want to make sure that, even though we're making this emotional decision, that we're not trapped in something because we decided not to add these protections for the buyers.

44:22Ashley Kehr:Now, before we wrap up here, the last thing I want to know is, as both a realtor and a mortgage loan officer, you are seeing the full picture before an offer is written. What is a conversation most buyer's agents are not having with their buyer that you always have before that first offer even goes out? Yeah, so the financing reality check, what their rate will look like, what the payments look like, what their, you know, cash to close will look like, you know, at the price that they're wanting to purchase the home. We talk about things like rate buy downs versus, you know, closing costs, credits, and how, you know, offering, making a good offer can structure them to where they can be able to see their full buying power, right?

45:08walking away with price and not selling because they have an emotional attachment to this house and just making a sound decision that is based more on, you know, the actual like numbers at the end of the day.

45:19Ashley Kehr:Well, Layla, thank you so much for joining us today. We really appreciate you taking the time to share your experiences with the rookie listeners. Where can people reach out to you and find out more information? Yeah, so I'm on Instagram at Lila underscore Dallas underscore realtor. Well, thank you so much for joining us today. We loved going through your list of 10 things to help everyone listening write a better offer. I'm Ashley. He's Tony. And we'll see you guys on the next episode.

45:50Tony J. Robinson:Hey, rookies, if you're watching this, we want you to apply to be a guest on the Real Estate Rookie Podcast. That's right. Ashley and I are looking for amazing stories just like yours to be a part of our Real Estate Rookie Podcast. Now look, you don't need to be an expert. You don't need to have done thousands of deals. Even if you've done one deal, your story could help inspire the next listener.

46:09Ashley Kehr:As a rookie investor, especially if you just got your first deal, it is all fresh in your minds and you are the best person to tell your story, give your experience on how you got it done to help someone else get their first deal.

46:21Tony J. Robinson:So head over to biggerpockets.com slash guest if If you want to be a part of our show again, that's biggerpockets.com slash guest. And we'd love to have you on.