Tips for Buyers: Making an Offer
Great! You finally found your next home and were pre-approved for a mortgage. Making an offer that is outstanding is essential to buying the home you love. Your experienced real estate agent can help you, but personally understanding the process would greatly allow you to make that proposal that will set you apart from your competitors.
Here are the steps on how the offer-making process works:
- View a house and decide that you want to make an offer.
- Speak to your real estate agent and come up what your proposition will be.
- Your real estate agent will write an offer letter and send it to the real estate agent representing the seller.
- The seller will respond in either of these ways: accepts the offer, makes a counteroffer, or declines.
Win that Bid
Calculating how much you can offer needs to consider a lot of factors. Let’s breakdown the process.
Step 1 Determine How Much to Offer
Your first step in making an offer is to determine how much money you are willing to pay for your dream home. Here are some things to consider before deciding the price:
- Think about the seller motivation. Find out why they are selling, the amount of time the home has been on the market. For example, if the seller needs a quick sale, your offer letter could state that you’d be happy to have a shorter period before closing day. Or if the house has been on the market for a while, find out the reason. If the house been on the market for a while, the seller will be more eager to sell and could mean more room for negotiation.
- Know the local market and home comps. How has the home’s value changed historically? What is the average cost per square foot for in the area? Have your agent gather data on the comparable properties nearby that are currently for sale.
- Repairs and renovations. Does the property need repairs? Consider the cost of these repairs when computing your total overall budget. When you prepare your offer, you may also ask the seller to make the repairs or other concessions.
- Check your competition. Has the seller received any other offers on the house? You will have a better shot at winning if you and your agent talk over on how much other buyers are offering.
Step 2 Decide on Contingencies
Contingencies are the clauses placed in our offer to protect yourself. These clauses allow you to back out of the transaction without losing your money deposit or face legal issues.
- Home inspection
- Home sale
Step 3: Determine How Much Earnest Money to Offer
Earnest money or a good faith deposit varies but is typically 1-2% of the total home price. The more money you offer, the better your offer looks in the eyes of the seller. This shows that you are a serious buyer and you have the assets to back it up. This money will be held in an escrow account and later applied to your mortgage down payment.
Step 4: Write a House Offer Letter
Your real estate agent will draw the offer letter for you. After finalizing, your agent will submit it to the seller or the seller’s agent.
Step 5: Negotiations
Depending on the quality of the offer and how the eager the seller is to find a buyer, you may hear back on your offer as short as a few hours. Typically, however, the negotiation process take one to three business days. The seller can either accept, counteroffer, or decline your offer.
Seller Accepts the Offer
Congratulations! Once the offer has been accepted, ask the property to be taken off the market right away. This can minimize the chances of additional offers coming in and could pull you of the deal.
Now you are ready to begin scheduling home inspection and appraisal visits, and move forward with the sales contract, producing the earnest money, and with your mortgage lender. Remember that the deal is not legally binding until the contracts have been exchanged.
Seller Makes a Counteroffer
If the seller makes a counteroffer, you have a few choices. You can accept the offer as-is, make your own counteroffer, or decline the counteroffer and move on to another property. Should you decide to negotiate, note that is not uncommon to go through several rounds of negotiations before reaching an offer that both parties can agree. More than the price, you can negotiate other items like contingencies, closing date, or repair requests.
Seller Rejects the Offer
Although a rejection may leave you feeling disappointed, consider the learning experience and go back to house hunting. Your true dream house is out there.
Purchasing a home may be the largest purchase you ever make and it is important that you get it right. Understanding how to make an offer that will be accepted and still within your budget can make your experience becoming a homeowner less difficult.