Making an Offer on a Property
Here's a guide to help you understand the typical process of buying a home, whether it's your first or last time.
Steps To Making An Offer On A House
Find The Perfect Home
Open houses and showings are encouraged. If you are serious about shopping, you can increase your search by using technology to alert you to any new listings that match your criteria in the area(s) you choose.
Find out if your home is within your budget. Now it's time for the numbers. Are you able to afford the down payment? Is it possible to afford the monthly payment for the house? Many mortgage lenders will include homeowners insurance and property taxes in your monthly payment. Also, add homeowner association dues to any condominium or planned community you live in.
Compare The Home Price To Similar Properties
Your agent should run "comps" or comparisons. This will give you an idea of the current market value for similar properties in the area. In addition, comps can give you an idea of the asking price for the property. If the asking price for the property you are interested in is significantly higher than the comps, this information can help you to shape your offer.
Your Offer price, Contingencies, And Timeline Should Be Determined
If you are competing in a market with multiple offers, the contingencies and timeline could be crucial to accepting your offer. Ask your agent if you are buying in a seller's market for advice on making your offer more appealing to the sellers of the home you desire to purchase.
Each seller will have their own needs. You can negotiate if you have the room. However, if homes sell quickly and at a higher price than the list price, you may need to shop for less expensive listings. It is also important to decide when you will officially take possession of the property and what contingencies, such as appraisals or inspections, you would like to be included in your offer.
Send Your Offer And Draft It
Your offer should take the form of a purchase-sale agreement. This will be drafted by your agent and signed or electronically signed by you before it is submitted.
You should include a letter explaining the market conditions and comparative markets that lead to your offer if your offer differs significantly from the asking price. Legally, the seller's agent must provide any information you give to him. Respectful letters can help sellers understand your offer and how you interpret the market conditions.
If the seller accepts your proposal, the purchase and sale agreement is legally binding. You are now buying a house, and the purchase-sale agreement will be a crucial part of the documentation that guides you through the sale.
Seller Replies: Yes, No, or Counter
After reviewing your offer, the seller may accept it as-is, reject it completely, or counter your offer to begin the negotiation process. Accepting your offer will result in the seller signing the purchase and sales contract. Negotiations cease if they reject your offer. You can accept or reject their terms or counter with your terms.
Negotiations can go on for a while with buyers and sellers offering counteroffers, often with the help and advice of their agents. You can negotiate the price, but that's not all. It is possible to negotiate repairs, contingencies, or furnishings, as well as a closing timeline.
The Signing Of The Final Sales Contract
Once the parties agree on the deal, including price, inspection, repairs, closing date, and so forth, both will be paid. Then, the contract is updated, and the house is now officially "under contract." After that, the listing will usually show the sale as "pending," depending on the closing date.
What Is A Real Estate Deal?
Although some elements of your offer may vary depending on where you are located and the market conditions, some basic items can be found in all property purchases offers:
Address of the property
Name of the buyer
Name of the seller
Price of the offer
Earnest money amount
Contingencies (like home sale, financing, inspection, appraisal, or waiver)
Identification of closing attorney (where applicable).
Credits if you're requesting them as part of the offer
Date and time of expiration (The offer submission process can take a while, so buyers often add a date and/or time to the offer to encourage sellers to act quickly and allow the buyer to look into other options if necessary).
Proposed closing date
Can Anyone Make An Offer For A House?
Anyone can make an offer on the house. However, they must be aware that residential sale and purchase contracts are legally binding. Therefore, it is difficult to cancel a contract once you have signed it. These contingencies can include inspections, clear ownership records, and the ability to obtain financing. Of course, all of these must be aligned with a timetable for getting them done.
If you have included a contingency to conduct a home inspection within two weeks and your inspector finds a leak in the roof, you can either cancel the contract or ask for the seller to fix the roof or lower the price.
You could lose earnest money if you back out of a contract with no contingencies or after the deadline has passed.
What Price To Offer For A House To Get It Sold
Offering the seller their full asking price is the best way to get them to accept your offer. However, you may need to offer more if the seller is in a highly competitive market or has already received multiple offers.
Some homes don't sell for the asking price, and some are priced incorrectly. So before you spend too much on your home, think of other ways to increase your offer in a highly competitive market. Your agent should be able to talk with the seller about how your offer could appeal to them.
In some markets, the average home will sell for more than the asking price. While some areas are more competitive, some homes will sell for less. You should ask your agent to assist you in assessing market conditions.
Consider An Escalation Clause
If you are considering multiple offers, it is important not to assume that another buyer will pay more than the asking price. Although you might end up buying the property, you may find that you could have obtained it for less. Instead of overpaying, talk to your agent about adding an escalation clause. This states that you are willing to pay a certain dollar amount more than the next highest offer from the seller.
Take, for example:
A house is listed at $250,000 with three other offers. An offer of $250,000 is submitted with an escalation clause stating that you will pay $1,000 more than the highest price, up to a maximum of $260,000. To secure the deal, you will automatically offer $256,000 to another buyer if they come in at $255,000.
Be Flexible With The Seller's Timeframe
Try to work around the seller's schedule if they need or want to close quickly. Timelines are more important than the price for some sellers, such as those who are buying simultaneously or moving for work.
Think About Whether You Want To Include Or Waive Contingencies
If you are unable or unwilling to close the sale, contingencies will allow you to cancel it and protect your earnest money deposit. In addition, some buyers may waive contingencies to make their offer stand out in a highly competitive marketplace.
Cash buyers may be able to remove the appraisal condition that is usually required for buyers who buy a home with a mortgage. However, removing contingencies can be risky as you might end up paying for costly repairs or losing your right to cancel the sale if the financing fails.
Buyers may also include a home-sale contingency. This means that their offer is contingent upon the sale of the home they already own. These buyers will typically use the equity they have from their home to buy a new one. However, this could make an offer less attractive to sellers looking to secure a sale that suits their schedule and priorities.
Put More Earnest Money
Earnest money, also known as "good faith money," is money that you pay upfront to the seller to prove you are serious about purchasing their home. When the sale is complete, the earnest cash will be applied to your total down payment as well as closing costs. The earnest money is a way to signal your commitment to the purchase. It also helps sellers know that you will not back out of the deal without reason. Experts in real estate say you should expect to pay 1% to 3% of the purchase price. However, this amount may vary depending on local market conditions.
Love Letters To Sellers Could Violate Anti-Discrimination Laws
So-called "love notes" are intended to appeal to sellers' heartstrings. Agents and buyers can be subject to fair housing violations. These letters may contain personal data about the buyer and can be used to illegally influence a seller's decision. This can violate the federal Fair Housing Act and other state or local laws against discrimination in housing.
Buyers should not write to sellers - agents surveyed said that love letters were the most important factor in selling on the current market.
Only 13% of surveyed agents reported using a love note in every transaction they handled as buyer's agents.
Bottom line: Don't write a letter. Instead, focus on your offer and make it the best possible.