Making an Offer
Making an offer on a home is an exciting step - you've found the house you want and you're working towards making it your home.
Be sure you're serious about buying before you make an offer. If the seller accepts your offer, it becomes a legal contract after a few days.
Details and planning are important. Know what you would like to pay but also think about the most you're willing to pay and the total home financing amount that your lender has pre-approved you for. Be specific, and put everything in writing.
What are the steps in making an offer?
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Negotiating is a standard practice in real estate, and something that your real estate agent will do on your behalf; learn more about it so it works for you.
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Before you negotiate a sales price, it's important to determine if you or the seller has the stronger position. Knowing this will help you plan your negotiation.
The seller may have the stronger position if:
- The local real estate market is strong and homes are selling quickly.
- They aren't in a rush to move.
- Similar houses have sold for close to or above their asking price.
The buyer may have the stronger position if:
- The local real estate market is weak.
- The seller needs to move quickly.
- The house has been on the market for a long time.
When negotiating, more information is better. Look at your notes from when you looked at the house. If there's anything in need of repair or replacement, you may include these costs in the negotiation. If you want certain appliances or fixtures to stay, be sure to include them in the negotiation. You may also want to make your offer contingent upon your obtaining financing or the house passing a professional home inspection, especially if it is an older home.
There are several steps to negotiating:
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Asking price.
This is the price the sellers have originally listed. In a buyer's market, you may be able to successfully offer below the asking price. However, in a seller's market you may want to be prepared to offer more. Before making an offer in a seller's market, know how much above asking price you are willing, and able, to bid in case the seller gets multiple offers. -
Initial purchase offer.
This is your first offer. It may include contingencies (such as a requirement that the home pass a professional inspection or that you receive adequate financing from your lender.) -
Acceptance of offer or counter-offer.
The seller can accept your offer or make a counter-offer of a new price or additional contingencies.
If you've made a home inspection part of the contingencies and something serious is found during the inspection, you may want to submit a new counter-offer and discuss the situation with your lender. The process may go back and forth several times before you and the seller reach an offer that is acceptable to you both. Remember that in some instances, your lender may not approve your mortgage if the home has serious deficiencies that could affect its value.
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Escalation clauses.
If you live in a market where homes are selling quickly and have multiple offers, your contract may need to be offered with something called an escalation clause, which allows the offer to increase by certain dollar increments if another competitive offer is obtained and entertained by the seller.
A word of caution about a "hot" market
If the real estate market where you are looking to buy is "hot", meaning that the houses are selling quickly and often for above the asking price, don't be tempted to bid more than you can afford for a home.
You may find that you are outbid on a number of houses but don't be discouraged – the right home is out there. Remember, it is truly only the perfect home for you if you can afford it. If you get caught up in a hot market, you may find yourself with a bigger mortgage than you can
Make an offer in writing
This is the time to think carefully about what you want and what you can afford. If your offer is accepted, it becomes a legally binding contract. Make sure you don't include anything in the offer that you're not totally comfortable with doing. Make sure you put everything in writing. Offers usually include items like: Proposed purchase price Concessions Conveyances Home inspection contingencies Earnest money Mediation and arbitration Once the seller accepts your offer, the offer becomes a contract – you've contracted to buy a house. What's in a contract varies from state to state, but some common things you'll find include: Legal description Conveyances Possession date Property insurance Property disclosures
Remember, the seller may counter-offer with a higher purchase price - consider that when you decide on your proposed purchase price.
This includes things you'd like the seller to help pay for, like closing costs.
This covers any personal property to be included in the sale, like the washer and dryer or the refrigerator.
Make sure you're prepared if the home inspection report shows major problems.
Earnest money is a deposit you offer to show you're serious about purchasing the house. Earnest money is usually held in escrow and applied to your closing costs at settlement. If you fail to meet the terms of your contract, you may lose this deposit.
This covers how long the seller has to respond to your offer before the offer is no longer binding.
These are legal methods for handling contract disagreements between you and the property seller. These methods are not necessarily beneficial to you, and you do not need to agree to them.When the Offer Becomes a Contract
This describes the property you are buying in terms of its dimensions relative to a fixed point (like a road) or in relation to a recorded subdivision plat or declaration of condominium. It often includes the street address of the property.
This is the price you and the buyer agreed upon, as well as the amount of earnest money you'll pay when you sign the contract.
A contingency protects you by stating that the sale depends on a lender approving you for a specific mortgage, rate, and term.
The closing date (also called the settlement) can be several weeks to several months away to meet the seller's and your needs.
Double check these conveyances to make sure that the items are there and are what you and the seller agreed on in the offer.
If you've made the contract contingent on a home inspection, this will set an inspection date and provide an explanation of what will happen if the inspection identifies any problems.
This is the date you can move in. It's usually the closing day or very soon after it.
This details the home insurance policy that will cover the property until the closing date. This can be the buyer's or seller's policy.
This includes legal notification of any required information concerning the property (such as copies of documents from the homeowners' association), issues or problems with the property.