Follow 5 Simple Steps to Make the Best Offer on a House
Congratulations on finding the home of your dreams! While this can bring on warm and fuzzy feelings, the process doesn't end with finding this desirable property for you. We would suggest that you make an offer that the seller will feel inclined to accept. Understanding how you can make such an offer on the house will help you prepare best for the home-buying process.
In this article, we will discuss the following five steps to ensure that you are making the best offer on the home of your dreams.
Before Making an Offer
The home-buying process can be an exciting time for those who have been on the hunt for a while, but before you get carried away, make sure that you have a pre-approval letter in hand and the best realtor at your side.
Get Pre-Approved for a Mortgage
In this case, it can seem like you are putting the cart before the horse, so to speak, but as soon as you decide to buy a home and before you begin the house hunting process, you should invest in the mortgage pre-approval process. There are two reasons why this is an important step to take:
- You will be able to make an offer the moment you find the home of your dreams.
- Sellers tend to prefer a home buyer who has a pre-approval letter from a lender.
Lenders will use the real estate terminology of "preapproval" or "pre-qualification" even though they are, with all intents and purposes, two different kinds of mortgage approvals. It is better to have a mortgage preapproval. Sellers and their agents will take this process more seriously, as your information is subject to verification for the desired approval letter.
Find a Realtor
If you want to save money during the home-buying process, you might be wondering if going in alone will help you avoid having to fork out a real estate agent commission, but working closely with an expert will more than likely save you money in the end. Agents can easily navigate the complexities of the market and offer advice about the aspects of buying a home.
5 Steps to Make an Offer on a Home
In this process, we will break down the process of making the best offer on the home of your dreams to ensure that it becomes the next place you can make all the best memories.
1. How Much Do You Want to Offer?
The very first step to making an offer on a home is to come up with a number that you want to offer on a home. It is important to remain in your budget, and a random number should not be thrown out. You are going to be looking for a sweet spot between getting the best price and not insulting the seller with a lowball offer. The following should be considered before coming upon a price that you would like to present to the seller:
- Consider the Market
Realtors can be useful in assessing the current state of the market and the cost of housing, which is why they will usually complete a comparative market analysis (CMA), which will take into consideration more recent sales in the area to assess how the house of your interest will compare with what some others have sold for.
- Consider the Budget
If you have been approved for a large mortgage and more than you expected, this should not dictate how much you offer the seller. You should be able to live comfortably with the monthly mortgage payment, even if you feel like you can afford it. In doing this, you won't have to worry about negotiation for any potential repairs or upgrades.
2. What Contingencies Do You Want?
Bill Stanley with Blue Sky Homes & Land offers this on contingencies: "Contingencies can act as an escape clause during the sales contract process to allow buyers to walk away from a sale with their earnest money in hand, aka a security deposit. More common types of contingencies include appraisals, home inspections, title, financing, and the home sale contingency. If you are buying a home and cash is a payment option for you, you won't be required to include the financing contingency or an appraised contingency, something required by lenders to ensure that the property is worth the mortgage amount."
3. How Much Earnest Money Do You Want to Offer?
In the world of real estate, cash is desired above all, and even if you can't buy a house with cash, you will still be required to submit something called a "good faith deposit," referred to as earnest money. Earnest money requirements will vary from market to market. However, it is usually 1% to 3% of the total home price. The more money offered, the better the offer will look to the seller. This money can be held in an escrow account and can be later applied to the mortgage down payment.
4. How Can You Write a House Offer Letter?
Let's fast forward now and say that you have come up with an offer amount; it is now time to convey this offer to the seller. If you are working with a real estate agent, they can help you draw up the letter yourself, or if you are flying solo without a realtor, make sure to include all the following in your offer letter:
- The address of the home being purchased.
- Your name and the names of anyone who will share the house title with you.
- The desired amount you will offer on the home.
- Contingencies the home is required to meet before the sale goes through.
- Items you want to include from the home in the sale.
- The total amount of earnest money deposited.
- The date you would like to close on the loan.
- The date you would like to move into the new home.
- The deadline to respond to your offer.
The offer letter will be finalized either by you or the real estate agent and submitted to the seller or the seller's agent. Afterward, the waiting period begins.
5. How Can You Negotiate the Terms of the Sale and the Price?
If the seller has agreed to your offer letter, congratulations! You can proceed to provide the earnest money and sign the sales contract. Now, you will be ready to move forward with the mortgage lender and start the scheduling process for the home inspection and appraisal visits. However, what happens if the seller does not immediately accept your offer?
A Counteroffer is Made by the Seller
If the seller responds with a counteroffer, it will be up to you to decide your next move. Your real estate agent can contact the seller or their agent on your behalf and put out feelers for what the seller is hoping to get for their home so that you can then decide to negotiate on a price point and terms. These particular negotiations are informal conversations between both parties and their agents that form the basis of the purchase contract.
Your Offer was Rejected by the Seller
Things sometimes are not meant to be. If you lowballed the offer or the seller has decided they aren't ready to sell, there are many reasons why an offer can fall short. A rejection can be disappointing initially, but remember that the house you love today can seem like a burden years down the road if you can't afford it comfortably.
Conclusion
Even after an offer is made, you are always free to back out and walk away before signing a legally binding contract. Don't worry if you feel like you are wasting time or disappointing anyone! You will be responsible for paying for and living in the house, so feel free to be comfortable with the terms of the purchase. We recommend working closely with one of our trusted real estate agents to help you land and secure the home of your dreams so that you will have decades to make happy, lasting memories. For more information on Corte