Stage 5 – Making an Offer
Making an offer on the potential house of your dreams can be a stressful proposition. You want the house, but offer too little, and someone else might get it for a bit more. Offer too much, and you might lose a pretty penny unnecessarily.
While there isn’t an exact science to ensure you do it perfectly, there is a lot you can learn to better your chances of doing it right.
Deciding How Much
After you find the proverbial “one”, the house that is more than a building and feels like a home, it’s time to make an offer. The question, then, becomes “exactly how much to offer?”
Staying within your budget is essential, but the whole decision is a lot more involved than merely picking a number.
A few things you should keep in mind as you figure it out:
- Are there similar homes for sale in the area? An abundance of similar offers suggests availability, which usually drives competition down. Competition is the primary factor that should drive your offers up, so it’s a good thing to consider.
- How long has the house been on the market? Find out if a place has been on the market for a long time (over three months), or has been listed multiple times. When that happens, there’s a good chance the seller will be more open to taking an offer below the asking price.
- Do you think other buyers are interested in the house? When you are considering a desirable property, there’s a chance of entering in on a bidding war. Decide how high you are willing to go before making your first offer! Sometimes, it pays off to open up with your strongest offer.
- Is the house in need of repairs? Definitively consider potential repairs or renovations while figuring out your offer! This cost can easily mess your budget, so you should plan accordingly.
Making an Offer and Approval
A lot of homebuyers ask if they can make an offer that exceeds the amount they were approved for by the lender. The short answer is that yes, you can, but you’ll likely have to make a more significant down payment to compensate the difference. It’s also something you can consult with your lender.
What Should Your Offer Include?
The moment you are ready to make an offer, your agent helps you get in touch with the seller and submit it in writing.
A good agent will most likely write the actual offer, but it’s advisable to know ahead of time what it should include:
- The property address.
- Your name (and the names of anyone else you are buying the home with).
- Your offer amount.
- Any conditions you require (things you need before closing the deal) such as a full home inspection.
- Any concessions you require from the seller, such as cash toward closing costs.
- Items you’d want to be included in the sale (window treatments, appliances, etc.).
- The amount of your earnest money deposit.
- Your approval letter (which helps sellers know you won’t run into unexpected financing issues).
- Expected closing date.
- Expected moving date.
- Deadline to respond to the offer.
Pro Tip – Repairs
You can also ask the seller to make repairs to the house before you buy it as a contingency. Required upgrades can also be requested in the same fashion.
Negotiating the Purchase Price
If a seller accepts your offer, congratulations! You are virtually a homeowner now. Your lender will send you a loan estimate outlining fees and costs for the deal. Do keep in mind though, that these figures could change up to 10% before closing. You get the final numbers on the closing disclosure right before you close.
However, if the seller counters your offer, or outright refuses it, it is really up to you how to proceed.
Your agent can reach out to the seller and see if they are open to negotiating, which leads up to rounds of trading counteroffers until both parties agree. During this period, you will most likely negotiate not only the price but other parts of your offer (moving date, repairs, etc.).
Pro tip – Be patient!
Negotiating a home purchase can be a stressful proposition, so its important to take it easy and remember your goals! Walking away from a deal is perfectly fine when you can’t reach an agreement with a seller. There will be other homes to purchase.
