How to Make an Offer on a Home

Overview of the offer process:

●  Find a home you like and tell your agent.

●  Your real estate agent will contact the seller’s listing agent to see if they are still selling

offers, to see if there are any other offers on the table, and to get information on the

seller.

●  Your agent will compare similar homes that have recently been sold to determine the

best price.

●  Get pre-approval before this process so your agent can confirm your pre-approval and

provide your pre-approval letter with your offer.

●  Your agent will discuss offer strategies with you that include an initial offer and room for

negotiating later.

●  Your agent will write up a formal offer, which they will send to you to sign, and then

submit it to the seller’s agent.

●  The seller will respond with accepting, rejecting, or counter offering your offer.

●  If a counteroffer is given, your agent will recommend a plan to you and start negotiating

with the listing agent. This may require several rounds.

●  When your offer is accepted, you and the seller arrive at a mutual acceptance and will

move on to closing.

Trusting your agent:

When it’s time to draft an offer, you’ll likely have some intense emotions and competitive feelings. It is important to maintain calm, make rational decisions, and to trust your agent. Your agent will guide you through the process smoothly.

A good agent will:

●  Communicate clearly and well with the listing agent.

●  Discover offer terms that may win over the seller.

●  Research the listing agent’s deal history and pricing strategies.

●  Write your offer and develop strategies that will increase your chances of obtaining the

property.

●  Schedule a pre-offer inspection to look for issues before you’re under contract.

●  Brief your lender on any issues that might arise and affect your financing.

Your offer price:

Your agent will do a comparative market analysis to determine an offer price and negotiation strategies.

Contingencies:

Contingencies are conditions that must be met before the sale goes through. Sellers want as few contingencies as possible and waiving them might give you a higher chance. Communicating with your agent on which contingencies (if any) you can drop is important. Make sure you are aware of the risks before dropping the contingencies.

The most common contingencies are:

●  Financing contingency: Let’s you back out of the deal if you can’t get a mortgage. If you

have a loan approval letter, you should consider dropping this contingency.

●  Home inspection contingency: Gives you the right to get the home inspected and

negotiate if there are repair issues. When you get the inspection back, you should be reasonable as sellers might back out if they feel as if you are taking advantage of them to make repairs.

●  Sale contingency: Success of the other depends on the sale of your current home. To waive this contingency, you can get a home equity line of credit (HELOC) loan, which will give you the funds to purchase a home while you’re paying the mortgage on your old one.

●  Title contingency: Gives you the right to review a title report.

●  Home appraisal contingency: Success of an offer is dependent on an appraisal confirming a value for the home that is equal to or greater than your offer. In short, if the home is worth less than what you are offering, you can back out of the deal. If you plan on being in the home for awhile and believe its value will rise, you should consider waiving this contingency.

Strengthening your offer:

To strengthen your offer and increase the chances of obtaining the property you can:

●  Work with a local lender or one that the listing agent prefers.

●  Increase your earnest money.

●  Shorten contingency periods or have them waived.

●  Be flexible about the closing date.

●  During negotiation, think carefully about re-negotiating your offer price after an

inspection as the seller might agree to the backup offer.

●  Write a cover letter with photos about yourself and what you love about the home.

●  Photocopy the earnest money check to show you’re serious.

●  End with your agent’s deal history to show that the process will go through smoothly.

●  Consider an escalation clause.

Ask your real estate agent if there is anything you can do to make your offer more appealing.

Dealing with a rejected offer:

Most buyers usually don’t get the first home they place an offer on. Though this can be dejecting, it is a good learning opportunity to reexamine your strategy. Ask your agent to explain why your offer was rejected. There can be various reasons but the main ones are:

●  Too low: You offered a lower amount than the seller was willing to accept. Some sellers will counteroffer but some will just refuse to respond.

●  Bidding war: Some sellers may have received bids from multiple buyers and decided to just take another bid.

●  Specific terms: Your offer amount was acceptable but the seller wanted specific conditions to be met such as a faster closing time or less contingencies to be met.

●  Financing issues: Even if you are pre-approved for a loan, a seller may want specific financing preferences. This can include a preference for all-cash buyers who aren’t at risk for being rejected for a loan.

Negotiating

If a seller counters your offer, it means they either want a higher offer amount or a faster closing. This means they are willing to meet in the middle with you. You can reach an agreement quickly or go through multiple rounds of negotiation. At this stage, either party can walk away from the deal.

Offer accepted:

When you and the seller agree on price and terms, both of you will enter mutual acceptance and sign the purchase contract. Usually, you’ll submit a check for your deposit within three days of your offer being accepted. You and the seller are now under contract to complete the deal unless a contingency of the sale is not satisfied.

Closing:

Appraisals, inspections, paperwork, and more tasks need to be done before closing. This period of time is called the post-mutual or escrow period. This will all happen within the next 30-45 days. If everything is met and done, contingencies will be removed and your bank will get the seller on time for closing.

Closing costs:

Closing costs are the lender and third party fees paid at the end of the transaction. They are usually 2-5% of the final sale price.