You've found the
house you want to purchase. Now what? Now, it's time to make an offer on the house, which isn't as simple as it may sound. You don't want to make an offer so low the seller flat-out refuses your offer. But then again, you don't want to pay more than you need to.
There are also considerations beyond price, such as whether you have to sell your existing home first, whether you want an inspection, etc. And remember…once signed, your offer becomes a legally binding agreement.
6 Tips to Make an Offer on a House
- Hire an experienced real estate professional
An experienced real estate professional understands the current housing market, local and national trends, what's worked (and not worked) for other buyers, what many sellers are looking for, house-buying legalese, and more. Therefore, they can guide you, make the process – including the offer and any counteroffers - proceed more smoothly, and help you avoid house-buying pitfalls.
- Get Pre-Approved for a Loan
Unless you are paying cash for your home, you should get pre-approved for a loan from at least one lender before you search for a house to know what you can afford. When it comes time to make an offer, being pre-approved for a loan shows the seller you're serious and that you are financially responsible, and it may give you a competitive edge if there are multiple offers.
- Determine a fair offer price
An experienced real estate professional can help you determine a fair offer price. The price should be based on several factors, such as your budget, how much homes are selling for in the area, how long the house has been on the market, the home's condition, if there are other offers, etc.
- Decide how much earnest money you want to offer
"Earnest money is a deposit made to a seller that represents a buyer's good faith to make a purchase such as the acquisition of a new home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing,"
Investopedia explains. "In many ways, earnest money can be considered a deposit on a home, an escrow deposit, or good faith money."
The buyer and seller negotiate the earnest money deposit. It is typically one to two percent of the home's purchase price but can be higher in a hot sellers' market. The earnest money deposit can sometimes be a fixed amount rather than a percentage of the purchase price.
- Decide on contingencies
Contingencies are clauses in the purchase agreement that give specific circumstances under which you can walk away from the deal without losing your earnest money. Typical contingencies include a home inspection, an appraisal, final loan approval, or selling your existing home.
- Write a purchase agreement
Typically, your real estate professional will write up the purchase agreement to comply with all state and local laws. It lists the offer price, earnest money amount, offer expiration date, seller disclosures, closing costs, contingencies, etc.
What Comes Next?
The seller has three options: accept your offer, make a counteroffer, or refuse the offer. If your offer is accepted, the seller and buyer sign the purchase agreement, and you begin the process of obtaining the mortgage, scheduling inspections, etc.
In a counteroffer, the buyer may change the purchase price, earnest money deposit, closing date, contingencies, etc. If this happens, you need to review the changes and accept, refuse, or make a counteroffer.
If your offer is refused with no counteroffer, you can ask your real estate professional to follow up with the seller's agent regarding why the offer was rejected and inquire about a counteroffer. Or you can walk away from the deal and look for another house.
Find Your Dream Home
Pete Heim is a proven negotiator who will help you find your dream home, make an offer, and get a better deal on your new home!
Call him today at
610-745-3378
or
610-898-1441, or
connect with him online.
