You’ve spent weeks and possibly months finding THE home. What now? It’s time to make an offer! First things first, talk to your REALTOR®. This is the person who will assist you every step of the way. Your REALTOR® can provide you with a sample of the contract documents so that you can be familiar with the document.
Think of the listing price as an opening bid in negotiations. Your REALTOR® can run comps (comparables), which is a process where you compare the house you have chosen to similar properties that have recently sold in/around the neighborhood. Take the following into account when deciding on an offer price:
- How long has the home been on the market? Chances are, the longer it’s been on the market, the more willing the sellers may be to negotiate and accept below the listing price.
- Is this a buyer’s or a seller’s market? buyer’s market is where there are more homes on the market than there are buyers; and seller’s market is where there are fewer homes on the market than there are buyers. If it’s a buyer’s market, the seller may be more likely to accept less than the listing price.
- Are there multiple offers? This happens more frequently than you would think. If this is the case, sit down with your REALTOR® and discuss what options you have and how aggressively you should go in with your offer.
EARNEST MONEY DEPOSIT
This is the money given in good faith as evidence to the seller that you are serious about buying their home.
There are many contingencies that appear in any given real estate contract. Contingencies are provisions that must be met before the closing can occur or the buyer is entitled to walk away from the offer, keeping their earnest money deposit. Below are a few common contingencies you may encounter. Keep these in mind when making your offer and be sure to ask your REALTOR® if you are unsure if your contract contains any of these:
- Financing Contingency – this gives the buyer (YOU) a specified amount of time to get a loan that will cover the mortgage.
- Appraisal Contingency – this allows a third-party appraiser to determine the fair-market value of the home to ensure the home is worth enough money to serve as collateral for the value of the mortgage.
- Home Inspection Contingency – this gives the buyer a certain number of days after the offer is accepted to do an inspection of the property with a licensed or certified home inspector. If anything comes back on the inspection, the buyer can request the seller to make repairs. Most of these repairs are negotiable. Be sure to discuss any home inspection findings with your REALTOR® and they can guide you how to negotiate.
READ EVERYTHING, EVEN THE FINE PRINT
The offer you are making is a legally binding contract. Read everything and make sure all information contained is correct. Verify the address of the home listed on the offer. Verify the fixtures/appliances that the seller plans to leave behind. Are they leaving the refrigerator and washer/dryer? If so, make sure that is noted on the contract.
Most of the time, the closing date is going to be approximately 30 days from the acceptance of the offer. This could be longer or shorter depending on individual circumstances. Make sure to discuss this with your REALTOR®.
BE PREPARED FOR A COUNTEROFFER
The seller may decide to make a counteroffer, which is a new purchase agreement with new terms (usually a higher sales price or fewer contingencies). You have the option to either accept these new terms, counter back to the seller, or walk away. Have a serious conversation with your REALTOR® about counteroffering. This is where you have to know your limits of your purchase price or how much you are willing to pay for the home.
This is a lot of information and it may seem scary! Don’t get discouraged! Your REALTOR® has had education and training on preparing offers and negotiations. Lean on them for advice and never worry about asking too many questions!