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The Guide To Making And Accepting An Offer On A House
Dated: September 22 2020
You’ve spent the last few months house hunting, preparing your house for sale or doing both. All that stands between you and a pending deal is the right offer.
On both sides of a real estate transaction, the purchase offer is the first formal communication that leads to the final deal. The offer combines financial details with the nuances of trying to avoid offending the other party, reaching an agreement and getting started on the steps toward closing.
In the large-scale seller’s market that has stood strong for the last few years, homebuyers are at a disadvantage as they try to compete with other house hunters for the limited number of houses on the market. Formulating an offer isn’t just about the asking price, but also what other potential buyers could offer at the same time.
On the receiving end of the offer, sellers must be able to weigh the buyer’s offer carefully, negotiate the terms and be as transparent as possible to avoid the deal falling through later in the process. As all real estate markets work through a cycle, sellers should also be ready for changes that give the buyer an advantage over sellers, whether it’s a temporary or prolonged buyer’s market.
To help you craft an offer on a home and understand what the other side of the deal has to do, we’ve broken down the steps to both making and accepting an offer on a house.
Buyers: Putting an Offer on a House
Making an offer on a house isn’t just about telling the seller how much you’re willing to pay. It’s also important to provide proof that you’re able to pay the amount, establish the expected closing date and state how additional costs will be covered and what you expect of the seller leading up to closing. By submitting an offer, you also need to be prepared to provide earnest money, which shows the seller you’re serious about buying the house and can range from $500 to 10 percent of the agreed-upon price.
But don’t get ahead of yourself. The first step to making an offer on a house is finding the house you want to purchase within your budget. The next steps are fairly easy, especially when you have your real estate agent walking you through the process. Here’s what you need to know.
When to submit an offer--especially if you’re house hunting in a market where there are few available properties compared to the number of active buyers, submitting an offer as soon as you’re sure you want to buy it is a must. Even if you move quickly, there’s a chance you’ll find yourself competing with other offers.
The first call we make when someone’s interested in a home is to reach the other agent – the listing agent – and find out if there are any other offers that they have in hand, and if so how many.
Even when competing offers are less likely, you must move quickly to avoid missing out on the house you want. Other scenarios, however, can give you the timing advantage. If you currently rent a property and have the right of first refusal included in your lease, your landlord is required to give you the chance to make an offer on the property before it’s available to other buyers. The landlord may not be required to take you up on your deal, but the early opportunity isn’t one you want to miss.
How much to offer--while the listing price does provide some insight into the seller’s expectations, the value of the property and the work that needs to be done play a larger role. When you’re ready to make an offer, we will sit you down and show you the sale history of properties nearby to help determine the home’s approximate value as it compares to the rest of the market. We like to look at the last six months of houses that have sold in the same neighborhood, or very close proximity, of a similar size.
In addition to recent sales and current buyer activity, you need to factor in your personal needs. Consider the details this house checks off for you--and consider the amount of work you’d have to do. Take into account details such as:
• Proximity to work, schools, stores, etc.
• Neighborhood amenities
• Age of major systems and appliances, including the HVAC, roof, plumbing and electric
• Deferred maintenance
• Renovations that need to be done
While we will help you consider all the factors that lead to the offer price, the price itself is something you ultimately have to determine on your own and be comfortable with.
Making a contingent offer--once you’ve moved past the price portion of the offer, consider if other needs and conditions will be included. If you already own a home and need to sell it in order to have the money to pay for this new one, an offer contingent on the sale of your house is necessary.
This offer contingency can be a sore point for many sellers, especially in a seller’s market where other buyers may not have the same constraints.
We recommend putting your home on the market before you start the search for your next house. Once you have the house under contract, you can make offers with home-close contingency. The contingency will show you’ve already found a buyer and simply need to have the closing on your purchase take place after the sale is completed, which can even take place on the same day.
Competing against other buyers--low inventory in many housing markets in the U.S. (Greater Phoenix included) makes the competition among buyers a constant part of the conversation for many homebuyers, particularly for those who are house hunting for the first time. Many buyers are afraid of getting caught up in a bidding war and paying more than they can afford or losing out on the house of their dreams.
Standing out against competing bids may take a bit more work, but a personal touch and some strategic moves can give you an edge. Here are a few things we recommend:
Write a personal letter. It’s not recommended for every situation, but a personal letter to the seller can make an offer stand out, especially when the seller appears to have some sentimental attachment to the property. Even if your offer price isn’t the strongest, tugging on the seller’s heartstrings can win you the deal.
Include quirky numbers. Rather than rounding to the nearest hundred or thousand, let some of the numbers stay specific in your offer. Offering $345,255 instead of $345,000 registers as a higher number when it’s just a difference of a couple hundred dollars. If you note you’ll cover $1,905 of the seller’s fees instead of $1,850, the slight difference in dollar amounts can stick in the seller’s memory. Quirky numbers can sometimes make the difference.
Be flexible. A good real estate agent will try to get as much information about the seller as possible from the listing agent so you can structure your offer around those needs. If the seller’s moving out of state, a quick closing date could be more enticing. With the closing date in particular, it serves you well to express that you’re willing to meet the seller’s needs.
Keep in mind that even if you lose out to competing buyers once or even a few times, eventually your bid will be the right one. Don’t get discouraged, and don’t shy away from making an offer on a house because you think you’ll lose out to another buyer. Most people will still take their best shot – it doesn’t cost a thing to make an offer.
John Lick--brings his vast experience in contracts and negotiations to the Maurice & Lick team. Prior to becoming a full-time Realtor, he worked for a multi-billion dollar government agency and with ....
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