Buying a home is one of the biggest financial decisions of someone’s life, and making the right offer could make or break the deal.
This article will cover tips for making an offer on a house that will help you land your dream home.
Work with A Realtor
A realtor will help you find the perfect property and help you make a winning offer. A good real estate agent understands their local market inside and out and can offer invaluable insights during the negotiation process, such as:
- Asking price versus selling price of comparable homes in the area
- How long the home has been sitting on the market
- Which contingencies to include (or not to include)
While the average realtor commission is around 5-6% of a property’s final sale price, split between buyer's and seller’s agents, the seller is usually expected to pay these fees.
Clever Real Estate can help you get paired with a top-rated local agent to guide you through your home search from beginning to closing. In qualified states, Clever agents also offer home buyer rebates of $1,000 on purchases between $150,000 and $500,000, and up to 1% back on home purchases over $500,000.
One of the most important steps to take before putting an offer on a home is getting pre-approved for a mortgage. This will show the buyer that you’re serious about purchasing the property and have the funding to do so.
Producing a pre-approval letter from your lender will also be useful if you find yourself in a bidding war because the seller will be more inclined to go with the buyer who definitely has funding in place.
Do Your Research
After you’ve found your perfect home and are ready to put in an offer, ask your real estate agent to run a competitive market analysis. This will reveal information about comparable homes in the area, such as how much they’ve sold for and how long they sat on the market.
When figuring out how to make an offer on the house, you should also search public records and previous real estate listings by the owner. This can reveal valuable intel about their motivations for selling and help you create a customized offer letter.
Pick the Right Price
When making an offer on the house, what is fair price-wise will depend on the research you and your agent have done, as well as what you can afford. For instance, just because a bank is willing to lend you $300,000 does not mean you should bid the entirety of the potential loan amount. This approach would likely make the seller nervous because, if interest rates rise, you may no longer qualify for that loan. It will also leave little-to-no wiggle room for you during negotiations.
Conversely, you want to make sure that your offer is not too low. Proposing a lowball amount in hopes of a counteroffer could backfire and insult the seller.
A Word on Contingencies
Most offers include some standard contingencies to protect the buyer if they need to back out or modify their offer. Some common stipulations include:
- Mortgage contingencies: Even if you’ve been pre-approved for a home loan, that does not mean you will definitely receive it. Therefore, a mortgage contingency clause protects buyers in case they cannot obtain funding.
- Home inspection contingencies: An inspection contingency should never be left out of an offer. While your lender will require a home appraisal to determine the property’s value, this is not the same as a home inspection. A qualified inspector will create a detailed report of the home's condition, including areas in need of repair. If a home inspection reveals more damage than anticipated, you will be able to back out of the deal without losing your earnest money deposit.
- Home sale contingencies: Making an offer on a house contingent on selling yours is advisable if you do not have a prospective buyer on the horizon or are still in the closing process of selling your current home. Home sale contingencies typically come with a timeline of around 30-60 days, after which the contract will be forfeited. Note, though, that these stipulations could put you at a great disadvantage in a seller's market.
While certain contingencies are advisable, putting a laundry list of demands in your offer could scare the seller. As the adage goes, don’t be penny-wise but dollar-foolish.
Offers typically include an earnest money deposit, which shows the seller that you’re eager to buy the home. Making a sizable deposit (e.g., 3% instead of 1%) will make the seller feel like you are committed and serious about the purchase.
Moreover, if you can pay “all cash” for your home, make that clear in your offer. This will make you a more attractive buyer because the seller will know you do not have to wait around for financing.
Write the Seller a Letter
Writing the seller a letter, especially if it’s hand-written, will really help make your offer stand out. Plus, in a situation where there are multiple offers on the table, it could make all the difference.
In your letter, try to appeal to the seller’s emotions and describe why you love the house. However, do not make your letter too long and don’t include too many details about your property plans. For example, if you plan to renovate a kitchen that they just spent a large sum of money redoing, they might be put off.
Don’t Be Afraid to Negotiate.
The seller may come back with a counteroffer after reviewing your proposal. In this instance, do not be afraid to negotiate.
For example, if the seller asks for a higher price, you could try to ask for some seller concessions, which are contributions from home sellers that help offset buyers' closing costs. Seller concessions could include credits toward home repairs, paying for the home inspection, or purchasing a home warranty policy for the buyer.
When negotiating, you should be mindful of the seller’s closing costs, ranging from 8% to 10%. In a seller’s market, buyers may want to consider reducing their demands to minimize the seller’s fees and make their offer more attractive.
Finalize the Deal
You may be wondering, “How long after making an offer on a house, do you hear back?” While sellers are under no legal obligation to respond to you at all, most have the courtesy to let you know within 2-3 days whether or not they have accepted your offer.
If they do accept your offer, then a legally enforceable purchase agreement will be created. A purchase agreement is signed by both the buyer and the seller and lays out the agreed-upon amount for the property as well as the terms of the sale. The seller will also agree to convey the deed to the home. Make sure all of your finances are aligned to ensure a smooth closing.
These tips on how to submit an offer on the house will hopefully help you nail down your dream home and make an offer the seller can’t refuse. To find an agent that can help you put your best offer forward, visit listwithclever.com today!