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Ever wonder if there are things you should know before writing an offer on a home? Have you ever read through an entire real estate contract? My guess would be no. It’s not exactly easy reading, it’s extremely wordy and most people just skim over it. How much are we offering? Will the seller pay closing cost? When do we get to move in? Can we negotiate any special furniture items? But there’s much more to writing an offer than that. Of course, I highly suggest you read the contract before you sign, and ask your agent to explain anything you don’t understand. However, I also want you to walk into the offer-stage and with confidence that you know what to expect. Keep reading to find out what every buyer should know when writing an offer.
“The house you looked at today, and want to think about until tomorrow, may be the same house someone looked at yesterday, and will buy today” ~ Unknown
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When should you make an offer on a house?
I’m not one for fear tactics, but there’s definitely truth to this quote. The longer you wait, the greater the possibility that someone else may submit an offer. On the other hand, the longer you wait, the longer the house has been on the market and the more the seller may get nervous and drop the price. You really don’t know which situation will occur because the listing agent is going to hold their cards tight and protect the seller’s interest. The best you can do here is decide whether or not you want to make an offer on the house. Next, you’ll move onto deciding the terms of your offer.
It’s obvious to focus on the overall price your willing to pay for the house. As you do this, consider the pros and cons of the items the seller discloses, like repairs, or when the home was built and purchased. This may change your decision of making an offer or not. Most items can be verified later through tax records or from the home inspector. If you decide to make an offer and trust the seller on school district, make sure you go back and confirm with the county before your offer is final.
Also, know ahead of time what your interest rate will be and how your monthly payment will change based on the final negotiated pricing. This will come in handy as you decide on initial offer price and as you negotiate.
Write & Submit the offer
If you want to increase your chances of getting an offer accepted when purchasing a resale home, make it clean! Discuss with your agent the list of allowances, fixtures or personal items that you may want the seller to include with the purchase of the house. Even though certain items are typically a given, it’s better to include them in the contract than to assume incorrectly. Read over the seller’s disclosure and consider the statements as you write your offer and determine the initial offer price.
Determine how much you will offer for your earnest money. Your agent should be there in a consultative way to advise you on the best way to structure your offer. The way you position your offer in a seller’s market is very different from how you position your offer in a buyer’s market. Your agent should know, specific to your area and price range, the types of stipulations and concessions that should be apart of your contract.
If purchasing a new home, you’ll most likely will be required to use the builder’s contract. There’s still a possibility that you can negotiate terms like adding a finished basement, including appliances, or the builder paying closing costs. However, if the house you’re considering is in a neighborhood that’s selling like hot cakes, you might not get any type of incentives.
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When talk with your agent about the contract, also. Let your agent know if you have a preference in terms of closing date and location. If you need closing cost assistance, this will lower your true offer price for the buyer, so you’ll need to consider how that looks that against any other contingencies you ask for. Contingencies include the due diligence period, buyers right to terminate an appraisal contingency and financing contingency. Decide on what’s most important to you – and if it’s possible, find out what’s important to the seller. This transaction can be a win-win.
Negotiations and Next Steps
The negotiations are typically a stressful and confusing time. As soon as you submit the offer, expect a counteroffer. It’s rare that your first offer will be accepted. But there’s no need for a tug of war. Make adjustments to the items that are most important to you. Come to a happy medium. Again, each agent is focused on getting the best deal for their client. This is where your agent is worth their weight in gold. Using the buyer’s net sheet to understand how much you actually need to come to the table with (the true purchase price)
Accepted Offer & Due Diligence
Due diligence is the time when you take reasonable steps to determine if you really want to buy the house. In other words – “checking things out” is on you. This means, hiring a reputable home inspector. If you want to avoid the flood insurance (which is crazy expensive) you want to check to ensure the house is not in a flood zone. Have the inspector check for radon, what repairs are needed and how long the major house systems and appliances are expected last. You could use these numbers to decide if you will go back to the seller and adjust the price of your offer.
Do as much research as you can now. I would also caution not to assume anything. If you’re thinking about painting the outside of the new house or changing the landscaping or something like that, reach out to the HOA and find out how much of a challenge that will be. Don’t be afraid to introduce yourself to neighbors and see what they have to say about the house and the neighborhood. Check the zoning in the area to see if there are any new buildings or stores on the horizon or if there’s a possibility for rezoning the schools. I also recommend checking out your local crime safety reports.
Once you’re firmly under contract and past your due diligence period, it’s time to move onto Closing & Prep where you prepare (both financially and physically) for your move.
Now that you know what every buyer should know when writing an offer, please share your experiences. Tell us below what you’re going through while you contemplate writing an offer. Do you have any suggestions for others?
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