Buying a house is a big step and can be daunting. This is likely to be one of the most expensive transactions you’ll ever make. Once you have identified the ideal property, you then need to decide how to bid for it. Do you put in a high offer to clinch it, and risk wasting money? Or a low offer and risk losing your dream home? What are the best tactics to ensure you get the perfect property at the best possible price? We’ve put together tips and guidance to help you in making an offer on a house.
Before you make an offer
We understand how exciting it is to buy a home, but before you get carried away, get a preapproval letter and select a real estate agent to work with.
as soon as you decide to buy a home and before you even start looking, you should begin the preapproval process. There are two major reasons for this:
- You’ll be able to make an offer as soon as you’ve found a place you love.
- Sellers prefer home buyers who have lender preapprovals.
Find a real estate agent
Real estate agents know the market and can offer advice about every aspect of buying a home. With a preapproval in hand and a real estate agent at your side, it’s time to get started on your offer.
Making an offer on a house
After you’ve secured your preapproval letter and real estate agent and chosen your dream property, the next step is to go through the offer procedure.
Decide how much to offer
The first thing you need to do is prepare and do your homework. Look up asking prices and sold prices of similar properties in the area (in terms of type and size) as the one you’re hoping to buy. This will help you to better understand the local market and reassure you that the price that you’re willing to pay is right for the area you are buying in. There are essentially two ways of thinking:
- Make your first offer your best offer: show you’re a serious buyer and try to avoid getting into a drawn-out negotiation process.
- Start with a lower offer: try and bag a bargain whilst giving yourself some wriggle room to negotiate if your offer is rejected.
Decide on contingencies
Contingencies are clauses in a sales contract that allow buyers to walk away from a sale with their earnest money, which is essentially a type of security deposit. Common contingencies include the home inspection, appraisal, financing, title. If you’re buying a home and can pay cash for it, you will not need to include the financing contingency or the appraisal contingency, which is required by lenders to make sure that the property is worth at least the mortgage amount.
Decide on the earnest money to offer
The earnest money requirement varies from market to market but is typically 1% – 2% of the total home price. That said, the more money you offer, the better your offer looks in the eyes of the seller. Your earnest money deposit will be held in an escrow account and later applied to your mortgage down payment.
Write an offer letter
Now that you’ve come up with an offer amount, it’s time to convey that offer to the seller. If you’re working with a real estate agent, they’ll draw up the offer letter for you. You or your real estate agent will finalize the letter and submit it to the seller or the seller’s agent. Then, all you can do is wait for a positive response.
Negotiate the price and terms of sale
A seller can do one of three things when they receive your offer. They can accept your offer, make a counteroffer or reject it. Was your offer accepted by the seller? If you answered yes, congratulations! You can now sign the sales contract and produce the earnest money check. It’s up to you to determine what to do next if the seller responds with a counteroffer. Your real estate agent can contact the seller or their agent to learn more about the seller’s expectations for their home and whether or not they’re willing to negotiate on price and terms with you. Sometimes, things just aren’t meant to be and the seller will reject your offer.