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How to Make A Purchase Offer On A Home

Written by on Thursday, 12 March 2015 2:55 pm
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You're ready to make an offer on the home of your dreams. But before you do, make sure you're really ready. Ask yourself and your household members if this is the home for the next five or so years. Make sure everyone is on board with commitments to make it work, from putting off the dream vacation to putting in the elbow grease to clean, paint and do the yard work.

Have your real estate agent pull up the most recent sold comparables (CMA) within a reasonable radius of the home, so you can compare the home with other similar homes in terms of location, size, features, and amenities.

Next, consider the most current market conditions, so you can choose the right offer strategy.

In a buyer's market, discounts are common because there are fewer buyers, more properties for sale, and home prices are soft or falling so offers under list price are common.

In a seller's market, homes sell quickly for full price or higher because there are plenty of buyers and few homes for sale.

Whether you are in a buyer's market or a seller's market, your goal is to buy the home at a fair price. If you were the seller, what is the lowest possible price you'd accept?

To show the seller you're serious, include a copy of your lender's pre-approval letter, along with a cover letter summarizing your strengths as a buyer in terms of creditworthiness, flexibility in closing, and why you love this home. Include a copy of the comparables you used to show why your offer is a fair price for the property.

If the seller's home is offered at a reasonable price, don't waste time. Pay asking price or close to it. A home priced to sell will sell quickly and you'll lose it if you mess around.

Offering too little for a property is risky. If the seller feels insulted by your offer, you've lost the opportunity to negotiate. On the other hand, some sellers are simply unrealistic about their home's value. Maybe your offer will be their wake-up call. The seller will probably respond with a face-saving still-high offer, but at least they're negotiating with you.

If your offer is conditional, such as your need to sell another home before closing on the seller's, you'll have to find a way to sweeten the deal, such as a full-price offer. Few sellers will accept a discount and a contingency.

Your real estate professional will help you draft the offer with a price, estimated closing date and terms, including earnest money (a guarantee that you'll perform as a buyer in good faith,) final approval by your lender and your right to have an inspection. Your earnest money check will be forwarded to the escrow agent when your offer is accepted.

You'll have a brief period to get your home inspections completed. Your home inspector will go through the home with you and point out the condition and potential lifespan of all systems and appliances. You should only renegotiate when a problem wasn't obvious before, or when a system is found to be unsafe or not functioning.

Once you and the seller have agreed to terms, your offer is now a binding contract and you're on your way to owning a home!

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  About the author, Blanche Evans

3 comments

  • Comment Link Barbara Deesing Friday, 13 March 2015 4:58 pm posted by Barbara Deesing

    Sellers need to keep in mind that the buyer will, if not paying cash for the property, have an issue of having to come up with more than the anticipated down payment if the lender's appraisal is found to be lower than the purchase price. As for buyers "getting stuck with a lemon" it pays to get inspections done during the home buying process, and also purchasing or asking the seller to purchase a home warranty insurance plan. Some Home Warranty plans have upgrade options for buyers on heating and air conditioning systems. Read the fine print for exclusions of coverage. Do your homework!

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  • Comment Link  Paul Howard Friday, 13 March 2015 12:17 pm posted by Paul Howard

    Nice article.

    Practices vary by area. One thing to be aware of is the wording of the inspection contingency in your contract. When the inspector says a system (e.g. roof, furnace, hot water heater) is operating beyond its life expectancy that generally will not give you an 'out'. The inspection contingency may say specifically that "beyond life expectancy" does not mean defective and is not a basis for 'renegotiating'.

    Whenever possible go into a negotiation with a "Plan B". The ability to walk away is the only strong negotiating position.

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  • Comment Link abraham marrero Friday, 13 March 2015 10:13 am posted by abraham marrero

    One thing that many buyers overlook when buying any property are the hidden problems that a home may have because of the appearance of such property: if the buyer does not do his own research there is no way of telling if the asking price is really fair and accurate, so do the math to be able to anticipate any unforseen problems with the home that the naked eye can not see due to many hidden problems that can be very costly to the new buyer down the road l.o.l its like buying a used car just cause it looks good and sounds good at first doesent mean is good you may just end up with a lemon but once you.buy you are stuck with the headace!

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