When it comes to making an offer on a house, how do you know the right price?
Considerations like square footage and the number of bedrooms may be necessary when determining if this property is worth your investment. But how about the neighborhood? What about proximity to work or public transit? Once you make an offer, will there be any contingencies in place, such as inspections or financing arrangements that could complicate things down the line?
These are all factors that should be considered before putting in an offer and can help determine if this property is worth your investment. And when a lot is riding on the offer because you truly want the house, the anxiety of getting a rejection can be devastating.
Here are three things that’ll help you prepare and submit a successful offer.
Know what you can afford
Shopping for a home is easy. Knowing what is affordable can be tricky, but it doesn’t have to be. Before looking at properties in the six-figure range, take an honest, thorough look at your finances.
First, make sure that this purchase will work out well financially with all factors. Start with your monthly bills, like car payments, student loans (if applicable), utilities, or credit cards. Then, consider your living costs. Once you’ve determined your expenses, factor in the estimated down payment, home insurance, HOA fees (if applicable), and property taxes.
Along with the down payment, you need to know the closing cost. This covers appraisal fees, discount points, title origination, and the like.
So before going on those open-houses and falling in love with some homes, get pre-approved for a mortgage loan. This way, you’ll know if your finances are ripe for buying a house or if you should wait.
Find an agent and work with them on the offer letter
When you’ve locked in on a home, the price is usually negotiable. Hence, the offer. Just because the seller priced it at, for example, $430,000 doesn’t mean that’s the price you’ll settle on. Unless it’s a seller’s market, which means you’re competing with other buyers for one home, the price on the house doesn’t have to be the price on the offer.
Any good agent will tell you if you should offer what the seller’s asking or if you can go in lower because:
- The house has been on the market for months
- Similar properties in the area have sold at lower prices
- You’ve uncovered a major repair issue but still want the house
This is why it’s always better to have your agent represent you in transactions. They have the know-how and stay up to date on the market.
Make an offer to purchase the home
Once you’ve figured out what you can afford, learned what other houses in the same neighborhood cost and have found the right agent, make an offer to purchase the home.
The offer letter typically contains what you’re willing to pay for the property, the contingencies, closing costs, down payment, earnest money (a deposit on the home, which goes into escrow), and your ideal closing date.
If the seller agrees to everything, you should be close to getting your dream home. If not, some negotiations may have to take place. Your real estate agent may suggest trimming your contingencies.
Contingencies are conditions on the purchase of the home. These may cover home inspection, financing to buy the house, and home appraisal. Some offer letters may also include a home sale contingency for buyers who are in the process of selling their homes. What this contingency stipulates is that the buyer’s home must be sold first before they can push through with their purchase.
These conditions may turn off some sellers, especially if you ask a lot. A home inspection might be a necessary contingency if the property was built decades ago. If you’re not OK with letting go of that condition, it may be time to move on to another property.
But if you truly want the property, you’ll have to weigh the risks.
Some things that make it easy for sellers to accept your offer are:
- A short closing period, which means the seller can unload the property fast
- Paying in cash, which usually trumps other high offers
- Depositing earnest money, which tells the seller you’re serious about buying
The home buying process can be daunting and exciting. The prospect of owning property is one many people dream of since it helps with financial security. So when you’ve found that dream home, make sure your offer stands out. Therefore, plan for it and work with an agent. Do everything possible to secure an acceptance.