Learn How To Make An Offer On A House
Carey Chesney5-Minute Read
October 19, 2021
So you’ve found the house of your dreams – or least the right house for right now – congrats! The next logical question floating in your head is "do I know how to make an offer on a house?" Fear not, here we’ll cover all the ins and outs of this process, giving you the tools and knowledge to put yourself in the best possible position to secure your new home.
Drafting An Offer Letter
You may be wondering where to begin to ensure you submit the best offer possible. Now is the time to huddle up with your real estate agent to do the following in order to draft a competitive offer:
- Confirm feasibility based on price: Prior to the home search, you probably already asked yourself the question “how much money do I need to buy a house?” If you received preapproval from a lender before the home search (which you should) then the numbers have already been run and you know exactly how much you can pay. If not, now is the time to take that step before you submit an offer.
- Run comps and understand the local housing market: Your real estate agent will run comps, which is the process of reviewing recent sales of similar homes to the one you're thinking of making an offer on to determine if the asking price is too high, too low, or just right. Once they share this information, it’s time for you to decide what price you want to offer.
- Set the offer price, contingencies and timelines: Now that you know what you and your agent think the home is worth, it’s time to consider other factors that should inform your offer price and the other components of your offer. Things like seller motivation (how fast they want to sell) and offer timing (when you should submit) are important to take into consideration when drafting an initial offer. Your real estate agent can fish for information on these topics by talking to the listing agent who represents the seller. They can also determine preference regarding inspection contingency timelines, closing date, financing, and a slew of other factors (beyond price of course) that can influence whether or not your offer is ultimately accepted.
Making An Offer On A House
So you’ve hammered out all the details and you feel ready to submit an offer – great! Keep in mind that you should be prepared to negotiate for your desired home’s purchase price or walk away if the terms don’t match your budget. As hard as it sounds, it’s time to try and take the emotions out of it and determine what your max purchase amount is and stay firm on that. Determining this before you make the offer is critical, so you won’t be scrambling to devise a strategy once negotiations begin.
Negotiate The Price Of The House
Once you submit the offer, there are three ways the seller might respond to an offer. They may accept it as-is (yay!), respond with a firm no (boo!) or present a counteroffer (the most common response). This puts the negotiation process in motion and there are a number of negotiation tactics that buyers can use including countering with an offer that meets somewhere in the middle, staying firm on the offer already submitted, or meeting all of their counter offer demands.
If there are other offers for the home in play, there are also various strategies you can employ to win a bidding war, including changing your offer from a loan to cash or waiving various contingencies, just to name a few.
Close The Deal
Once both parties agree to all of the terms of the deal, the contract is updated and the house is officially “under contract.” This marks the beginning of the home closing process.
The first major step is usually the inspection contingency where you hire a professional to find out if there are any issues you may have missed during your showings. Once that is complete more negotiations occur regarding asking for repairs, a reduction in price, or cash from the seller at the closing table to help with your closing costs. Next up is the appraisal, where your lender sends an expert out to assess the value of the home.
If it comes in at or above value, things keep moving along. If not, more negotiation can occur as you try and ensure you don't overpay for the home and the lender feels comfortable approving your loan. Side note: cash deals do not require an appraisal, since there is no loan. Once you are through appraisal the only big item between you and the closing table is the final approval of your loan.
How To Make An Offer On A Bank-Owned House
Before you consider buying bank owned property, there are a few things you should keep in mind:
- Bank-owned homes likely have been sitting, unlived in, for a while. This means their condition could be, well, not optimal.
- Homes are sold as-is, so you usually can't ask for repairs.
- There will likely be a lot more paperwork than a traditional sale, so patience is a virtue.
The Bottom Line
Using the knowledge and strategies outlined here, work with your real estate agent to prepare, submit and negotiate the best offer possible. Knowledge is power, so do some more research on negotiating and bidding war strategies to make sure you’re ready when the time comes to make that offer on your next home.
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How Much Money Do You Need To Buy A House?
Wondering how much money you need to buy a house? Check out our handy guide to learn about the costs associated with home buying—and how much cash you’ll need.