Okay! You’ve seen at least a dozen homes, perhaps more, and now it’s time to make an offer. Ah, but it’s not that simple! There are many decisions for you to make. if you’ve done your homework these decisions will be much easier to make, and the whole process will be less stressful. Below are some important issues you need to deal with as soon as you’ve selected a home to purchase.
VALUE: The first step is to determine the price or price range you are ultimately willing to pay for the property. To do this you need to review recent comparable sales of homes located within the neighborhood you’ve selected, preferably limiting your search to the past 6 to 9 months. Current market conditions also heavily influence price (remember that rule about supply and demand?) Real estate agents typically are the best sources for this information because they usually have comprehensive knowledge of the homes that have sold as well as the terms under which they sold. Real estate agents also have the most direct contact with home buyers, giving them invaluable insight into today’s consumer.
OFFER PRICE: Let’s face it, most people feel compelled to offer less than they’re ultimately willing to pay. There are many theories on this issue, ranging from “10% below list price” to “What have I got to lose?” My advice is to reach a compromise between your opinion of what is “reasonable” and advice from your real estate agent. Find out the seller’s motivation (how badly does he/she need to sell?) and determine how patient and tenacious you’re willing to be in the pursuit of the lowest possible price.
OFFER TERMS: These can be nearly as important to a seller as the price. Because the length of the escrow or settlement period has a financial impact to both a buyer and seller, find out what the seller’s optimum closing date would be and try to accomodate it. Other terms to address in an offer include repair of any termite and/or fungus damage, who will pay for what inspections, who will pay for a home warranty, and time frame for removal of all contingencies to name just a few.
CONTINGENCIES: Protect yourself and give yourself the opportunity to have inspections on the home, review documents related to title, solidify your mortgage, etc. Contingencies reduce the risk of you losing your earnest money deposit should you decide not to buy the home for certain reasons after your offer has been accepted. Carefully consider the time periods that may be necessary for you to complete your “due diligence” phase of the purchase, and make sure your contract addresses these timeframes clearly.
It is a very good idea to ask your real estate professional for a copy of a standard purchase contract as you begin searching for a home. This gives you an opportunity to preview all of the components of the offer and ask questions well in advance of actually writing an offer on the property. Remember, the more prepared you can be the less stressful the whole experience may be and the less chances you will have for mistakes!
The most important aspect of making an offer on any home is to structure that offer to be as attractive as possible to the seller, especially when there are multiple offers on the property. Make every effort to identify all of the seller’s goals, financial and otherwise, then make them an offer they can’t refuse!!