When you have been house-hunting for months in search of the 'perfect home', you will feel the thrill of excitement that comes when you find the home that fits your ideal. It is true that making an offer on a home is very exciting, but it can also be stressful as you navigate the process with the help of your real estate agent. When you want a particular home, you will want to move forward with the right approach so the seller is likely to accept your offer.
When to make an offer?
As soon as you find a home that you would be happy to buy, you should at least consider making an offer on it. It is always tempting to wait and view a few more properties just in case a better home is out there, but this can be risky. A good rule of thumb is that if you would be devastated to have another buyer snatch up this home, you should make your offer immediately.
If current conditions indicate a "seller's market", where homes stay listed for a very short period before going under contract, you should try to make an offer the day you see the property. That is especially true if the home has just gone on the market. On the other hand, it might be a "buyer's market". If there is a large inventory of homes that have been on the market for awhile, it is probably safe for you to take your time and come back to that house after seeing a few others.
Factors to base your offer on
Start by having your real estate agent run a comparative market analysis, which pulls information about recent sales of properties that are similar to the one you want to purchase. These comparable properties (often called comps) should be in the same neighborhood, have a similar number of rooms, and be of a similar size. Your real estate agent can help you adjust these sale prices to account for differences between the property you are looking at and the ones that sold. Differences could include the age of the home, number of bedrooms or bathrooms, condition, and home improvements.
You'll also need to look beyond the hard facts of the home to get a sense of broader factors affecting your offer. For example, in a seller's market, you may need to make an offer higher than the asking price because you are potentially competing with other buyers. You can also consider anything you know about the seller's level of motivation to sell. For example, sometimes a listing will advertise that a seller is relocating, which lets you know they are likely to accept a lower offer.
5 key ways to make your offer appealing
- Get preapproved for a mortgage or submit a cash offer. Sellers want assurance that you will be able to come up with the money you have offered for the home. The absolute best way to do that is to make a cash offer, but that is not possible for typical buyers. The next best thing you can do is to get a lender to preapprove you for a mortgage. The lender will review your financial documents and credit report and give you a letter stating that they have approved you for a mortgage of a specific amount.
- Put up a hefty deposit. Your deposit, or earnest money, is the money you submit along with your offer to show the sellers that you are serious about following through with the deal. Once you and the seller have both signed a contract, the contract, and your state laws specify the circumstances in which you could get your deposit back. Otherwise, if you back out, the seller keeps your deposit. If you put up a high amount, the seller will know you are in a strong financial position and that you fully intend to go through with the purchase.
- Limit the contingencies in your offer. You are allowed to write several contingency clauses into an offer that give you the flexibility to back out without penalty. For example, you can make an offer contingent on the sale of your current home by a specific date or contingent on a clear inspection by a third party property inspector. The fewer contingencies you include, the more confident a seller will be that the deal will go through.
- Be flexible with timing. Unless you need to be in the home by a specific date, it can be helpful to indicate in an offer that your timing is flexible. While you do need to write in a closing date on the offer, you could include a note that you are willing to adjust the date to be sooner or later depending on the seller's needs. A seller might want more time to find a new home or might already have another home under contract, in which case they'll want a quick sale date.
- Write a personal letter to the sellers. While a purchase offer is a legal document, it does not hurt to add a personal touch. Write the sellers a letter telling them about your family, what you like about their home and neighborhood, and how much you are looking forward to taking care of the home they have made so beautiful. You can also include a photo of your family. This personal touch can go a long way in helping sellers feel good about you and your offer.
Ultimately, the key takeaway is that buying a home is a significant financial and emotional investment, and a well-considered offer is crucial to securing a home that aligns with your needs and financial capacity. If you are looking to further understand your home-buying options, chat with one of our loan officers today.