Putting the offer on a home is an exciting and scary part of the real estate process. You’ve been house hunting with your REALTOR® and you think you’ve found the one. Now is the time to write up an offer that the sellers will accept bringing you closer to your dream of home ownership.
The challenge for most home buyers is what to offer in terms of price for the house. Most buyers will know what their limits are because they decided to become prequalified by a lender. However, what a you can afford to spend doesn’t really matter to the seller. The seller is going to want the most money possible, you will want to purchase the house at the lowest price possible.
This is where negotiation begins and having a great REALTOR® makes the difference.
The first step in determining what to offer a seller is to find out what the home is valued at before submitting an offer. This is often difficult for home buyers, who are going off of the emotion of the buying process. Your REALTOR® should create a comparative market analysis (CMA) on the home. The CMA is a report where your REALTOR® will gather comparable values of like homes in the neighborhood that have sold recently to determine what the market says a home should be valued at. Comps are homes that are similar in size, location, and amenities to the home you want to put an offer in on.
Try your best to keep the emotion of the home purchase out of the negotiation process. While this can be difficult, using a logical approach will allow you to keep a clear head during negotiations. The best thing to do is know what you want to pay for a property before you make your first offer. If you’re working with a REALTOR® under a buyer broker agreement, you should feel free to ask what he or she would pay for the house.
Make sure that when you are looking at property that you’ve found a REALTOR® that you have a buyer broker agency relationship with. Without that buyer broker agreement, the agent is only allowed to provide enough information for the buyer to make an informed decision, but he cannot offer any further advice. Buyer brokers are under a fiduciary responsibility to you, the buyer, and as such must be forthcoming with how much they think a property is worth. When you don’t have this relationship, the selling broker is obligated to only suggest you pay the list price.
The sales price isn’t the only thing that you have to focus on when writing the offer. You also have contingencies that need to be included. Contingencies allow you to back out of a contract for a specific reason. There are typically three contingencies that accompany a contract to purchase: financing, inspection, and attorney approval. These are the most common but here are some others that you could discuss with your REALTOR® to see if you should include them.
- Sale of your current residence.
- Admittance to certain clubs, like a nearby private golf course. If this is the reason you are moving to that neighborhood, you want to ensure that you get in before closing on the house.
- Approval by the condo or co-op boards.
- Specific inspections including pest, asbestos, radon, lead, water – these may be covered under inspections, again please check with your REALTOR®.
- Compliance with building code.
- Approval of home owner association documents. If you’re moving into a neighborhood with an HOA you want to make sure you can live with the rules that have been set up.
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