Making An Offer On A Home: The Process
When people say that you need to make an offer for a house you want to buy, they make it sound so easy. Reality is a bit different; there’s a lot of paperwork involved and a little negotiation that needs to be made—wondering what you need to do? Here’s your step-by-step guide on how to make an offer for a house.
Step 1: Make sure you understand what making an offer on a house means.
Making an offer on a home isn’t like making an offer on some shoes at a yard sale. If you make an offer on a house, you’re going to be putting a guarantee that you will buy that home as long as contingencies noted in the agreement are met.
That means you can’t back out of that agreement unless the homeowner refuses your offer, the homeowner doesn’t complete his end of the deal, or if you are okay with forfeiting a large sum of money. That also means you can’t back out if you see another home that’s prettier. Are you sure you want to do this? If so, keep pressing on.
Step 2: Talk to your realtor about putting an offer together.
Once you decide you’re serious, talk to your realtor about your interest. This will lead your realtor to help you determine whether it’s financially feasible for you. If it is, your realtor will run some comps on the house to help figure out your ideal price.
From there, your realtor may offer to call a home inspection service to get a better idea of what you’re dealing with.
Step 3: Get that home inspected.
If you’re serious, ask to get the home inspected by a professional company. Home inspectors can see issues most people would ignore, which means that you get a better idea of what your house is really worth—and how much money you would need to fix things up.
Your home inspector will give you a list of things that need to be fixed, plus a general idea of the value of the home. This will provide you with a lot of information that you’ll need to make a better, more realistic offer.
Step 4: Put together an official offer.
Once you have all the information you can get on the home, you will need to put together an official offer package. In New York City, this usually includes a letter stating the following, at a bare minimum:
- Home Address. To make it legal, you need to mention the home address, the seller’s name, and your full legal names. Most offers also contain contact information, too.
- The Price. How much are you willing to pay for the house or apartment? You need to come up with a reasonable price.
- Fees, Down Payments, etc. Who do you want to cover closing costs? What are the fees going to be for your realtor? How much will be put as a down payment?
- Earnest Money. How much of your down payment are you willing to put as earnest money? In many parts of New York City, you might expect to put down as much as 10 percent in earnest money.
- Timing. How fast do you want to close the deal? Sellers often want to have a quick sale. When would this offer expire?
- Contingencies. Are there any repairs you consider to be a dealbreaker if they aren’t done prior to you buying the house? What happens if you lose your job? When you make an offer on a house, you get to add contingencies that give you an “out” if the deal isn’t to your liking. Repairs are one of these contingencies.
- Information on the Title Company. Many real estate companies will also request that you have information on a title company or attorney if need be.
Step 5: Send in your offer.
Once you’ve put in an offer, you can expect the homeowner to do one of three things: accept, reject, or make a counteroffer. If your offer gets rejected or there’s a counteroffer on the table, you can decide to keep searching or put together another offer.
Tips For Making An Offer On A House
There are a lot of little details that go into a good house buying offer, most of which your realtor will be able to explain to you. However, there are some things to keep in mind if you want to make an offer that will get accepted—or if you just want to save a few bucks.
- Don’t panic if you end up in a loop with a bunch of counteroffers. In most real estate areas, it’s normal to get multiple counteroffers on the table before you actually get an agreed-upon offer. This might be annoying, but haggling is just part of the process.
- Try to aim for lower than the original asking price at first. If you are in an area that doesn’t have a very competitive market, your home’s seller could be amenable to getting something below their asking price. In many parts of the NYC tri-state, it’s often better to just work with the asking price, simply because the competition is so high.
- Don’t be afraid to ask your real estate agent for advice. Realtors are professionals who have seen it all, especially if they serve high-demand areas. They will often be able to guide you (or at least nudge you) in the right direction in terms of offers.
- If you are making an offer on a distressed property, expect things to be more complicated. REO properties, foreclosures, and distressed properties are not easy purchases to make for a wide variety of reasons. If you aren’t patient, it may not be worth doing.
- Cash is (usually) king. Cash offers are almost always taken more seriously than those that involve a loan. Even having a higher down payment or a higher amount of earnest money can help move things along.
- But time matters, too. Most sellers wanted their homes off the market yesterday. So, being willing to make an offer that involves a short timeline. As long as the timetable allows for a reasonable time to repair anything you asked to have repaired, it should be good to go.
- It’s okay to appeal to a home owner’s human side. Sometimes just adding a heartfelt letter about who you are, what you do, and why you like their house can be enough to make someone more amenable to selling with you.
- Use an escalation clause. Do you HAVE to have this house? Are you worried about a bidding war? Use an escalation clause. This allows you to say that you’ll pay a higher price than the highest bid, up to a specific limit.
What Does An Offer Rejection Mean?
Let’s say that you found your dream home, and you’re ready to move in. Unfortunately, your offer wasn’t met with a counteroffer. It was flat-out rejected. At first glance, you might not know what to do. It’s a harsh way of saying “NO,” isn’t it?
In many cases, a rejection with no counteroffer happens for one of five reasons. These reasons include:
- The price you offered was too high. If you offer a price that’s too high, there’s a chance that the deal will fall apart once it’s appraised. This will mean that you will waste the seller’s time, and they know that. In areas where there’s lower demand, you might want to bid lower.
- Your bid was the lowest or slowest of the bunch. If the deal you’re offering is an outlier when it comes to price or timing, you’re probably going to get a firm rejection.
- They are playing hardball. Hard negotiations might make a seller choose to negotiate with no counteroffer—but with an encouragement to let you make the next move. Act accordingly.
- There’s something intangible here. Sometimes, the answer isn’t entirely clear. Homeowners have the right to say no for almost any reason, so don’t be too upset. There’s always another home.
Don’t give up!
If you’re worried that you’ll have to make tons of offers on a house you love or are scared that the offer you have will fall through, take a deep breath. This is just part of the house buying process, and it’s normal to be worried or frustrated. However, it’s all going to be worth it once you move into your new home.