Making an Offer on a Home

You’ve done it! You have found your dream home and are ready to make an offer. Although there are several important pieces to completing this process successfully, no one way is “the right way”. Purchase contracts differ throughout the nation and vary in length and terms. Negotiating is a give-and-take event that begins with the initial offer. A good offer is the first stepping-stone to a successful deal. Here are several things to think about as you craft your offer.

Lean on your real estate agent

Assuming you're using an agent, the vast majority of times they will actually be presenting the offer for you. This is helpful on several levels.

First and foremost negotiations (espeically about someone's home) can get emotional and that may not be the best way to get to a deal that works for both sides. So it helps to have a dispassionate, skilled person acting as an intermediary.

Second, a good agent will be critical in helping you put together an offer that meets your needs, but also has an appropriate level chance of being accepted by the seller.

The decision on what to offer and how is ultimately yours, so you need to be 100% comfortable with it. But have a good long sit down with your agent to craft an offer that you agree on.

Lean on your loved ones

This can be a very stressful decision and can bring out the best and the worst in people & relationships. Have a calm, patient and open dialogue with your significant other about the offer. You both need to feel comfortable with it and should share ownership of it. Otherwise it could be a point of contention down the road.

A good offer contains several key points

Your offer must make sense and be realistic. If you had a dream last night that you got the house for $30,000 that’s not a good enough reason to use that as your initial offer. It must be based on comparable homes in the area selling within the last six months. Make your comparisons based on homes of the same size, condition and location. It isn’t accurate to compare a home that sold in the same neighborhood but was two bedrooms shy or thirty years older.

Make sure your loan and financing terms are realistic and up to date. A offer can easily been turned down because the buyer's mortgage interest rate, origination fees and more were not based on current lending conditions. Make sure that you have allowed for a reasonable amount of time to obtain financing.

A good idea in any offer is to include clauses to allow for continued negotiation in the event of problems. Something is bound to come up. If not, you’ll be the only person in the world who had an absolutely flawless home buying experience. Neither you nor the seller will be aware of all property defects. Use a property inspection clause so that price negotiations can reopen in the event of corrective work.

Consider writing a letter to go with your offer

Writing a letter to the seller to accompany your offer can be a great strategy in a couple of ways. Sellers are people too! Believe it or not, bringing yourself and your family to life in your letter can often sway a seller as much as a few thousand dollars more on the sales price. Talk about the things that you love about their home, let them know why it is you feel like it's ideal for you and your family. Most sellers are proud of their home and want people to be happy. This could be the difference between accepting two offers at the same basic price.

A good letter also gives you the opportunity to offer some rationale behind your offer. You can reference comps in the area, pieces of work you expect to have to do to the house, etc. Just be sure and do it in a tone that doesn't make them defensive!

Offer a little more "earnest money"

Earnest money is essentially a deposit you make when you make your offer that will help demonstrate how serious you are about the purchase. Typically (although this does vary), if you pull out of the deal as the buyer your earnest money gets forfeited. If the seller pulls out you will get it back. If the deal goes through, it is applied to your payment for the house.

The more earnest money you offer, the more serious your offer will look. But remember, if you pull out of the deal - you are likely to lose that so use it carefully.

Put a clock on it

You may want to consider giving the sellers a limited time to accept your offer. This can be good because it will give them a sense of urgency. It also will ensure that you'll get an answer in the timeframe you need so that you can move on if this deal doesn't go through.

Contingencies

Contingencies are a whole world of issues unto themselves and it would be a mistake to oversimplify them here. What you should know is that some contingencies protect you, and some protect the seller in the event that something unforeseen happens along the way after you've had your offer accepted.

You may be able to increase the likelihood of your offer by waiving some of the contingencies that might protect you (e.g. making the purchase contingent on the sale of your current home) - but you should be very mindful in doing this. These contingencies exist for a reason. Don't get swept up in the moment and waive something that could prove expensive or painful later.
 
Congratulations! You've made an offer, now what? 
You're one step closer to moving in to your new home. But be patient, there's a lot more to come. First the seller needs to respond and until you have this deal in writing, it's not done. They may accept your offer, they may decline it and accept someone else's, or they may counter. Be prepared for any of those and take it one step at a time.