Insider's Guide to Saving Money &
Eliminating Risks When Buying Your First Home!
Chapter 6: Making An Offer
By this point, you have found a real estate agent you trust, contacted a few lenders, and seen a few homes. If you haven't made up your mind on a home yet, you should take your time and keep looking. But keep in mind that if you wait too long, you may end up in a bidding war with another buyer.
Making an offer on a home is a huge step. You will be taking on the responsibility of a mortgage, repairs, lawn care, and other chores that homeowners sometimes gripe too much about.
While you should be cautious, you should also make an offer on a home that you really like within a week after seeing it. This will put your mind at ease so that you can think of all the other items you will have to get done before the closing.
What To Do Before Making An Offer
Before you make an offer on a home, you should do the following:
- Attend open houses
- Find out more about a property
- Find out about taxes in the area, and
- Have an appraisal done before making an offer
These suggestions will help you make the most informed decision possible when it comes to buying your first home.
Attend Open Houses
Attend as many open houses as you can in homes that are in the area where you want to live. This will give you the opportunity to see what is out there, the going price of homes in the area, and also give you a basis of comparison when looking at other homes.
Open houses are fun because you will be able to look into every area of the home without having to worry about the homeowners and real estate agents following you around. Many times, you may even find your new home this way.
Almost every weekend in most neighborhoods, there will be an open house. Stop by and see for yourself what the homes in the area look like and what you can get for your budget.
Find Out More About A Property
If you find a home that you might want to buy, you should find out everything you can about the property first before making an offer. Visit the county clerk’s office or land records office to see how much the current homeowners paid for their land and the value of their property.
This will give you an idea of how much you should offer for the home. If the home is in an area that has seen better days, then you can make an offer that is less because when you sell the property some day, you may have to lower your price as well.
Find Out More About Taxes In The Area
As a homeowner, you will be paying yearly property taxes, local taxes, school taxes, community dues, and other taxes that could drive your household spending through the roof. Before you commit to living in a certain area, make sure you understand everything you will be paying each year.
Your real estate agent should have the neighborhood information that will help you decide where you want to move. You can also visit your local tax office and see how much the current homeowners paid in taxes last year.
Have An Appraisal Done Before Making An Offer
Most first time home buyers do not have an appraisal done until their lender asks them for one. But you are well within your rights to ask for a home appraisal before making an offer. You will not have to share the findings with anyone until your lender asks to see the appraisal. Typically appraisals are completed after the offer is accepted and the lender has reviewed it.
How To Write A Purchase Offer
This is the most important step when making an offer to buy your first home. The purchase offer should outline everything you expect from the homeowner and what they can expect from you. You should include the following in your offer:
- price being offered
- amount of deposit on the home
- amount of money you will be putting down on the home
- mortgage terms
- Contingencies (such as appliances that will stay repairs that will need to be made, removal of items in the yard, etc.)
- when closing will take place
- specify who will pay which fees
- any reports that will be needed, and
Each of these categories should be explained in its own paragraph. You should try to be as specific as possible when writing up a purchasing offer.
Each state has its own laws concerning contingency, amount of time a buyer has to respond to the offer, and fees that are to be paid. Be aware of these laws before sending your offer or you may end up with a counter offer or a rejection.
Have a lawyer or your real estate agent look over the purchase offer before sending it. They may have some advice or additional categories you should add depending on the age of the home, the neighborhood, and the laws that exist. If you make an offer that is reasonable, well written, and hard to break, then you will be on your way to buying a home.
Making An Offer
After completing your research, you will be ready to make an offer on your first home. You will have to visit your real estate agent to sign a formal agreement that will outline your offer and for how long you will be making this offer. Most agreements allow the sellers anywhere from 24 hours to three days to a week to consider the offer, depending on circumstances.
In this time, the offer may be accepted, rejected, or a counter offer will be made. You will have to decide what you will want to do next if the offer is rejected or another offer is made. If the offer is accepted, then you will have to contact your lender, a home inspector, and make arrangements for your move.
Most homes will go to closing within a month after an offer has been accepted. This may seem like a long time, but it is not. You will have plenty to do in the meantime.
Low Or High Offers
Hopefully, by researching the neighborhood, the property, and the value of the home, you will be able to come as close to the seller’s price as possible. Sometimes, though, this is not possible. There may be circumstances that may prohibit you from making an offer that is close to the selling price.
Making The Right Offer
The closer you can come to the asking price, the better off you will be. Once the home inspection is complete, the homeowners may have to come down in price anyway because of the repairs they will have to make.
Making the right decisions when buying a home are not always made quickly. You should play by the rules and just see what happens. If you get into a bidding war and cannot bid any higher, then it is best to let the home go and find another. You should not be a slave to your first home by buying one that is over your budget. There are many homes available if you keep looking.
How To Handle A Counter Offer And Offer Rejection
Sometimes, if you give homeowners an offer that is lower than their asking price, they may offer a counter offer. This is usually an offer that is more than your offer, but a little less than the asking price.
Counter Offer
Depending on where you live, the laws pertaining to counter offers will vary. Typically, the number of counter offers is limitless, but no counter offer can be the same. While counter offers are usually concerning money, these offers may also contain the following:
- Ownership of appliances
- Repairs
- Time frames for closing, and
- Time frames for counter offers
Buyers and sellers may only have hours to accept, reject, or offer another counter offer after receiving one. This can be a very stressful process, especially if you are dealing with a seller that has other offers on the table. While most homeowners will reject an offer if it is too low or they have received another, some will try to get the most they can from the sale which can include the smallest items in the home.
If you are determined to buy a home, but still want a lower price after the seller has reacted with a counter offer, you can try to find a price that will suit everyone’s needs. If you are making a counter offer that does not make that much of a difference, you should weigh the odds that another offer has been made, the homeowner will reject your offer, and that time is ticking for everyone.
Try your best to accept the counter offer before making one of your own. Is it really worth losing your dream home over one or two thousand dollars?
Dealing With Rejection
The hardest part about an offer rejection is that the homeowner does not have to answer your offer. If you do not hear from the homeowner within a week, it is safe to assume they are not interested in your offer. While this can be frustrating, you will have to move on. Begin your house hunting again and try to stay positive.
If the homeowner gives you a response in the form of a rejection, they may site the reason why in the paperwork. If your offer was too low, they had another offer, decided not to sell, or want to wait for a higher offer, at least you can move on without wondering why your offer was rejected.
Considering Items In The Home
When you are writing your purchase offer, you should consider the items that you would like to keep and items you would like to have removed from the home. These items can include:
- Certain appliances (such as the washer and dryer)
- Lighting fixtures
- Storage fixtures
- Single air conditioning units that fit into windows
- Hardware from windows and doors, or
- Pools
You should put these items in writing so that you will get them with the home. Some homeowners may try taking certain items with them either because they didn’t know that you wanted them or because they were not supposed to be sold with the home to begin with. Be sure to obtain a list of items the homeowner is selling with the home so that you can compare it to your list.
This can also work in reverse. If there are items that you would like removed from the home or the property before you move in, you should specify these in the offer.
Understanding The Seller
One of the key elements of making a solid offer is having an understanding of the seller. Your real estate agent will be able to tell you a little about the seller that may help when trying to come up with a fair offer.
When deciding on an offer for the home, you should find out the following about the seller:
- How eager are they to sell their home?
- How long have they lived in the home?
- How many offers have they received?
- How many have they turned down?
- Have they lowered their asking price?
- Are they relocating to another area?
- Do they need to sell their home quickly?
- Are they waiting for their asking price?
These questions, although you may not know the answer to some of them, will help you make an offer that will be looked at by homeowners and taken seriously. Sometimes when a homeowner needs to leave the area in a certain amount of time they will lower their asking price. This could be an advantage for you, but if the homeowners have already lowered the price, they may not want to lower it any further.
Make a reasonable offer and see what happens. Depending on the circumstances, it may be accepted.
What To Do In A Buyer’s Market
In a buyer’s market, you will have more choices when it comes to the types of homes you can purchase. Depending on how long the market favors the buyer, you will also have the luxury of taking your time because bidding wars are much less. When buying your first home, you should check out all your options. That home you couldn’t afford a few years ago may be in your price range today.
When looking for a home in a buyer’s market, you should do the following:
- Stay current with the listings in your area
- Sign up for free email listings and newsletters
- Check out homes that have recently been reduced
- When making an offer, ask for closing fees to be paid for by the seller
- See if there are other offers, such as appliances that come with the home
- Ask for certain allowances (carpeting, roofing, siding, ect.)
- Do not be afraid to offer a lower price, and
- Ask for a shorter response time
In a buyer’s market, homeowners may offer these options to you as incentive to buy their homes. They may also offer warranties on appliances that you should take advantage of.
There are dangers that you should consider when buying in a buyer’s market, however.
- If you are not planning on living in the home for more than three years, you may want to wait until the market changes or plan to live in the home longer. Many times, market trends can last for a few years. If you need to move after a year or so, you may have difficulty finding a buyer and you may have to sell the home for less than what you paid for it.
- While most homeowners stay in their homes for at least two years in order to save money in taxes, marketing trends have been known to last longer. You should be prepared for this when buying your first home.
- Make sure a thorough home inspection has been completed before buying the home. If you decide you cannot live there after you have bought the property, you may have difficulty selling it and you will have to spend more money making repairs.
Even though you cannot predict how the market will change, you should consider a home that you can afford, that you will want to live in for a long time, and one that can be improved upon while you own it.
What To Do In A Sellers Market
In a sellers market, you will have to play the game slightly different than you would in a buyer’s market. In this type of market, there are many buyers who will want to buy homes that are attractive and priced within their budget. Homeowners will have their pick of offers to choose from so your offer will have to stand out in more than just price.
When looking for a home in a seller’s market, you should:
- Make an offer that is close to the asking price or slightly over
- Send a pre-qualification letter from your lender with the offer
- Choose a closing date that is sooner rather than later
- Do not ask for too many contingencies
- Send a personal letter
- Promise more of a down payment, and
- Use a real estate agent that gets things done quickly
In a seller’s market, you may also want to think about the dangers of buying a home. If you make an offer that is too high and you find out later on that the mortgage payments will be a struggle, you may have to sell. Depending on changes in the market, this may be more difficult than when you were looking for a home.
Buying your first home during this time may also be difficult because you will not be able to put much down, you may only qualify for a certain amount of money which may not be enough to compete during a bidding war, and you may be out bid by those who have more experience than you do.
When you decide to buy a home, you should be looking at your finance situation, the market, and the asking price for the homes you are interested in making an offer on.
I
f you can wait a few months to see where the market is headed, then maybe this is the best way to save more money and find a home that is affordable. This is a waiting game that no one wants to play, but may be necessary, especially if this is your first home purchase.
Seller’s markets and buyer’s markets have their advantages and disadvantages, but in the end, the offer that you make will determine whether your offer will be accepted.
Next: Chapter 7 - Closing The Deal!
