Finding your perfect dream home is no easy task. In case you have managed to complete this task, you will still have to make that perfect offer to close the deal with the seller.
One thing you have to do, before making an offer for your home, is to get preapproved by a mortgage lender. You should easily find such a lender through mortgage leads.
Most sellers prefer selling their homes to buyers who come with lender preapprovals, as their details will already be verified. Also, the preapproval process will help you understand how much you can offer for the home that you want to buy.
Working with a qualified real estate agent can help make the process of home buying easy and hassle-free. Although you have to pay a commission, this will save you a lot of money in the long run.
Once you have a real estate agent by your side and a preapproval letter in your hand, you are ready to make that offer. Here is what you need to do, to make sure your offer stands out:
Decide on the Offer Price
Finding out how much money you can pay, is the first step you need to take, while making an offer on your dream home. It is not about throwing a random number at the seller. You need to have a budget and you have to stick to it, if you want to make the best offer. At the same time, make sure you don’t make a lowball offer that might insult the seller.
Here are a few things you need to consider while determining the final price for the home you want to purchase:
- The duration for which the home has been on the market
- The selling prices of comparable homes in the area
- The approximate cost of repairs and renovations, if any
- The kind of competition you are facing as a buyer of this home
- The exact market value of the house in the current scenario
- Your budget, considering your current financial situation
Discuss these things with your real estate agent to figure out the exact price you need to offer. Although you may have to do all the math by yourself, your real estate agent should be able to tell you whether your offer looks successful or not.
Consider the Contingencies
Every sales contract comes with a set of escape clauses or contingencies that help the purchasers walk away with their security deposit or earnest money. Some of the most common contingencies are home appraisal, home inspection, title, and financing.
In case you are paying cash for buying your home, you may not need the financing contingency or even the appraisal contingency.
Find Out How Much You Can Offer as Earnest Money
Whether you are paying cash or taking a loan to buy your home, you will have to pay up some advance which is usually called the earnest money or the good faith deposit. This will usually come up to about 1 to 2 percent of the purchase price. The higher the earnest money, the better your offer would look to the seller.
This money will be in an escrow account until it gets applied as your mortgage down payment. If you are paying a larger earnest money, your seller would consider you as a serious buyer who has assets to back up his mortgage.
Write Your Offer Letter
Once you have decided on the offer amount, your next step would be to actually make that offer on paper. Your real estate agent should help you in drawing up the offer letter. If not, you can draft one by yourself, by including the following details:
Your name along with the name of the person who would be sharing the house title with you
- The Home Address
- The offer amount
- Contingencies if any, that need to be met before the actual sale
- Concessions if any, to cover repairs or closing costs
- List of items to be included, such as appliances, lighting fixtures, or window treatments
- Earnest Money amount
- Mortgage preapproval letter
- Expected date of closing
- Date of possession
- Last date by which the seller should respond to your offer
Include a few reasons as to why you want to buy the house. Once you finalize your offer letter with your real estate agent, you can submit the same to the seller or his agent and wait for his response.
Negotiate For Best Terms and Price
If the seller accepts your offer right away, you can just pay up the earnest money and sign the sales contract. If not, he might either reject it or make a counteroffer. A counter offer from the seller would make room for some negotiation on the terms and the price.
Here are a few negotiation tips that may come handy here:
- Involve your real estate agent while negotiating with your seller.
- It is fine if the price is slightly higher than your offer price, as long as you can afford the same
- Let go of your repair or concession requests, if the seller is ready to accept a lower purchase price
- Identify the pain points of the seller and try to find a solution
- Try and be more flexible with your offer
If your offer is heartfelt the seller might be compelled to accept it. If not the seller might reject your offer.
Don’t treat this rejection as the end of the world. It just means that the seller may have received a higher offer from another buyer. All that you will have to do is restart your house hunting process. You might find another dream house, somewhere around the corner.
The Bottom Line
The purchase of a home doesn’t have to end with making an offer. There is always time to walk away until you sign the contract. After all, you are the one who will be living in the house that you are going to buy. If you are not comfortable with the purchase terms you don’t have to force yourself to buy the home.