If you’ve found a home you’d like to buy, it’s time to make an offer. But, there are some steps to take before you make an offer.
1. Get Pre-Approved
You should begin the preapproval process when you start looking for a home. This will help you determine the price range for your home purchase and make it easier to negotiate with sellers.
To get pre-approved, you will complete a mortgage application and the lender will verify the information that you provide. Once you’re pre-approved, you’ll receive a letter that is an offer to lend you a certain amount. When you’re ready to make an offer on a home, this pre-approval letter will provide the seller with security that you will get the loan. It will also solidify you as a legitimate home buyer if you are competing with other buyers.
2. Find a Real Estate Agent
Real estate agents know the market and can offer advice about every step of the home buying process. A real estate agent will benefit you in many ways, including:
- Searching for a property – Once you know the features you’re looking for in a home, a real estate agent will search for homes that meet your criteria in the areas that you do (or don’t) want to live in.
- Access to homes – After REALTOR® has narrowed down these options, they can arrange a showing of the homes that stood out to you.
- Price research – Real estate agents have access to information on homes that have sold in the past few years, so they can help you determine if a potential home is priced fairly.
- Negotiating contracts – A real estate agent can help protect your interests and make sure that contracts are not unfair to you.
- Informing you of important details – A REALTOR® will be able to guide you through various issues that can come up when buying a home. This could be anything from making sure timelines are appropriate to offering advice on specific things to look for in older homes.
Now that you’ve locked down your preapproval letter and REALTOR®, the next step is making an offer. Let’s break it down step-by-step.
1. Decide How Much to Offer
There are essentially three considerations to make when you’re deciding how much to offer on a home.
Considerations About the Home Itself
The amount of time the home has been on the market can tell you a lot about how motivated the sellers might be. If the home has been on the market for more than a couple months, the sellers may be more motivated to make a move. Depending on the current market, you may be able to make a lower offer on homes that have been on the market for a while.
You’ll also want to ask your REALTOR® for comparable properties in the area that are currently for sale. See if those homes have higher or similar asking prices to those with similar amenities.
Consider any necessary repairs or renovations that need to be made to the property. Keep the costs of those repairs in mind when you consider your overall budget. Then, when you prepare your offer, you can potentially ask the seller to make the repairs or other concessions.
Considerations About the Market
Your real estate agent can be particularly useful in assessing the current housing market & costs. Your agent will complete a comparative market analysis to show the most recent sales in the area to help you make assessments about the property you’re interested in.
Considerations About Your Budget
Make sure you can live comfortably with the monthly mortgage payment and all of the extra expenses that come with purchasing & moving into a new home. Don’t offer your entire pre-approval amount (even if you feel like you can afford it), because it may leave no room to negotiate for potential upgrades or repairs.
Contingencies are things that buyers can include in addition to the main body of the contract. Contingencies can be negotiated between the buyer and seller just like any other term of the real estate contract. They allow buyers to walk away from a sale with their earnest money. Common contingencies include home inspection, financing, title, and appraisal contingencies.
3. Earnest Money
You’ll have to submit a deposit referred to as earnest money. This requirement varies from market-to-market, but it is typically between 1%-2% of the total home price. This money will be held in escrow and later applied to your mortgage down payment.
4. Write the Offer Letter
Now that you’ve come up with an amount and decided what contingencies you want to include (if any), it’s time to convey the offer. If you’re working with an agent, they will draw up the letter for you.
One thing to keep in mind is that sellers are more likely to accept an offer that reduces the risk of potential hang-ups in the process. However, don’t remove a contingency for the sake of competitiveness if it puts you in an uncomfortable position. It’s crucial that you feel comfortable moving forward when you’re putting in an offer.
5. Negotiate the Price and Terms of Sale
Your agent will get in contact with the seller or the seller’s agent to submit the offer letter. From here, you can expect the seller to:
- Accept your offer: If they accept, you’re ready to move on to the next step of producing the earnest money check and signing the sales contract.
- Reject your offer: If they reject your offer, you can choose to submit another one or move on to another home. While rejection may leave you feeling disappointed, consider it a learning experience and resume your house hunting. Another opportunity may be right around the corner!
- Make a counteroffer: The seller could also come back with a counteroffer, where they may change the purchase price or the terms of the sale. You can accept the counteroffer, reject it, or make another one.
Ready to start the process?
Team Melton is ready to help you with the home buying experience. Our team of professionals has over 50 combined years of real estate experience to assist you through every step of the process.