Ready to make an offer? Here are the 4 steps
Congratulations on finding a home you want! Here's what to do next.
You might feel like the hard work of buying a home is over when you finally find a property you love, but you still want to look good crossing that finish line.
To seal the deal, you need to put an offer on the house—and have the seller accept it. Here's what you need to know about making an offer on a house to improve your chances for success.
1. Include these items in your offer
When you've decided on a home you want, you need to make a written offer. This offer needs to comply with state and federal regulations (which a Realtor or lawyer can help with) and include:
- The price you're offering to pay for the home – Keep in mind, you don't have to offer the list price. What you offer can depend on many factors, like whether you're in a buyer's or seller's market, the home's location, the condition of the property and how motivated the seller is.
- Terms, conditions, stipulations and provisions – These can include who pays for the title insurance, how closing costs will be split and specific requests that you have for the seller before you'll buy (like making repairs or updates to the home).
- An expiration date – This makes the offer void if the seller doesn't act by the deadline.
- Optional: A letter explaining your offer – Some prospective buyers write to the seller to share why they love the house and how they intend to take care of it, which could make the offer stand out if you're negotiating with a sentimental buyer.
2. Be ready for what happens after making an offer on a house
Once you've drawn up your offer, submit it and wait for the seller to respond. Typically, there are three possible outcomes:
- The seller can accept your offer as is.
- The seller can reject your offer.
- The seller can counteroffer, putting the ball back in your court.
If the seller accepts your offer, the offer becomes a legally binding document. If the seller rejects it, you can continue your house hunt or submit a new offer. If the seller counters, you need to know how to negotiate the best deal.
Making an offer on a house goes a lot better when you have a real estate agent. Not only will an agent help you draft your initial offer, but he or she can also help you negotiate if the seller comes back with a counter.
3. Know how to negotiate
Many people expect to negotiate when buying a house, so they offer a lower amount than they're ultimately willing to pay. This can work to your advantage (by positioning you to pay less for the house), but it can also backfire if the seller thinks you lowballed them or you're not the only party interested in the house.
Making an all-cash offer, shopping in a buyer's market and not having a home to sell before you can buy a new house all help to give you more bargaining power. It's also an advantage if a house has been on the market for a long time.
You may not have as much leverage if the sale depends on selling your old house or if you're not yet approved for a new mortgage. And if it's a seller's market, consider that other buyers may be competing to buy the same house.
4. Remember what to consider when there are multiple bidders
Making an offer on a house gets more complicated if several buyers bid on the same property. For the seller to choose your offer, you need to make it more appealing.
Here are a few things you can do to improve your offer:
- Start with your best offer, which might mean offering above asking price.
- Make it a "clean" offer—not contingent upon something like selling another property before you'll buy this one.
- Consider forgoing the home inspection.
- Offer to buy "as is," meaning you won't require additional inspections (structural, HVAC, termite, etc.).
- Buy with cash rather than with financing. Your offer will look more attractive compared to buyers who must get lender approval and take out a mortgage to purchase the home.
Keep in mind that it's easy to get carried away with your offer when multiple buyers are involved. Don't lose sight of your financial reality by making an offer that requires you to pay more than you can afford or give up features that are important to you.
Sometimes, the best step to take after making an offer is to walk away and keep looking. That may not be easy, but it's always an option—and it might be the best choice in the long run.
Keep it up. You're getting smarter about home buying.
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