One of the most stressful things about buying your first home is making your first offer. This list should help ease your mind and prepare you when making your first offer.
Before you Bid
Before you go asking for that home you want, make sure you are pre-approved for a mortgage. Having a pre-approval make you a more attractive buyer, and means you haven’t wasted people’s time (including your own) if you find out your cannot get the loan.
Put it in writing
Offers contain a lot of legal clauses and contingencies to protect both the buyer and the seller. Some of the basic items you need to put in the offer include:
- The price you are willing to pay
- Conditions you need met such as financing, home inspection, etc.
- What you want included in the sale (appliances, curtains and blinds, light fixtures)
- Amount of deposit
- Closing date
What Price Should you Offer?
You know what the seller is asking, but what price do you want to offer? How do you determine the number? Your agent will help you with this by looking at a few factors such as recent sales, condition of home, market conditions and how motivated the seller is to unload the property.
Terms and Conditions of the Sale
Price is arguably the most important part of the offer, but you might want to add some conditions to the offer. It is always wise to include a “subject to financing” clause in your real estate offer, to protect yourself against unforeseen issues.
You want to put down enough money to show you are interested in buying the home, but how do you know how much is enough? While there is no rule on how much to put down, the standard is about 5 to 10 percent of the purchase price. If you back out of the offer after it has been accepted, you will likely lose this deposit to the seller. You may also face legal action. This is why it’s critical that you are 100 percent sure you are ready to make the offer before you sign on the dotted line.
Now, there is one more item to carefully consider before presenting the offer to buy the home: “closing time”. It takes more than simply picking a date when you want to be living in your new home. Avoid a common mistake of first-time homebuyers: don’t set the closing date for the same day as your moving date.
Presenting the Offer
It’s time to present it to the seller. Your agent will do this on your behalf. The process will either be quick and painless, if the offer is immediately accepted, or it can turn into a long evening of back and forth negotiation.
Offers and Counter-Offers
Counter-offers are common in home sales. Your original offer is the first step in the negotiation process. The transaction will usually go one of four ways:
- You make the offer. Offer is accepted. You just bought yourself a new home!
- You make the offer. Seller makes a counter-offer, asking for a higher price and/or different terms. You sign the offer back (once, or more times if necessary) and agree to some or all of the terms. The vendor accepts your counter-offer. You have a deal!
- You make the offer. The seller counters. You reject the counter-offer and decide not to make a subsequent offer. The deal is off.
- It’s a bidding war. You make the offer. The house is sold to a higher bidder. You move on. After all, there are other houses.
The agreement isn’t final until you’ve signed the paper. Once that’s done – congratulations! You’re a home owner.