When you get ready to make an offer on a house, it can be nerve-wracking. Buying a house is one of the biggest events of your life. It’s a big investment and commitment. But, there is no reason to worry if you are prepared and aware of your options during the offer process.
Use the following information to understand what happens when you make an offer on a house so you feel confident going into the process and you can improve your chances of having your offer accepted.
#1) Choose a Good Starting Offer
Every real estate negotiation begins with a good offer. You want to make an offer that is competitive in the market, meaning the homeowner will pay attention to it, but also one that is reasonable within your budget. Fortunately, a Realtor® can help with this.
Your Realtor® understands the market demands and the motivation of the seller. They know whether it is a buyer’s or seller’s market and whether or not you can bid aggressively because of it. Your Realtor® may also know whether the seller really wants to sell the house fast, making them more open to lower bids.
You should rely on your Realtor® to make a bid, but also should understand your own budget. Know what your limit is to buy a house so you don’t overbid or look at properties you can’t afford.
Related: How Much House Can I Afford?
#2) Determine Any Contingencies You Have
The base amount you choose when you make an offer on a house isn’t necessarily the one you will submit. You should also look at any contingencies you have related to the house and the buying process.
A contingency could include:
- Determining which appliances will stay with the house.
- Asking the homeowner to make certain repairs before selling the house.
- Requesting a deduction because of necessary repairs that lower the home’s value.
- Setting time frames to push back or move forward the closing date.
As you can see, these contingencies can be financial (changing your bid) or personal (based on your individual needs). Setting your contingencies ahead of time will help the seller understand your needs and determine whether they should accept your bid.
#3) Gather Materials to Prove Your Offer is Legitimate
When you make an offer, you will likely be asked to put cash on the line to prove that you are serious about your bid. This is called earnest money and is often one to three percent of the total purchase price.
This money goes into an escrow account, and there are terms in the offer that reflect when you would forfeit the funds. The most common reason for forfeiting funds is when a buyer backs out of the agreement too late in the process.
You may also want to include a house offer letter, which adds a personal touch to the offer. It explains why you want the house and how excited you are to live there. This may make your bid more competitive if your seller has multiple bids at the same level.
#4) Prepare for a Counter Offer
It takes time to make an offer on a house, but submitting your offer is nowhere near the final step in the buying process. Within a few hours or days, the homeowner is likely to respond to your bid. They could provide a counteroffer based on your starting point or reject your bid entirely.
If the seller rejects your bid, it is likely because you chose an amount that was too low. The seller was insulted or thought the bid wasn’t serious. This is why choosing a reasonable offer is so important.
It is unlikely that the homeowner will accept your first offer, but they might if it is competitive and they want to sell the house. If this happens, you can move forward with the buying process.
#5) Continue Negotiating or Walk Away
If the seller rejects your bid and makes a counteroffer, you have two options:
- You can continue negotiating
- Walk away
Some buyers walk away if they decide they can’t afford the house or if the seller isn’t making reasonable counteroffers. In the same way that the seller can reject a bid, you can walk away, too.
If both parties are interested in negotiating, they will continue to go back and forth until they agree on a price.
#6) Use a Realtor® to Help Make an Offer on a House
There are many ways a Realtor® can guide you through the process of putting an offer on a house. They can make recommendations for bids, work with the homeowner’s Realtor® to navigate the negotiation, and provide you with resources for putting funds in escrow.
With a Realtor®, your offer is more likely to be taken seriously and you may have a stronger negotiating foothold.
If you found a place you love and are ready to make an offer on a house or you are just starting the process of searching for a new property, an EffectiveAgents.com Realtor® can help. Find the perfect agent for your needs by using our proprietary algorithm that matches you with the best Realtor® suited for your needs.
Photo by Fran Hogan on Unsplash