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Dan Green
Since 2003, Dan Green has been a leading mortgage lender and respected industry authority. His unwavering commitment to first-time home buyers and home buyer education has established him as a trusted voice among his colleagues, his peers, and the media. Dan founded Homebuyer.com to expand the American Dream of Homeownership to all who want it. Read more about Dan Green.
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Making a great offer is essential to buying the home you love.
An experienced real estate agent helps a lot, but understanding the process of making an offer on a house is important. Consider home buyer education if you’re a first-time buyer to hit the ground running.
Here is everything you need to make the best offer on a house.
A pre-approval is a dress rehearsal for your mortgage. It uses your actual income and credit info to calculate how much home you qualify for and provides proof that you’re qualified to buy the home.
The first step to making an offer on a house is to get pre-approved for your mortgage.
To get pre-approved, you’ll provide some basic income and credit information, as well as the estimated purchase price you’re looking at. Once the lender reviews the numbers, you’ll receive details like interest rate, closing cost estimates, monthly payment amount, and the purchase price you qualify for. You’ll also get your pre-approval letter.
Always include your pre-approval letter when making an offer on a house. This shows sellers that you have the financing necessary to follow through on your offer.
Make sure you’re getting a pre-approval and not a pre-qualification. Pre-qualifications don’t require a credit check, making them inaccurate and unreliable.
Most sellers only entertain offers that include a pre-approval letter.
Once you’re pre-approved, it’s time to begin the home search. Start by browsing listings online, setting up listing alerts on various real estate platforms, and working with your real estate agent to schedule tours and attend open houses.
When you find a home you’re interested in, dig deep into the data. To make the best, most competitive offer, you’ll want to know:
The more informed you are about a property, its location, and its history, the better your offer will be. Remember, you’re not alone in this. Your real estate agent is an expert in this area, so allow them to guide you along the way.
Determining the right price to offer can be a challenge, and there are a few things to consider.
Understanding how long the seller has owned the home and how long it’s been listed can help you. Typically, if the house has been on the market for a while, the seller will be more eager to sell. This could mean more room for negotiation. If the home was recently listed, the seller is more likely to hold out for the highest price.
You can find a lot about a home in its listing and public property records. If you attend an open house, you can also ask questions there. The listing agent or someone from their brokerage will be on site.
Have your real estate agent gather sales data from other homes in the area. This will give you an idea of what similar properties are selling for and point you in the right direction.
Also, consider the local housing market. Ask your agent if it’s a buyer’s market or a seller’s market to get an idea of how much room you have to negotiate.
You get pre-approved for the purchase price you can qualify for, but that’s not always the amount you can afford. That decision is up to you.
Put together a detailed budget using your take-home income and all monthly expenses. This will make it simple to determine how much home you want to buy.
Once you know your budget, stick to it. This will ensure that you’re comfortable with your competitive offer.
A mortgage pre-approval can help you set a budget.
An earnest money deposit is an amount of up-front cash you put into the transaction that you forfeit to the seller if you back out of the deal for reasons that aren’t covered in your contingencies.
This money comes from your down payment funds, so it’s not extra cash you need to save.
Earnest money deposits can vary but are typically in the 1 to 2 percent range. This can help your offer stand out from others and will show the seller you’re serious.
Contingencies are clauses you put in your offer to protect yourself. They allow you to back out of the transaction without losing your earnest money deposit or facing legal issues.
There are five types of contingencies:
Since contingencies mean more risk for the seller, waiving some of them can make your offer more competitive. Make sure you talk to your agent before doing this, though. Waiving contingencies is seldom recommended and could have serious repercussions.
Next, it’s time to write up your offer. Your real estate agent will do the heavy lifting here, but you’ll need to look it over and sign it before submitting it to the seller.
Your offer should include:
Real estate contracts vary by state, so there may be other items required where you live. Regardless, make sure you review it closely and ensure all info is correct and nothing is left blank. Your agent or a real estate attorney can help ensure your offer complies with local laws and regulations.
After you’ve submitted your offer, the seller can either accept it, reject it, or make a counteroffer.
If the seller accepts your offer, then congratulations!
If the seller rejects your offer, it’s time to start looking for another property. Use this experience to help guide your next offer.
You have a few choices should the seller make a counteroffer. You can accept the offer as-is, make your own counteroffer, or decline the counteroffer and move on.
If you decide to negotiate and make a counteroffer, know that it’s not uncommon to go through several rounds of negotiations before reaching an offer that both parties are happy with.
Keep in mind that you can negotiate more than the price. You can remove contingencies, change your closing date, or offer a lease-back, which means the seller can rent the home back from you while they search for a new property.
These negotiations are where your real estate agent will shine.
Once you and the seller agree, you’ll finalize the contract, and both parties will sign it.
Then you’ll send this contract to your mortgage lender to continue the mortgage process where your pre-approval left off. Your lender will order the appraisal, and you can set up your home inspection.
The right offer depends on several factors, including how competitive the local housing market is, how long the home’s been on the market, and the number of other buyers interested in the property. Comparable sales can give you an idea of what a home may be worth, but make sure to stay on budget and never offer more than you can comfortably afford.
Knowing the local housing market, the seller’s situation, and the home’s history can all help you craft the best offer possible. Do your research and work closely with your real estate agent to get all the info you can. Your agent can also consult with the seller’s agent to get more information about their motivations and ideal timeline.
To make an official offer on a house, you’ll need:
Your real estate agent or attorney can draft the offer on your behalf, but they will need your input on price, down payment, earnest money, and other details.
The funds will all be handled by a title company when the offer is accepted.
If the offer is based on research, data, and comparable sales, it’s not rude to make an offer lower than the home’s listing price. Just be prepared for a counteroffer or, in some cases, a rejection.
If you make an unjustifiably low offer that isn’t based on local data, you may offend the seller and see your offer rejected or ignored.
If you want to buy a house, follow our top three tips:
Making an offer on a house may be a new experience, but it’s not hard. Once you have a budget and a mortgage pre-approval, you’ll be ready to submit a competitive offer as soon as you find a house you love.
Happy homebuying.
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Making a great offer is essential to buying the home you love. An experienced real estate agent helps a lot, but understanding the process of making an offer on a house is important. Consider home buyer education if you’re a first-time buyer to hit the ground running. Here is everything you need to make the […]
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