Welcome back, home buyers! Today the scariest part of the home buying process is upon us, making your first offer on a house…DUN DUN DUN!
What Should You Offer
You did it! You found a house that checks all your boxes and fits the budget, it’s officially time to write an offer! A lot of people think this is the scariest part of the home buying process. I know I used to think so. However, this part is considerably easier than the other stuff!
Once you’re ready to make an offer the first step is writing a comparative market analysis (CMA). This is a tool that real estate agents use to help you maximize your offer. We start by finding comparable homes, is it in the same town, in the same neighborhood, with the same amount of bedrooms and bathrooms?
A simple way to think of this process is apples and oranges. Instead, we are comparing apples and apples to determine how much you should pay for your apple, or in this case house. For example, if everyone was paying $1.00 for their apple and your apple was exactly the same, came from the same fruit tree and everything, but with one slice removed, you’d feel pretty cheated paying a whole dollar for that apple. It’s the same with homes! If your house has 1500 sq. ft. and everyone else in the neighborhood has 1900 sq. ft., ideally you would offer a little less.
This works the other way as well, you don’t want to offend a seller with a lowball offer. Chances are they know what their home is worth because they also have an agent that helped them determine a price when listing. The best-case scenario is that your offer is accepted, the second best is a counter offer! This means that the seller is still interested in working with you and that is good!
Writing the Offer
Now we’ve determined how much to offer. The next step is writing the contracts! Real Estate contracts are scary if you don’t understand the language. Your agent should walk you through every single paragraph of every single contract in a way that you can understand. Don’t be afraid to speak up and ask for clarification, these are binding and enforceable contracts, so you need to be working with an agent who can properly explain them. Below I’ll list the most common real estate contracts to give you an idea of what you’ll be signing.
- Purchase & Sale Agreement
- Financing Addendum
- Inspection & Inspection Response
- Legal Description (commonly referred to as Exhibit A)
This is just a sampling of the paperwork you’ll come across. Once you’re ready to make your offer your agent should guide you through every form so that you have a complete understanding of what they mean.
Submitting the Offer
This is the step where anxiety blooms, waiting. All offers have an expiration date, usually, within 24-hours. This is not always a hard and fast rule. For example, I submitted an offer on the Saturday of Memorial Day weekend with a 24-hour expiration. Well because it was a holiday weekend the sellers were out of town and not checking emails. Scenarios like this are not uncommon and everyone involved is usually very understanding of that. Imagine the anxiety my client had waiting until TUESDAY to hear back!
Countering or Accepting
Now we’ve heard back! As I stated earlier, the best-case scenario is that the seller has accepted your terms, but a counter-offer is the next best thing! Counter-offers can come for a number of reasons, sometimes the seller wants to negotiate the price or the closing day, there is a myriad of reasons for a counter-offer and it should not be seen as a negative to receive one. This means that you have a seller who is willing to negotiate, and I’ll take that over a seller who’s set in stone on their terms any day!
This can be a devastating moment for buyers, a flat-out rejection. If this happens after you’ve taken the proper steps to submit a strong offer, chances are it’s because there was an even stronger offer than yours. That doesn’t always mean more money either. The buyer that makes an offer with no contingencies, e.g. waiving inspections, not asking for repairs, etc., or who has better loan terms with fewer restrictions is usually more appealing to a seller. The fewer hoops a seller has to jump through, the better. It may not be fair, but the sellers have that right as the homeowners.
Rejections are more and more common. I worked with clients who submitted twelve offers before we finally had one accepted. We put forth our strongest and best offer on every home, but it was at the height of this market and cash buyers with no contingencies were running rampant. Each time it was a huge letdown, but they didn’t give up and that meant that I wasn’t going to give up either. Then this April, after a long and stressful year of house hunting, submitting offers, and getting rejected, they finally closed on their home. The feeling I had delivering those keys is exactly why I do this work.
Stay Tuned for What Happens Next
Next month I’ll walk you through what happens after your offer is accepted! In the meantime, you can start searching for homes on our website!
As always, make it an extraordinary day!