The seemingly endless hours searching for homes on the internet are finally over. No more open house visits to wade through, no more house tours with your agent. You found the one – the place that feels like home! The house you may have spent weeks and months searching for in a sea of ‘for sale’ signs. Okay, a little melodramatic maybe to the build up, but now you are at that point where after talking it over, you contact your agent and say, “I want to make an offer.”
This is the statement that starts the process of turning your dream into a reality.
It’s easy to get excited. Yes, you’re buying a home. But you’re also making a significant financial investment both now and for your future so let me encourage you not to allow your emotions and desires to cause a lapse in judgement.
Of course, a good buyer’s agent will be with you every step of the way and you should feel free to ask them any and every question that pops up.
Read on for what you’ll need to know about your purchase offer and why we agents ask some of the questions we do.
Your first decision will be a financial one. “How much should I offer?”
Although while today through the use of AVM’s or automated value models (like the Zillow Zestimate) many buyers feel they most likely have a pretty good idea of a home’s market value, a good buyer’s agent will run a comparative market analysis to ensure that you don’t offer too much, or too little. This is as useful to you as a home buyer as it would be to a bank (in a real estate owned situation) or a relocation company which would ‘also’ get at least 2 different estimates of value before valuing any home to true one up against another.
Not only is understanding the market value important, but knowing how long the home has been on the market may affect how much you offer. Whether there are other offers on the table being negotiated at that time is another factor. Is the home now vacant or occupied? If it’s occupied and it looks like they are in no hurry to move, then they might not negotiate much. If suddenly the home is vacated during the selling process then that may be a good sign that all of a sudden some motivation has set in and they need to get the house off their hands.
‘Tis’ the Season’ as they say around the Christmas holidays, but in home sales the season of the year can also play a role in how aggressive or conservative you might want to be within your offer. A seller with a listing for sale in the early spring to summer may not need to negotiate as much during ‘peak season’ as a seller with their home still on the market around the holidays and through winter.
Homes that sit on the market for longer than comparable homes racking up big ‘Days on Market’ typically sell for less and the most common reasons for this is that the home is overpriced or it may have problems that impact its value. It might be guilty of that dreaded condition known as ‘deferred maintenance,’ have an outdated or odd floor plan layout or it could just be a home that’s dated in general.
If the average time a home stays on the market is 30 days, and the one you love has been sitting for 90 days, you’ll most likely want to see it in person to find out why.
On a listing like this don’t hope for much. Walk in with low expectations or you may be disappointed. Those long days on market rarely lie, and so I caution home buyers I’m working with not to emotionally move in before seeing it just in case it has significant problems.
After determining your offer price you’ll want to give the seller a specified amount of time to mull it over.
Too long and another buyer may sneak in with a better offer. Too short of an offer expiration date may aggravate the seller. Best counsel on this, though it varies according to the type of market we’re in, is to give the seller 24 hours to respond to an offer yet I’ve seen 9-12 hour windows for a seller response as well on an offer made early morning to get a response same day.
Other time limits you can negotiate include:
- Loan approval (although there’s not much wiggle room here as this is determined ultimately by your lender)
- Appraisal contingency
- Due diligence (inspections)
- The closing date
- Date you want to take possession of the home
Think carefully about the last two on the list. Closing and possession dates are often used as negotiating tools. For instance, if the seller needs more time because the home he or she is buying won’t close on the same day, offer to extend one or both of these dates.
Or, offer to rent the home back to the seller for a specified amount of time (with stipulations). In Georgia, for example, we have a Temporary Occupancy for Seller after Closing Exhibit that can be added by amendment to the contract. It’s spells out in detail who is responsible for what and where the liability rests if there are any issues.
If through viewing the home during a showing it is perceived that there may be problems with the home, when we write up the offer, we can add a special stipulation stating that your offer is only valid if the problem is remedied. Yet, I wouldn’t go there yet. Why? Reason being is that if you find yourself in competition with another buyer you want your offer to be as “clean” as it can be. Also, I’ve found over the years there are quite a few things that we may ‘think’ are issues, which really aren’t.
You will have a chance to address those concerns seen during your property showing as well as others that come up during due diligence. That’s the time or step in the process where you deal with items of concern related to the home inspection report and other.
For instance, suppose the homeowner had disclosed that there are problems with the HVAC system. During due diligence when we write up an amendment addressing inspection concerns, we can insert a request to have it fixed or replaced using a licensed HVAC company. Repair to be done prior to closing.
Sellers are under no obligation to agree to any repairs, but they often do to ensure the home sells.
While these aren’t the only contract considerations, I think these are among the most important that you should be prepared for when making an offer on a home.
As always, we are happy to answer any questions you may have.