Check your understanding

Check your understanding of key concepts before moving to the “Do it yourself” section.

Indicate whether each statement is True or False.

1. When you make an offer on a home, you typically do not need to put down any money.

Correct! A purchase offer is typically accompanied by a certain amount of “earnest money” (a small good faith deposit to show you are serious about buying the home). The “earnest money” deposit can range from about $500 to 5% of the value of the home, depending on where you are interested in buying. This amount is typically put towards your closing costs; however, if you enter into a contract with the seller and then breach that contract, you could stand to lose your earnest money.
Incorrect. A purchase offer is typically accompanied by a certain amount of “earnest money” (a small good faith deposit to show you are serious about buying the home). The “earnest money” deposit can range from about $500 to 5% of the value of the home, depending on where you are interested in buying. This amount is typically put towards your closing costs; however, if you enter into a contract with the seller and then breach that contract, you could stand to lose your earnest money.

2. Regardless of whether you think a home is overpriced, you should always lowball; as a rule of thumb you should offer about 20% below the asking price.

Correct! If a home doesn’t seem significantly overpriced, it’s best not to go in too low; you risk insulting the seller. The seller may also not take you seriously. You should offer a little below what you feel the home is worth if you are really interested in purchasing it.
Incorrect. If a home doesn’t seem significantly overpriced, it’s best not to go in too low; you risk insulting the seller. The seller may also not take you seriously. You should offer a little below what you feel the home is worth if you are really interested in purchasing it.

3. As a rule of thumb, you should show your enthusiasm when you see a home – it will make the owner more likely to give you the home for less.

Correct! In this market, it is unlikely that you will face many competitive buyers when making an offer. It’s difficult for a seller to start the negotiation process over again – they usually want to make a deal happen. If you appear unenthusiastic, they may get nervous that you will walk away; if you show your enthusiasm they may be less willing to compromise, sensing that you are willing to pay more for the home.
Incorrect. In this market, it is unlikely that you will face many competitive buyers when making an offer. It’s difficult for a seller to start the negotiation process over again – they usually want to make a deal happen. If you appear unenthusiastic, they may get nervous that you will walk away; if you show your enthusiasm they may be less willing to compromise, sensing that you are willing to pay more for the home.

4. If you, as a buyer, don’t do an inspection before you make an offer, anything that is found in the inspection, even if it means major repairs, is your responsibility to take care of.

Correct! Because an inspection happens after you make an offer, you can and should put contingencies in your purchase offer to protect you if your financing falls through, or if the inspection unearths problems with the home.
Incorrect. Because an inspection happens after you make an offer, you can and should put contingencies in your purchase offer to protect you if your financing falls through, or if the inspection unearths problems with the home.

5. Negotiation is a very important part of making an offer on a home.

Correct! You can often negotiate for a better offer. In fact, you are often expected to negotiate. By educating yourself on the real estate market in your area, and by fine-tuning your negotiating skills, you could end up saving yourself thousands (or even tens of thousands) of dollars when purchasing a home.
Incorrect. You can often negotiate for a better offer. In fact, you are often expected to negotiate. By educating yourself on the real estate market in your area, and by fine-tuning your negotiating skills, you could end up saving yourself thousands (or even tens of thousands) of dollars when purchasing a home.

Practice what you learned Do it yourself

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