Because your written offer forms the basis of a legal contract with the seller, be thorough. There are some important details you should be sure to talk through with your agent, and to make sure are accurately included on your purchase offer, such as:
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, and the state of the market. Your earnest money 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 this money.
Once you make a purchase offer, sign it and submit it to the seller along with your earnest money (this is usually done through your agent), the seller has the right to either sign your offer as is, make a counter offer, or reject your offer outright.
If the seller accepts your purchase offer, the offer becomes a contract, and you are on your way to owning the home. If the seller counters your offer, you may choose to counter his or her offer, or walk away.
Note: If, for some reason, you forget to specify contingencies in your offer, there are sometimes legal steps you can take to back out of the deal. Ask your agent what recourse you have.
Treat your initial offer as an opportunity to gather information
about the seller’s motivation for selling.
Are the sellers retiring, and would like to downsize? Does the seller need
to make a quick move due to a sudden job change? You may not get
direct answers to your questions about the seller’s motivation for
moving, especially if their agent has urged them not to divulge this information,
but you might be able to get insight into the seller’s willingness
to negotiate by making an offer and seeing what the seller comes back to
you with. If the seller refuses to come down off of his or her listing
price, this may indicate that he or she isn’t in any hurry to move.
On the other hand, if he or she responds immediately with a counter offer
that is higher than what you offered but lower than the listing price,
they may be in a bigger hurry to sell.
Be realistic with your offer; don’t lowball. This shows the
seller you are serious.
Nothing is accomplished by going in with a low-ball offer (except sometimes,
in the cases of foreclosures or when a home is significantly overpriced
and has been on the market a long time). If you go in too low, you’re
going to insult the seller. Sellers love their homes and offering a lot
less than what a property is worth won’t win you any points. If
your research shows that the property is fairly priced, offer just slightly
less than the listing price.
If your offer does not elicit a meaningful counteroffer from the seller, your offer failed. How do you negotiate with someone who won’t respond? You can’t. You have to get them to believe that you are a serious buyer who will actually complete the transaction. To do this, you have to first get them to believe that you’re capable of arriving at a price that is agreeable to them. That starts the negotiation process.
Be ready to walk away.
If you can’t put together a deal on the first property you like,
don’t worry. There will be a lot more homes for sale, especially
in this kind of market. It is VERY common that you’ll end up finding
a home a week later that you like even more than the first. Not taking
that first home might end up being a blessing in disguise.
Don’t show enthusiasm.
There is a time for trying to convince the seller that you will be broken-hearted
if you don’t get his or her property—when there are multiple
competing offers for a home. In today’s market, however, you won’t
have as many competitive buyers. You should be dispassionate about potential
homes and, more importantly, appear to be that way. Fact-driven, highly
qualified and ready to walk away at anytime—this should be the attitude
you display (even when you don’t feel that way) during the home buying
process.
Stick to your guns.
By the time you’re ready to make an offer, you should have done your
homework. You know what homes in your area are worth. And you also know
how much home you can afford. Be serious about defending these figures.
It is easy to get carried away by emotion and allow the seller to box you
into a price that is above what you’ve decided. If you have chosen
your agent well, this won’t happen. Nevertheless, bad agents have
been known to urge clients to accept counter-offers simply so they can
stop working on the negotiation. Be firm.
Set tight deadlines for the expiration of your offer.
You and your agent need to make sellers BELIEVE that if they want to sell
their home to you, they’re the ones who need to get with the program. You
can tell them other homes are on your list, ones you are just as happy
with, in fact, and that you’ll gladly make an offer on if the
sellers don’t make a deal with you first.
When you make your offer, there will be a space for putting a time limit on it. Make this a very short period, for example, within 24 hours. If you are making an offer in the evening, make the expiration early the next afternoon. Why? Having a longer period just invites a competing offer, exactly what you do not want. Don’t give the seller’s agent a chance to round up someone else.
Be creative with your offer if the owner is stuck on price.
If the seller seems emotionally tied to a certain price on his or her home,
instead of asking the seller to lower their asking price, ask for certain
concessions, such as repairs, or that the owner contribute to the closing
costs.