Home > Mortgages > The Smart Way to Make an Offer on a Home

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Deciding to buy a home is a huge decision — and the price is not something to take lightly. When you find a property you love within your budget, you want to be sure you are making a good offer to beat out other buyers without overpaying.

1. Conduct Research

Looking at this transaction objectively will help you strike a better deal with the seller — you want to consider several factors before determining a good offer. It’s a good idea to think about the health of the overall housing market, the local supply and demand dynamics in the specific area you are looking to purchase, the physical condition of the house, the length of time the house has been on the market, seller motivation and resale motivation.

The more information you gather, the better prepared you will be for negotiations. Keep in mind that your initial offer is often merely a starting point. Also, consider obtaining pre-approval from your lender so you know the amount of home you will be able to afford.

2. Draft the Letter

The initial offer is usually presented in a formal letter to the seller. It is important that the offer letter contains all the material terms and conditions you will need to protect yourself. From address of the property and seller’s promise to provide clear title of ownership to price and financing terms, there are plenty of specifics that you must outline before the offer letter becomes a legally binding purchase contract.

3. Negotiate

Once you have submitted an offer letter, you will likely receive a counter-offer from the seller outlining any unsatisfactory terms, such as price or contingencies. As a buyer, be prepared for the negotiation to last several rounds of counter-offers, though this isn’t always the case.

It’s a good idea to remember that you have a budget and needs and you don’t want to get swept up in the negotiations and agree to something that doesn’t meet your needs. You should always be able to walk away from the deal if any valuation or contingency parameters make you uncomfortable. When you and the seller are able to agree on an offer and sign a formally binding sales contract, the next step is working toward inspection and financing.

4. Schedule a Home Inspection

Before you complete the buying process, it’s important that you take the time to check all the specifics on your prospective home. A proper inspection will focus on standard aspects that can cause unsafe conditions or expensive repairs like structural integrity, plumbing, roof condition, electrical maintenance, the presence of any pests and more. If you have any more specific concerns, be sure to clarify this with the inspector. It’s a good idea for you or your agent to be present to document any concerns and supervise the inspection. Once complete, the inspector will produce a report that you can use to renegotiate price, continue as is or walk away from the transaction in case of any serious problems.

5. Finalize Your Financing Options & Close

After fulfilling all your financial paperwork with your agent and seller, you can submit your mortgage application to any potential lenders. It may take up to 30 days to receive final approval from the lender after submitting any additional financial documentation, disclosure of all assets and debts, explanation of any credit issues and possibly evidence of mortgage, home and flood insurance in addition to an appraisal verifying that the home’s value exceeds the mortgage amount. Once approved, you can close by signing the mortgage and title and officially purchasing your new home.

You should check your credit scores before you apply for a mortgage to make sure there aren’t any hiccups in the closing process. You can get two of your credit scores for free every month on Credit.com.

Following the above steps for making an offer will ensure you are making an informed decision and place yourself in a great negotiating position. Once you are in your new home, you should have the peace of mind that you did your due diligence.

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  • Ron Mazur

    There is no state in the country where the offer process begins with a letter. You don’t want to make an offer on anything except the commonly used contract form. First of all all of the terms are in the contract. Secondly, if the seller decides to accept your offer, why would he wait for you to transcribe your letter to a contract form when he already has others who have properly presented an offer. AJ Smith may have a passion for meeting new people, but has no experience representing buyers in a housing transaction. Buyers are not looking for someone to spin yarns. Find a good realtor working in the market daily and go buy a house.

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