Preparing for Making an Offer on a HouseHow do you decide on how much to offer on a home? It isn’t as simple as just looking at the asking price. Making an offer on a house – a successful offer – requires that you plan with your real estate agent and prepare so that you have the best chance of having your offer accepted. There is always some amount of give and take during the deal. If you prepare in advance, you can avoid unnecessary frustration that comes with multiple rounds of negotiating. This experience can be intimidating to a first time home buyer. The good news is that a little bit of preparation can help you get most of what you want. You need to have a good understanding of the market. Your agent should be able to tell you the general market conditions in Arizona (is it a “buyer’s market” or a “seller’s market”) and also provide specific information about recent sales of home comparable to your target. You will need to consider the asking price, how long the property has been on the market and whether the price has come down during that time. Walk through the home again. Make sure that it is to your standard and see if anything new stands out and moves up or down on your list of desired features. Also, look at the age and condition of the home and see how they will impact your offer. Have your agent talk to the seller’s agents to get a feel for their priorities and appetite for making repairs. This will help put you in a better position for negotiating. You should spend time in the neighborhood where the home is located, be very observant and take notes. This will be your community and you will be a part of it. It will impact the quality of your living. Watch to see if people are friendly, watch to see how traffic flows and watch to see if people take care of their yards. You should talk to the local police department about crime rates. Ask questions. Because if you are going to live there, you should know. Make sure that you and your real estate agent are in agreement on what you plan to offer. Your agent must know your top priorities. Your agent should always have your best interest in mind. However, you won’t get anything that you want if the seller rejects your offer or accepts someone else’s offer. Part of your preparation must be to figure out the seller’s priorities so you can understand the negotiation points.
Negotiating the OfferNegotiating the offer can be the trickiest part of buying a home and a little creativity can go a long way. Negotiating informally starts when your agent enters into communication with the seller’s agent and officially takes place between the time that your offer is submitted in writing and when it is accepted. That’s why it’s important to have a high caliber real estate agent who has had previous success with regards to making an offer to buy a house and working through many different scenarios. Hopefully, by researching the market, neighborhood, the property condition, and the value of the home, you will be able to come as close to the seller’s price as possible. If you have been able to find out the seller’s priorities, you will be able to potentially avoid obstacles. Your agent should be communicating with the seller’s agent to find out as much about the seller’s priorities as possible and to let them know if you intend to formally submit an offer to buy the home. Here are some of the key elements in the purchase agreement that will be part of the negotiating process when making an offer on a house.
- The purchase price
- The closing and possession dates
- The length of time of the inspection period
- The amount you are asking the seller to pay for your closing costs
- The amount of earnest money deposit you will provide
- Whether or not the earnest money deposit is refundable (you can negotiate amount and timing)
- Inclusion of certain fixtures and personal property
- Who will pay for the appraisal
- What title and escrow company that will be used
- Paying for a home warranty
- Paying for HOA-related fees
- Payment for repairs
Making an Offer On a HouseAfter completing your research, you will be ready to make an offer on your first home. Your agent will prepare the documents needed for officially making an offer on a house. You need to review the documents and make sure that they properly presents your best interests. You will sign the purchase offer and your agent will present it to the seller’s agent along with your mortgage pre-approval letter. Usually, the seller will have a few days to make a decision. Here is a sample of the most commonly used residential real estate purchase contract in Arizona. You need to clearly understand that once signed by both parties, your purchase offer becomes a purchase contract. You are legally bound to honor the agreement. If you breach the contract you will probably lose your earnest money deposit. It is even possible that if the seller can sue you if she or she believes that your breach has caused him or her to suffer losses. As such, you need to communicate any changes in your circumstances that would cause you to not honor the purchase contract. You also need to know that there are certain contingencies included in the purchase contract that allow you back out of the contract under certain circumstances. Two common contingencies that exist in the commonly used Arizona residential real estate contract are as follows:
- Loan Contingency – This allows you to cancel the contract and get your earnest money back if your loan is declined up to 3 days prior to the close of escrow date.
- Appraisal Contingency – This allows you to cancel the contract if the appraised value of the home is lower than the purchase price.
The Seller’s Response to Your OfferAfter you present your written offer to the seller, her or she can:
- accept your offer,
- make a counteroffer (an offer made in response to your offer) or
- reject your offer.
Congratulations! Your Offer Was AcceptedAs mentioned above, once you and the seller have agreed to all terms in writing, the signed purchase and sale agreement becomes a legally binding contract. You will be expected to follow through on all terms of the transaction and not change your mind after your offer has been accepted by the seller. You will be expected to provide an earnest money deposit when making the offer. An earnest money deposit is required to show that you are committed to buying the house. This deposit will be held by the escrow/title company until loan closing and can be applied toward your total required cash to close. Most homes will go to close within a month after an offer has been accepted. You will use this time to take care of all of the activities necessary before you close on the home.
What is A Counteroffer?If the seller likes some parts of your offer, but not others, he or she will issue a counteroffer. A counteroffer implies that they have rejected your initial offer and are instead presenting you a different offer. Counteroffers are usually concerning the purchase price. But, they can be made about any of the elements of the purchase offer. Other typical reasons you will receive a counteroffer include ownership of personal property such as the appliances, repairs and the close of escrow date. Here is a sample of the most commonly used counteroffer form in Arizona. The counteroffer provides a time period for acceptance and you have to decide to accept the counteroffer or respond with a counteroffer of your own. You’ll need to consider the offer and seek the advice and assistance of your real estate agent. This can be a very stressful process, especially if you are dealing with a seller that has other offers on the table.
Dealing with RejectionIt’s possible that the seller will flat you decline your offer or accept one that he or she likes better. While this can be frustrating, you will have to move on and continue your home search.
Legal Disclaimer This home buyer series is intended to provide general information regarding the process of how to buy a house in Arizona. It is not intended to provide buyers with legal, accounting or financial advice. You are advised to seek the services of a skilled professional this those fields. Additionally, this home buyer series does not set forth all qualification criteria for any of the loans described herein; all interested persons must successfully meet qualification criteria and complete the application process to obtain such loans.
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