Let's say you've been pre-approved for a mortgage and found a house you want to buy. Making an offer on a new home is a process filled with hope, excitement, and anxiety, but it helps when you know what to expect.
Many buyers believe the listing price is the main negation point, but it’s just one piece of the puzzle. Before you make an offer, you need to determine if this house is affordable for you, which means you should talk to your lender about the cost of potential HOA fees, property taxes, insurance, and maintenance. Talk to your agent about “comps,” or the selling prices for comparable homes in your area. They’ll also be able to give you information about the average price per square foot for similar homes. This can help you determine a realistic monetary amount for your offer.
Next, determine the contingencies you want to include. One of the most common is that any repairs found during the home inspection are to be paid for by the seller, or the cost of repairs deducted from the selling price. Often you, the buyer, might need to sell a home and that can be included as a contingency. (Generally, contingencies include anything that needs to happen before you actually buy the house.)
Your offer should also include a timeline. For example, if you have a home to sell yourself, this needs to be included in your timeline. (If you’re in the position of needing to sell a home, talk to your lender about options that might be used to temporarily accommodate two mortgages.)
Now that you’ve determined how much you can afford to offer, your contingencies, and your timeline, you’re ready to finalize your initial offer. It’s common to offer a lower price than you’re actually willing to pay so you have room to negotiate, but before you determine your approach, it’s important to discuss it with your realtor. Your agent is experienced and has access to information that will help you determine the best strategy to use to get the most agreeable terms possible.
Your initial offer will be made to the seller in the form of a purchase and sale agreement, and should include a deadline for the seller to respond. This deadline may vary, but generally is within 1 – 2 days. The seller can respond by accepting your offer, making a counter-offer, or rejecting it. Your purchase and sale agreement will become legally binding if the seller accepts it.
If the seller counters your offer, you can either accept their counteroffer or counter back. It’s common for negotiations to go a few rounds, with the buyer and seller providing counteroffers back and forth, usually with the advice and assistance of their agents.
At the end of negotiations, you’ll either come to an agreement – which means you’ll sign a purchase contract – or you won’t, which means you need to keep looking for a new home. It can be disappointing to lose a house you love, but the negotiation process is a great learning experience.
Once both parties agree to the deal — including price, inspection, negotiated repairs, closing date, etc. — the contract is updated accordingly and the home is officially “under contract.” Assuming all goes well with contingencies and financing, you’ll be a homeowner in about 45 days.
What's included in a real estate offer?
While some elements of your offer vary based on location and market conditions, there are a few basic items you'll always find:
- Property address
- Buyer’s name
- Seller’s name
- Offer price
- Earnest money amount
- Contingencies (like financing, home sale, inspection or appraisal) or waived contingencies
- Identification of title company or closing attorney
- Credits, if you are requesting them as part of the offer
- Offer expiration date
- Proposed closing date
The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent the views of Citizens State Bank and its affiliates, and Citizens State Bank is not responsible for and does not verify the accuracy of any information contained in this article or items hyperlinked within. This is for informational purposes and is no way intended to provide legal advice.