Time to Make An Offer

When you prepare an offer to purchase a home, you already know the seller's asking price. But what price are you going to offer and how do you come up with that figure?

Determining your offer price is a three-step process. First, you look at recent sales of similar properties to come up with a price range. Then, you analyze additional data, such as the condition of the home, improvements made to the property, current market conditions, and the circumstances of the seller. This well help you settle on a price you think would be fair to pay for the home. Finally, depending on your negotiating style, you adjust your "fair" price and come up with what you want to put in your offer.

Comparable Sales

The first step in determining the price you are willing to offer is to look at the recent sales of similar homes. These are called "comparable sales". Comparable sales are recent sales of homes that compare closely to the one you are looking to purchase. Specifically, we will compare prices of homes that are similar in square footage, number of bedrooms and bathrooms, garage space, lot size and type of construction.

Other Factors Influencing Your Offer Price

Gathering and analyzing information from comparable sales helps to establish the range of prices you should consider when making an offer to buy a home. More weight should be given to the most recent sales; however, you also need to consider the condition of the property, improvements, the current market and the circumstances behind the seller's decision to sell.

How Market Conditions Affect Your Offer Price

A hot market is a "seller's market". During a seller's market, properties can sell within a few days of being listed and there are often multiple offers. Sometimes homes even sell above the asking price. Though most buyer's want to get a "deal" on a home, reducing your offer by even a few thousand dollars could mean that someone else will get the home you desire.

A slow market is a "buyer's Market". During a buyer's market properties may languish on the market for some time and offers may be few and far between. Prices may even decline temporarily. Such a market would allow you to be more flexible in offering a lower price for the home. Even if the offered price is too low, the seller is likely to make some sort of counter-offer and you can begin negotiations in earnest.

More often than not, the market is simply "steady" or in transition. When a market is steady, no real rules apply on whether you should make an offer on the high end of your range or the low end. You could find yourself in a situation with multiple offers on your desired house, or where no one has made an offer in weeks.

How Seller Motivation Affects Your Offer Price

It is rather rare that a seller's motivation will dramatically affect the price of a home, but it is often possible to save a few thousand dollars. The most common "motivated seller" is someone who has already bought his or her next home or is relocating to a new area. They will feel pressured to sell the home quickly or face the prospect of making two mortgage payments at the same time. Since that can drain a bank account quickly, most sellers want to avoid such a situation and may be willing to give up a few thousand dollars to avoid the possibility.

There are also family crises that can motivate a seller to make a quick deal. However, when you see a real estate ad that mentions "divorce", "motivated seller", "relocation", or something to that affect, beware. Although the facts may be true, that does not necessarily mean the seller is motivated to make a quick and costly sale.

However, there are times when a seller is truly distressed, willing to make a quick sale and sacrifice thousands of dollars. With the seller's permission, the listing agent will post this information along with the listing in the Multiple Listing Service.

The Final Decision on Your Offer Price

Comparable sales information helps you to determine a base price range for a particular home. Adding in the various factors like property condition, improvements, market conditions and seller motivation help determine whether a "fair" price would be at the upper limit of that range or the lower limit.

The "fair" price should be approximately what you are willing to agree on at the end of the negotiations with the seller. The price you put in your offer to begin negotiations is totally up to you and depends on your negotiating style. Most buyers start off somewhat lower than the price they eventually want to pay.

Although, I am there to provide advice and guidance for you through this process, you are the one who makes the decision. The price you put in the offer is totally up to you.

Your house-hunting expedition has been a success! You've found the right home, one that satisfies your needs, most of your wants…and best of all, fits your budget. Now comes one of the most important phases of your home buying experience; making an offer to purchase the home.

Writing an Offer to Purchase is not as easy as it sounds. Your offer is the first step toward negotiating a sales contract with the seller. Since this is just the beginning of negotiations, you should put yourself in the seller's shoes and imagine their reaction to everything you include. Your goal is to get what you want, and imagining the seller's reactions will help you attain that goal.

The offer is much more complicated than simply coming up with a price. Because of the large dollar amounts involved, especially in today's litigious society, both you and the seller want to build in protections and contingencies to protect your investment and limit your risk.

In an offer to purchase real estate, you include not only the price you are will willing to pay, but other details of the purchase as well. This includes how you intend to finance the home, your down payment, who pays what closing costs, what inspections are to be performed, timetables, whether personal property is included in the purchase, terms of cancellation, any repairs you want performed, which professional services will be used, when you get physical possession of the property, and how to settle disputes should they occur.

Conditions in a Purchase Offer

It is absolutely essential that you include a closing date as part of your offer. This way, both you and seller can make plans for moving, and the seller can make plans for buying their next home.

In most purchase transactions there may be a slight challenge or two, but most things will go quite smoothly. However, you want to anticipate potential problems so that if something does go wrong, you can cancel the contract without penalty. These are called conditions and you must be sure to include them when you offer to buy a home.

For example, some "move-up" buyers often agree to purchase a home before selling their previous home. Even if the home is already sold, it is probably a "pending sale" and has not closed. Therefore, you should consider making closing your own sale a condition of your offer. If you do not include this as a contingency, you may find yourself making two mortgage payments instead of one.

There are other common conditions you should include in your offer. Since you probably need a mortgage to buy the home, a condition of your offer should be that you successfully obtain suitable financing. These conditions are meant to protect your interests.

Basically, the offer (known as the Agreement of Purchase and Sale) is a precisely worded document that sets out the terms and conditions between the buyer (you), and the seller. Once the offer is made and accepted, and after any conditions of the offer are met (if there are any conditions), the offer becomes a legally binding contract.

Conditions would generally be inserted at your request and for your protection. I would ensure these very important points. If a condition is not satisfied within the time allowed, your offer would no longer be valid and you would usually have the right to get your deposit refunded.

Chattels included and fixtures excluded

In order to attract buyers, it is common for sellers to include some of the chattels that are not normally considered part of the dwelling itself. These movable pieces of personal property often include washers and dryers, or microwave ovens, and are listed as items to be included with the sale. Fixtures are permanent improvements to a property that normally stay with the property as part of the sale.

If there is ever any doubt as to whether chattels and fixtures are part of the agreement, specifically list the items you are concerned about in your offer.

After the offer is signed, I, as your agent, would take it to the listing broker and the seller. It is not likely that you would meet the seller in person, which is usually for the best, since many negotiations are more successful that way. During the irrevocable period you've defined in your offer, the seller can accept the offer, reject it or "sign back" a counteroffer.

A seller who signs back a counteroffer is indicating interest in your offer, but dissatisfaction with one or more of your terms. Most frequently, this revolves around the purchase price, and the seller will cross out your price and insert a somewhat higher figure. If you are not happy with the counteroffer, you can cross out the seller's price and write in another figure. This process continues until both parties agree to a price, or until one of you ends the negotiation.

Counteroffers may involve other terms besides price. Perhaps the seller wants a shorter period before closing, or disagrees with a chattel you have listed in the offer. In any case, counteroffers place the ball back in your court, and it is up to you to pursue the purchase or end it there. You should always be willing to compromise on minor items, but avoid giving up on the things that are truly important to you.

It's Time

Put yourself in the seller's shoes and imagine how they will react to everything you are about to put in your offer. Oral promises are not legally enforceable when it comes to the sale of real estate. I will ensure that everything that you have communicated that you want is included in the offer.

Price

I will do a comparative market analysis for you. That will show you the fair market value of the property. The following factors could affect the offer price:

• Property condition
• New home improvements
• Market conditions
• Seller's motivation
• Multiple offers – expect to pay more if there are multiple bidders on a property

Deposit Money

After you have come up with an offer price, the next step is to determine how large a deposit you want to make with your offer. You want the "earnest money deposit" to be large enough to show the seller you are serious, but not so large that you are placing significant funds at risk.

The deposit required will be mentioned in the listing and I can give you guidelines for how much this should be.

Financing Contingency

You will probably need to get a mortgage. Even if you have been pre-approved, the lender will still need time to have the appraisal done. I of course, can advise you as to how much time you need.

Home Inspection

Do not skip this, whether it is because you think you can check out the house yourself or you want to save the money a professional inspector charges – it is money well spent in the long run. But remember, no home is perfect and small maintenance-type things found by the home inspector should not be part of any renegotiations with the seller. And never skip the final walk through just because you had a home inspection.

Disclosures

Make sure you receive all the proper seller disclosures. Sellers may have completed a Seller Property Information Statement, and I will request a copy for your review. Further, material defects MUST be disclosed if known by the seller. I would ask that you look over these documents carefully – the laws that govern them limit your recourse once you have signed them.

Multiple Offers

It doesn't have to be a "hot" market for a seller to have the luxury of choosing between multiple offers on their property. If you find yourself in a multiple offer situation don't panic and don't withdraw your offer – you may be the highest bidder and won't even know it if you pull out. I always recommend going through at least one round of negotiations. You have no chance of getting your dream home if you don't at least try. Have a price in mind of where you want to go and stay in the game until that price has been reached. I will be there to guide you through the process.

Once the offer has been presented to the seller, the negotiating process begins. There are likely to be numerous counter-offers going back and forth between you and the seller. There are a few important things to remember:

• Your offer is just that – an offer – until it has been accepted and agreed to by both you and the seller. At any time during the negotiating process another offer could come in and cause you to be in a multiple offer – or worse – lose the house completely. A wise buyer will try to come to an agreement with the seller in a reasonably short period of time.
• If your contract calls for a home inspection and/or a financing condition, we will choose both of these as quickly as possible so I will know who they are and can co-ordinate. Usually there is a limited amount of time to protect your interests.
• Be sure to comply with all requests of your lender after the mortgage application has been done. Not producing the documents or information they need may jeopardize you getting your mortgage on time.
• Generally, the buyer accompanies the home inspector at the inspection. The average inspection generally takes 2 to 3 hours, however more time may be necessary for a larger home.
• I will act as coordinator for all activities from this point and will keep everyone informed. The lender, home inspector, both attorneys, the other realtor and possibly the title company will all be performing necessary duties during this time.
• If necessary, I will work together with the cooperating realtor to negotiate any repairs that were noted during the home inspection. Remember, routine maintenance items are not the type of thing that should be noted and negotiated. The purpose of the home inspection is to avoid buying a home with major structural deficiencies.
• Your walk through will be scheduled as per your sales contract. I, as your Realtor, will schedule this with you, the seller and the listing sales representative. It should happen just prior to the closing.

If all of this sounds a little overwhelming, don't worry; you're in good hands. I have been through this many times and will be there for you during the entire process. Relax and enjoy the experience.