You are finally done with house hunting, and you think you're ready to make an offer. What are the things you have to consider in settling on a price? Here are the top 10 things you should know to successfully close the deal with your offer.
1. Your budget
Before even thinking about looking at houses you might one day call your own, this should have already been settled. Knowing how much you can realistically afford should always be the number one consideration.
Getting a loan is difficult enough. If you're still finding it difficult to chip in cash for a down payment and still have to look into other savings for this investment, you might want to think twice or even thrice if you are ready to purchase a house at this time.
2. Your dream house's price
What's the price of the house? After making sure that it fits your budget, investigate further if it seems too high or even too low. The following items on this list will help you with that investigation.
This will also help you estimate the price you're willing to offer for the property--whether to add more to the asking price, or haggle with a lower-priced offer.
3. The property's value
To be sure of the property's value, you may want to get a legal evaluation. You may also want to consider adding (or even decreasing) its cash value for its unique traits. For example, the property's architectural design is outstandingly your style, or maybe you're enthralled by the design of the kitchen. It may also be something as personal as its location being close to a dear relative. For rare features like these, you can show the owner your eagerness to own the house by adding a specific amount on your offer (especially if you're caught in a bidding war).
On the other hand, if there are some things on your dream property that you are not comfortable with, you may also mention these to the seller, and offer a lower price.
4. Prices of other houses
Look at comparable houses ("comps") in the area, and see how much they are/were sold for. These properties should be in the same neighborhood with the same dimensions, age, and number of rooms. If it has been sold, the purchase should not be older than six months.
5. The market
If the real estate market is doing well, there's a chance for other bidders to price their offers too high. This may cost you the house if you don't strategize well. Not to mention that in most cases, giving an offer that is higher than the asking price may easily give you a better (if not sure) chance of owning the property. But if the market is down, you can opt to offer less than the asking price and still have a high chance of winning the bid.
6. The seller
Based on your encounter with the house's seller, do you think he/she is the type of person who would price the property irrationally? Does the property have sentimental value to him/her? Is he/she the type who would be offended if you gave an offer lower than the asking price?
On making your move, remember that you're not only dealing with legalities, but personalities too. If you still can, try to win the heart of the seller. Sometimes, people choose a buyer regardless of the amount of their offer, as long as they think that you are able to take care of the property when they legally transfer all its rights to you.
7. Conditions to be set
Upon making your offer, you must already mention your closing conditions to the seller. These include requesting for a home warranty, the type of deed you are obtaining, and asking for assistance with home repairs.
Payment conditions are also very important in this transaction. Will you be paying in full on a specific date? Are you offering earnest money and are willing to pay with interest? These are some things the seller needs to know off the bat.
8. Flexibility with terms
If you are in a bidding war, more than the price, you can also haggle with your versatility with the offer's conditions. For example, you can't offer a higher price, but you can haggle that you can pay your offer in full and on the spot. This may be quite attractive to the seller, and instantly gives you leverage on any other higher bid.
In cases where the seller gives you a counteroffer, make sure that you study it first before accepting or rejecting. You may still give your counteroffer if you study the terms and conditions wisely.
9. Sending necessary letters
If you received a loan to pay for the property, obtain necessary documents as proof like a pre-approval letter from your lender. This ensures the seller of your paying capabilities, and gives your offer a higher worth.
Another thing to consider is writing a personal letter to the seller of how much you appreciate the property. Especially for sentimental sellers, a mover like this will give you an invaluable leverage over anyone else who's bidding for the house.
10. Don't give up too easily
If you think that the property is really your dream house, don't give up on it even if your offer fails. Most times, very high offers do not push through upon appraisal. In other times, buyers take back their offer, because he/she made bids on other houses.
You are still in the game as long as there has been no final transaction yet.
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Counseling Session Activities
- Prepare the buyer for executing a buyer representation agreement
- Explain agency relationships to the buyer and get state required legal consent to represent, if needed
- Inform the buyer of working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies
Building a Relationship
- Learn the buyer’s wants and non-negotiable needs
- Understand the buyer’s budget and what will be needed financially
- Help the buyer understand what property their chosen budget will buy
- Consider having the buyer fill out a homebuyer’s checklist
- Assist the buyer in examining how much they can afford to spend
- Provide quality lender resources
- Partner with the buyer to locate suitable properties for consideration
- Match the buyer’s needs with available property
- Constantly re-evaluate buyer’s needs and refocus property showings to fit those needs
- After ensuring the buyer understands what is done for them, how it is done,and the benefit to them, obtain signatures on the buyer representation agreement
- Explain how compensation is paid, who pays it, and what the buyer’s options are for paying it
Educating the Buyer
- Communicate the working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies
- Explain Federal and State Fair Housing laws
- Explain what to look for in applicable property disclosures
- Reassure the buyer that their personal information will remain confidential
- Inform the buyer that you will always disclose all known material defects
- In accordance with state law, provide information on checking the sex-offender registry and crime statistics for the neighborhood
- Discuss available resources that the buyer can check to learn more about prospective neighborhoods
Preparing the Buyer
- Explain the timeline for house hunting, mortgage approval, and closing
- Explain the local market and how it impacts the buyer
- Show statistics on what percentage of list price sellers in the area are currentlyreceiving
- Inform the buyer on what home features are popular
- Identify current average days on market
- Share the dangers of using the price per square foot to figure home values
- Explain the concept of absorption rate and how it impacts the buying process
- Indicate current listing months of market inventory
- Share estimated potential out-of-pocket costs to complete the transaction
- Assist the buyer in analyzing the loan estimates
- Qualify the buyer for financial ability to purchase
- Help the buyer account for the complete costs of homeownership
- Prepare lender for listing agent calls
- Assist in comparing different financing options
- Help the buyer select for viewing only those homes that fit their needs
- Proceed in showing homes that fit the buyer’s must-haves
- Caution the buyer on posting information to social media
- Review the sample sales contract so the buyer is prepared when it comes time to make an offer
Showing Properties
- Schedule showings and provide access to all listed properties as soon as they become available in their local MLS broker marketplaces
- Educate the buyer on the immediacy of new listings appearing in their local MLS broker marketplaces and the lag time for them to appear on some websites
- Collaborate with the buyer on properties they may have learned about through their sphere contacts
- Research and assist on all unlisted properties the buyer wishes to see
- Preview properties prior to showing if needed
- Network with other agents to source properties not yet in their local MLS broker marketplaces
- Contact homeowners in focus areas to see if they are considering selling
- Set up an automated email alert system through their local MLS broker marketplaces that immediately notifies the buyer of properties that fit discussed requirements
- Arrange a tour of areas, schools, and key points of interest
- Provide resources containing neighborhood information on municipal services,schools, etc.
- Inform the buyer of negative aspects like nearby venues or operations that may result in issues that could impact value
- Collect and share any other vital information on available homes, remembering to follow all fair housing laws at all times
- Check applicable zoning and building restrictions
- Help the buyer decipher public property and tax information
- Collect and share pertinent data on values, taxes, utility costs, etc.
- Compare each property shown to the buyer’s wants and needs list and remind them of what they were looking for
- Help the buyer narrow the search until the buyer identifies top choices
Negotiating Offers
- Assist the buyer in getting the best property at the best price
- Suggest that the buyer learn more about the neighborhood prior to makingan offer
- Prepare a comparative market analysis (CMA) in advance of making an offer
- Prepare the buyer to have the most attractive offer in the current marketplace
- Explain common contract contingencies and include approved protective clauses in the purchase offer
- Ensure that the buyer receives and understands all state and federally-required disclosure forms
- Prioritize contract negotiation goals with the buyer
- Help create a negotiating strategy
- Use strategies such as an escalation clause to maintain a competitive offer
- Prepare the buyer for a multiple offer situation and develop negotiation strategies
- Write an offer that has a reasonable chance of being accepted
- Recommend optional contingencies and explain the pros and cons of using them
- Provide information on purchasing incentives that may be available
- Discuss financing alternatives
- Negotiate the buyer’s offers to arrive at the best price and terms
- Utilize hyperlocal expertise and strong communication skills to assist the buyer in being the successful offer
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