November 25th, 2015 Leave a comment Go to comments

Drafting a solid offer, or purchase contract, for a new home is a bit like walking a tightrope. As a buyer, you want to pay the lowest possible amount for your new home, and have flexible terms for items such as earnest money deposits, mortgage commitments, and closing dates. As a seller, you want to get as much as you can for the property, with few contingencies and a quick timeline, making is a seamless transaction.

The offer on a house should be a combination of price and terms. Everything is negotiable starting with the price, the terms, the occupancy date and what personal property is included in the sale, such as appliances and light fixtures.

Good real estate agents are invaluable when you are ready to decide on an offering price. The buyer should know what comparable properties in the neighborhood are selling for. Your agent can provide you with statistics of the list price versus the sales price for the neighborhood. They can provide you with an average price per square foot. You should compare the price and quality of other homes you have seen with the one you have decided to purchase. Then make your opening bid something that’s fair and reasonable and it not going to offend the seller.

When putting together your offer you want to avoid making unreasonable demands such as a lightning-fast closing date. This is especially important as a result of changes in the residential mortgage industry that took effect on October 3, 2015 (“TRID Regulations”) which has increased the amount of time that may be needed by your mortgage lender to get your loan closed.  Your offer is more likely to be accepted if you are considerate of the fact people are trying to carry on with their lives, move and all the other stuff that goes along with that. Being pushed out of your house can be very unsettling.

The price you offer will depend on what the market is like. Are people in bidding wars for homes or are the properties sitting on the market for 6 months? If the market is hot and you offer exactly what the seller is asking, you will get his or her attention and your offer will most likely be accepted. Offer a bit more than asking price, and you may chase other buyers away whose offers are at or below the list price. At the other end of the spectrum, a very low offer may insult the homeowner. A trained real estate agent who is familiar with the local market will have the best read on what your seller is likely to accept.

If you’re looking to make the strongest offer possible, make sure it’s not so high that you can’t afford it. Keep in mind the additional costs involved in home ownership such as property taxes, utilities, homeowner association dues and insurance. New homeowners also need to be prepared to pay for repairs, maintenance and potential property tax increases.  

Beyond price there are terms to the offer. Time limits are set for a response to the offer, either it is accepted, rejected or a counter offer is brought into the negotiations.  Deadlines and dates are also set for a closing date and date for moving in. In addition, contingencies are outlined, such as the offer being conditional on the inspector’s report.

An offer is far more attractive to a seller if the buyer is preapproved for a mortgage loan. Keep in mind that a preapproval is not to be confused with a prequalification or a firm, written mortgage commitment. Preapproval means that the mortgage company has done the same due diligence necessary for full approval. The seller knows the offer is sound and is unlikely to fall through because the buyer was unable to secure financing. Buying a home is generally the largest financial transaction you make and knowing what to expect can help you negotiate the process.

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