The Basics of Making an Offer on a House By Realtor.com

That’s why doing your homework is critical before you can determine how much to offer on a house. You’ll want to use an affordability calculator or a mortgage calculator to compare your finances against the price of the home and the current mortgage rates.

Having this information in hand will embolden you to make an offer that’s not only financially responsible for you, but also attractive to the seller.

When an offer comes in, a seller can accept it exactly as it stands, refuse it (seldom a useful response), or make a counteroffer with some requested changes.

In evaluating a purchase offer, sellers estimate the amount of cash they’ll walk away with when the transaction is complete. For example, when they’re presented with two offers at once, they might discover they are better off accepting the one with the lower sale price if the other asks them to pay points to the buyer’s lending institution.

Get pre-qualified for a mortgage

To prove you’re in well enough financial standing to both the seller and lenders, you’ll first need to get a mortgage pre-qualification.

When you pre-qualify for a home loan, you’re getting an estimate of what you might be able to borrow, based on information you provide about your finances, as well as a credit check.

Once that’s established, you’ll move on to the pre-approval stage, which is a commitment from a lender to provide you with home financing up to a certain loan amount.

Think of this as a stamp of approval that you have the money, credit history, and other credentials to buy a home up to that price. With that in hand, everyone—including yourself—should feel confident that you have the money to buy your dream home.

Deciding on how much earnest money to offer

Earnest money is a deposit you put down with your offer on a house. A seller is understandably suspicious of a written offer not accompanied by a cash deposit to show good faith.

A real estate professional or an attorney usually holds the deposit. The amount varies from community to community, and it becomes part of your down payment.

Consider the contingencies you want to include

If your proposal says, “This offer is contingent upon (or subject to) a certain event,” you’re saying you will go through with the purchase only if that event occurs. The following are two common contingencies contained in a purchase offer:

• Financing: You, the buyer, must be able to get specific financing from a lending institution. If you can’t secure the loan, you will not be bound by the contract.
• Home inspection: The property must get a satisfactory report from a home inspector “within 10 days after acceptance of the offer” (for example). The seller must wait 10 days to see if the inspector submits a report that satisfies you. If not, the contract would become void. Again, make sure all inspection conditions are detailed in the written contract.

Write a house offer letter

Your purchase offer, if accepted as it stands, will become a binding sales contract—also known as a purchase agreement, an earnest money agreement, or a deposit receipt. It’s important, therefore, the offer contain every element needed to serve as a blueprint for the final sale.

These purchase offer should include the following:

• Address and sometimes a legal description of the property
• Sale price
• Terms—for example, this is an all-cash transaction, or the deal is subject to your obtaining a mortgage for a given amount.
• Seller’s promise to provide clear title (ownership)
• Target date for closing (the actual sale)
• Amount of earnest money deposit accompanying the offer—whether it’s a check, cash, or promissory note—and how the earnest money will be returned to you if the offer is rejected (or kept as damages if you back out of the deal for no good reason)
• Method by which real estate taxes, rents, fuel, water bills, and utilities are to be adjusted (prorated) between buyer and seller
• Provisions about who will pay for the title insurance, survey, termite inspection, and the like
• Type of deed that will be granted
• Other requirements specific to your state, which might include a chance for attorney review of the contract, disclosure of specific environmental hazards, or other state-specific clauses
• A provision the buyer may make a last-minute walk-through inspection of the property just before the closing
• A time limit (preferably short) after which the offer will expire
• Contingencies

Make sure you cover everything. For example, if the sellers said they’d help with $2,000 toward your closing costs, include that in your written proposal and in the final contract—or you won’t have grounds for collecting it later.

Negotiating the final price and terms

Is the listed price the right price? A real estate professional can give you a Comparative Market Analysis (CMA) of the home’s value, or you can check local listings on Realtor.com to see what similar properties sold for. Based on the home inspection, you might also ask for a lower price or repair contingencies if the home needs fixes.

You’re in a strong bargaining position—meaning you look particularly welcome to a seller—if the following conditions apply to your situation:

• You are an all-cash buyer;
• You have been pre-approved for a mortgage;
• You don’t have a house that must be sold before you can afford to buy.

 In those circumstances, you might be able to negotiate discounts from the listed price. On the other hand, in a hot seller’s market, if the perfect house comes on the market, you might want to offer the full list price (or more) to beat out other early offers.

It’s very helpful to find out why the house is being sold and whether the seller is under pressure. Keep these considerations in mind:

• Every month a vacant house remains unsold represents a considerable expense for the seller.
• If the sellers are divorcing, they may just want out quickly.
• Estate sales often yield a bargain in return for a prompt deal.

After the offer is drawn up and signed, it will usually be presented to the seller by your real estate agent, by the seller’s agent, or often by the two together.

In a few areas, sales contracts are typically drawn up by the parties’ lawyers.

The seller’s response to your offer

You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that. The seller cannot change their mind later and hold you to the deal.

If the seller likes everything except the sale price—or the proposed closing date or the basement pool table you want left with the property—you might receive a written counteroffer with the seller’s preferred changes.

You can accept or reject it, or even make your own counteroffer—for example, “We accept the counteroffer with the higher price, except we still insist on having the pool table.”

Each time either party makes any change in the terms, the other side is free to accept or reject the offer or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side’s proposal.

Withdrawing an offer

Can you take back an offer?

In most cases, the answer is yes, right up until the moment it is accepted—and in some cases even if you haven’t yet been notified of acceptance.

If you want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don’t want to lose your earnest money deposit or get sued for damages the seller may have suffered by relying on your actions.

Counteroffers

When sellers receive a purchase offer from a would-be buyer, remember that unless they accept it exactly as it stands, unconditionally, the buyer will be free to walk away. Any change the seller proposes in a counteroffer puts the seller at risk of losing that chance to sell.

Who pays for what items is often determined by local custom. Sellers can, however, arrive at any agreement they and the buyers want about who pays for the following:

• Termite inspection
• Survey
• Buyer’s closing costs
• Points to the buyer’s lender
• Buyer’s broker
• Repairs required by the lender
• Home protection policy

Sellers might believe some of these costs are not their responsibility, but many buyers—particularly first-timers—are short of cash. Helping a buyer might be the best way to get a home sold.

Whether you’re buying or selling, make sure a real estate agent and/or an attorney evaluate all terms in the offer and counteroffers.

As soon as both parties accept the written offer, you have a legal contract.

"Call Eli Torres at (832) 430-2107, for your home buying and selling needs."

Source: www.realtor.com