Making an offer on your home
You find a new home. You decide to make a real estate purchase. You make an offer? Easy. Right? Not always. The advice below will help guide you through this process.
If you are purchasing a new construction home or condominium, you have it easy. You pay what they ask. Sometimes demonstration units are discounted, or you can choose from upgrades, but, generally, if you like it you pay the price. However, if you are purchasing a home or condominium from a private owner you have a much more complicated process.
Whether you are buying real estate or selling a home, consider the sale of a home as a mutually beneficial transaction. It is true that an asking price is exactly that — an asking price, but very often buyers and sellers become emotional, feel slighted or even offended if neither party makes responsible and realistic offers. For all purposes, this is a business transaction that requires multiple parties and often outside services and financing (which often require more time than most people think). The key, however, to moving the entire process along is an agreement—legally binding—between the buyers and sellers of homes.
The Offer Process
The buyer gives an offer to a buying real estate agent who writes an offer letter. The buying real estate agent meets with the selling real estate agent (usually with the sellers present). The buying real estate agent presents the offer. The sellers decide to accept the offer, counter the offer or reject the offer. Sometimes there are contingencies with the offer, the counter offer or both. A contingency is an offer with a set of specifications or requirements attached. Some of these contingencies include:
- I will purchase your house if and when I sell my current house.
- I will purchase your house if you fix the back stairs to the house.
- I will purchase your house if my mortgage loan is approved.
Sellers can also add contingencies in their counter offers. Also, either party has a time limit set to respond to the offer/counter offer and can withdraw it prior to that time if there is no response. Doesn’t this make buying a car seem simple?
From the Seller’s Perspective
There are two crucial factors in selling your home. How much you are willing to accept for a home and under what time frame. Price goes a long way in determining how quickly a home will sell. Legally any real estate agent representing a buyer that is interested in a home must present an offer to your selling agent regardless of the amount offered. Take an offer seriously, and don’t get offended if it is below the price you are asking. You can always reject an offer.
Unless you accept earnest money with an offer that has contingencies you should add your own contingency that you can continue to market your home in case the contingent offer falls through. Earnest money is a non-refundable deposit of sorts. You should also set as tight a time limit on a contingency period that a buyer sets. If you are accepting bids during a contingency period and another offer comes in you can accept that other bid if you give the first buyer notice and a time period to respond. For instance if you are waiting in a contingency for the buyer’s own house to sell and another offer comes in for your home, you can give 48 hours for them to close on your house, making their contingency on selling their house to buy yours null. The buyer may very well go ahead and close on your house even though they have not sold theirs.
If you have multiple bids you do not have to accept the higher offer. Sometimes some things may be more important. For instance, it is not uncommon for developers to come into established communities to purchase smaller homes, tear them down and build a new larger home. Maybe you would rather a family purchase your home instead of a single person. Legally you can not discriminate against a buyer because of race.
As a seller, use the following guidelines:
- Let your real estate agent do the negotiating.
- Look at all offers seriously.
- Don’t get emotional over offers.
- Be open-minded to all buyers of homes.
- If you make a counter offer make the best one possible.
- Don’t judge buyers by appearance.
From the Buyer’s Perspective
The process begins with a warning for home buyers. Because the commission that the buying agent gets comes from the sale of the home and hence the seller, your buying real estate agent may have legal responsibility to the seller of the home. If this is the case they are legally an “underagent” or “sub-agent” for the seller. Even though they are helping the buyer in the process they have disclosure responsibility to the sellers. This means if you disclose a bid but tell the agent you would be willing to come up if they reject it, your buying real estate agent would have to reveal that to the sellers if they ask. In some states there is "buyer agency." Buyer agency means a real estate agent is contracted to work exclusively for the buyer and that real estate agent has legal responsibility to the buyer. If your state has an underagent arrangement (the agent buyer is responsible to the seller), don’t be dismayed. Although this is not ideal, it has worked fine in states for a long time. The main thing to do is ask the real estate agent to whom they are legally responsible and to not divulge information that the agent would have to reveal to the seller. In other words make a bid but don’t talk about how you’ll offer $125,000 but would be willing to pay $140,000.
When you are seeking to make an offer make your most reasonable offer. You aren’t haggling over a used car, and it is unlikely that the buyer will make more than one counter offer. When you are seeking your deal make sure you understand all the items included in the sale. If you want the kitchen appliances make sure that is understood. Items that are permanent attachments are included in the sale of a house but if there is some special item, for instance an antique chandelier, make sure it is part of the offer. The last thing either a buyer or seller needs to do is haggle over an old stove. Closings have failed for less.
As a buyer, use the following guidelines.
- Let the real estate agent do the negotiating.
- Do not call the seller.
- Don’t give a rock bottom bid unless you are aware that the seller is open to them.
- Include everything in the bid that you want, including inspection service, repairs, appliances, etc.
- Don’t request personal property, including washer and dryer unless you know they are looking to leave it.
- If the seller is present during viewing don’t give your personal opinions about the home.