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Step 4 Making An Offer |
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Making an Offer |
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Once you find the home you want, it's time to make the seller a written offer to purchase. Depending on the circumstances your offering price might be higher, equal to, or lower than the seller's asking price.
Remember that the legalities of this phase are very important. If you have any questions or concerns, they need to be addressed right away. After all, no one has ever said at their closing, "I wish I had asked fewer questions".
Your agent can save you time and money by making sure that your contract meets all the legal requirements according to local and national guidelines. Your agent will be able to expertly advise you on how to create an offer that will have the best chance of being accepted. Also, your agent will ensure your financial position as the buyer by including any necessary contingencies, which would protect you if a particular requirement is not met.
REALTOR® groups, working with legal counsel, have developed forms that are appropriate for realty transactions in specific communities. Such documents include numerous sale conditions and their wording should be carefully reviewed to assure that they reflect the terms you want to offer. REALTORS® can explain the general contracting process in your community as well as his or her role.
After the offer is drawn up and signed, it will usually be presented to the seller by your REALTOR®, by the seller's REALTOR® if that's a different agent, or often by the two together.
The owner, in turn, may accept the offer, reject it or make a counter-offer. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side's proposal. Each time either party makes any change in the terms, the other side is free to accept or reject it, or counter again.
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Responses to Offers |
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Rejection
If the offer is rejected, that's that, and the sellers could not later change their minds and hold you to it.
Acceptance
If the seller accepts the offer, and signs an acceptance, you have a deal. If not, you are free to walk away, and cannot be held liable for the contract.
If the sellers agree with the price and terms contained in your offer, they'll sign it.
Their agent should give you a signed copy of the offer immediately. When you actually receive a copy of the offer signed by the sellers, you have what's called a ratified offer (that is, a signed or accepted offer). This doesn't mean that you own the house or that it has been sold. All you can say for now is that a sale is pending.
Counter
If the seller likes everything except the sale price, or the proposed closing date, or some other condition of the sale, you may receive a written counteroffer, with the changes the seller prefers. You are then free to accept or reject it or to even make your own counteroffer.
Sellers use counter offers to fine-tune the price, terms, and conditions of offers they receive. If you really want the home, this phase of the game can be nerve-racking. You worry about another buyer making the sellers a better offer and stealing the house away while you're trying to get the price down that last $3,000. The sellers are equally concerned that they'll lose you by pushing too hard for the final $3,000. You don't want to pay a penny more than you have to. The sellers don't want to leave any money on the table.
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Negotiating |
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The key to successful negotiating is keeping in mind that the end result must make you, the buyer, and the seller happy. Otherwise, negative feelings will persist throughout the remainder of the process and someone may walk away feeling that they were not treated fairly. Here are six tips and suggestions to turn negotiation into agreement:
1. Start with a fair price and a fair offer.
There's no question that significantly overpricing your home will turn off potential buyers. Likewise, making an offer that's far lower than the asking price is practically guaranteed to alienate the sellers. Asking and offering prices should be based on recent sales prices of comparable homes.
2. Respect the other side's priorities.
Knowing what's most important to the person on the other side of the negotiating table can help you avoid pushing too hard on hot or sensitive issues. For example, a seller who won't budge on the sales price, might be willing to pay more of the transaction costs or make more repairs to the home, while a buyer with an urgent move-in date might be willing to pay a higher portion of the transaction costs or forgo some major repairs.
3. Be prepared to compromise.
"Win-win" doesn't mean both the buyer and the seller will get everything they want. It means both sides will win some and give some. Rather than approaching negotiations from an adversarial winner-take-all perspective, focus on your top priorities and don't let your emotions overrule your better judgment.
4. Meet in the middle.
Can't decide who will pay the recording fee? Can't agree on a close-of-escrow date? Arguing over cosmetic repairs? Splitting the difference is a time-honored and often successful negotiation strategy. Pay half the fee. Count off half the days. Fix half the blemishes.
5. Leave it aside.
Politicians and corporate executives are famous for their "for future discussion" agreements. If you have a major sticking point that's not material to the overall contract (e.g., the purchase of furniture or fixtures), finish the main agreement, then resolve the other difficulties in a side agreement or amendment. This technique allows both sides to recognize and solidify basic areas of agreement, then move ahead toward a fair compromise on other terms and conditions. Summarizing the points of agreement in writing is another helpful strategy.
6. Ask for advice.
Successful REALTORS® tend to be experienced negotiators. They've seen what works and what doesn't in countless real estate transactions, and they've established a track record of bringing buyers and sellers together. Consult your REALTOR about negotiating strategies, win-win compromises and creative alternatives.
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Withdrawing an offer |
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In most cases you can withdraw your offer up to the point when it is accepted. If you do wish to cancel the offer, it's a good idea to consult with a real estate lawyer. You don't want to lose your deposit, or be sued for damages perceived by the seller.
Can you take back an offer? In most cases the answer is yes, right up until the moment it is accepted, or even in some cases, if you haven't yet been notified of acceptance. If you do 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 find yourself being sued for damages the seller may have suffered by relying on your actions.
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Multiple Offers |
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In many of today's strong real estate markets, home buyers can expect to face multiple offer situations. Multiple offers are a classic example of economic realities because they appear when the supply of homes for sale is limited and the demand for good-condition homes is strong. Buyers hate multiple offers because they push up home prices and create an extremely stressful home-buying experience. Knowing a few tricks of the trade can make the difference between walking away disappointed and purchasing the home of your dreams at a fair price.
How can you make your offer more attractive to the sellers? Offer the highest price you can. Get pre-approved, not just pre-qualified, for your mortgage and attach a copy of the pre-approval letter to your offer. Make as large a down payment as you can and provide documentation showing the source of your down payment (e.g., a bank statement). If your current home is in escrow, provide information about that transaction. Avoid unnecessary contingencies. (Waiving your inspection or financing contingency can make your offer attractive, but it's foolish.)
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Buyers Remorse |
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Buyer's remorse is the sinking feeling that you paid way, way too much for your new home. This feeling begins once you sign the purchase contract. Buyer's remorse can be compounded by many other anxieties -- that you're getting the world's worst mortgage, that the bottom will fall out of property values in the years after you buy a home, that you'll lose your job and that your health will fail. These anxieties are absolutely normal reactions to the uncertainties most of us initially experience. They will go away. If it makes you feel any better, nearly all homebuyers are traumatized by the same concerns while purchasing a home.
The first step in your recovery program is to see buyer's remorse for what it is -- plain, unadulterated fear. Facts defeat fear. The faster you get the facts you need, the less you'll suffer. As a buyer, you fear that you overpaid. By scrutinizing these hidden fears in the bright light of day, you can counter them with facts. After you've signed the contract to buy your dream home, you do one or more of the following:
Read ads in the real estate section of your local newspaper even more intently than you did before you signed the contract. You want to be searching for similar or nicer houses with lower asking prices.
Spend Saturday and Sunday touring open houses. Touring property is the best way to determine if your fears are valid or groundless. Reading ads isn't enough. Pound the pavement; look for better buys than you got. After all, seeing is believing. (Speaking of seeing, you may see the remorseful sellers making the rounds of the same houses that you're looking at, trying to find less-nice properties with bigger asking prices.)
After going through these exercises prior to closing and for a couple of months after the purchase (until you're emotionally and physically exhausted), you'll probably discover that your fears are groundless. There's nothing wrong or unusual about your concerns. What is wrong is letting these fears gnaw away at you secretly instead of openly confronting them.
In conclusion, don't beat yourself up with asking prices. A home can have more than one correct price. Pricing and negotiation are arts, not precise sciences. You can sleep soundly if the price you paid as a buyer is in line with the sale prices of comparable properties. Before you write your offer our professional real estate agents will provide you with the most current information available on comparable property values so you can feel good about your decision and get on with your life.
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Step 1 Deciding to buy a Home
Step 4 Making an offer