When you’ve found the one you want to call home, it’s time to take things to the next level by making an offer. So let’s get started by examining the art of the offer.
Step 1: Understand the market
If you’ve been house hunting for some time now, you’ve probably figured out whether it’s a buyer’s or seller’s market. If it seems like the ‘for sale’ signs are literally multiplying overnight, you’re in a buyer’s market, and on the flip side, if real estate signs in yards are as sparse as country music fans at a Guns N’ Roses concert, you’re in a seller’s market.
Understanding which housing market you’re in helps you present realistic offers. In a seller’s market there’s typically low inventory, which means each home for sale may receive multiple offers. In this case you need to come to the table with a strong offer or you’ll likely be kicked to the curb fairly quickly.
Likewise, in a buyer’s market there tends to be more houses for sale then there are buyers, and buyers typically have the ability to negotiate more than they would in a seller’s market. Even in these conditions experts recommend you don’t offer less than five percent of list price–barring the house hasn’t grown stagnant in the market–if you want your offer to be seriously considered.
A Realtor will help you present your most competitive offer, so no matter which market you’re in, make sure you lean on their expertise.
Step 2: It’s all about the comps
Take the guesswork out of the equation when you evaluate the comps, or comparative home sales, before making an offer. Your Realtor will work to pull data from recent home sales that match or closely resemble the value of the home you want to purchase. Use this information to make a competitive offer.
Don’t make the rookie mistake of perusing the interwebs to look at popular websites like Zillow or Trulia to try and conduct your own research. These third-party sites often pull inaccurate data from various sources to report property value estimates. Trust us, your Realtor’s got your back on this one.
Step 3: Don’t forget about your budget
Remember this when we mentioned–scratch that–proclaimed from the rooftops how important setting a budget was? Well, here’s where that really comes into play.
In a buyer’s market you’ll likely not only stick to your budget but potentially come in under budget. But not so much for a seller’s market, as multiple offers fuel bidding wars and can drive up price. Do not, we repeat, do not find yourself in the middle of a bidding war that’s now thousands more than your max budget. Set your budget and stick to it, even if a bidding war ensues, because just like Grandma says, there’s more fish in the sea.
Step 4: Factor in contingencies
Submitted together with the price you’ll need to clearly communicate the contingencies you’re requesting. Contingencies are items that must be crossed off the list before the sale of the property can go through.
Normal contingencies–things like an inspection or available financing–are to be expected and won’t throw the seller off. On the other hand, attaching too many contingencies to your offer–especially in a seller’s market–could seriously impede your ability to get the offer accepted. Work with your Realtor to decide which contingencies are best to include in your offer.
Step 5: Submit the offer
This is where the rubber meets the road. Once you’ve submitted the offer the seller has three options–they can accept it, counter the offer or just simply say, ‘no thanks.’ Stay tuned next month when we tackle what happens once you’ve submitted the offer.