You've found the home of your dreams or at least a home that's pretty close to it and now you want to make an offer. First of all, have you done your financial homework? This is really the first step to buying a property. You should speak with a lender or mortgage officer and find out exactly how much you can afford in a monthly mortgage payment. A lender will do the math and figure out how much that equates in the final home purchase. For instance, if you can afford a $2000 month mortgage payment with your interest rates and terms, this could equate to a $420,000 house. This is your budget for looking for a home. Once you have found a home that you'd like to make an offer on, your buyers agent will help you walk through the process.
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Another major key point for buyers is having your own buyers agent. Try not to use the listing agent of the home you want to buy as their primary goal is to sell that home for as high of price as possible. Their best interest is not for you but for their seller so it really pays to have your own representation when purchasing a property and it costs the buyer nothing since the agent gets paid from the sale of which ever home you choose.
Your buyers agent will help draw up the proper paperwork and if it's an experienced agent they will know how to make a solid and tight offer, one in which sellers will find attractive. So here's some of the basics to making an offer, how to make it, and when to submit an offer.
How much to offer.
Does anyone offer full price anymore? Yes! And it really depends on the type of market we are in. If it's a buyers market, the buyer is in the driver seat and can offer less depending on how long the house is been on the market and if it's overpriced. If it's a sellers market, the seller is in the driver seat and they potentially could be getting multiple offers. Lowballing an offer when multiple offers are on the table simply will not even get reviewed. So, it's important to discuss the right offer price with your real estate agent to determine a price that will not only get reviewed, but potentially accepted.
Related: Can Social Media Help You Find the Perfect Home?
When to offer.
Many listing agents will list a property on a weekend but then not review any offers until the following Friday. This is to create a little bit of a buzz or urgency with the house. If the seller had 10 people that love the property but won't review any offers for a week, it gives a chance for buyers to work up their best possible offer. Then the seller can sit down with their listing agent and review all the offers deciding on which is the best for their needs and budget. However, some aggressive agents may be able to get in there offers early so it never hurts to ask. If you are a full price buyer with very little contingencies presenting a clean and simple offer, the seller doesn't have to wait, they can accept the offer right on the spot. This is definitely something you should work out with your real estate agent. Being confident, aggressive, and creatively negotiating with a listing agent can really help your chances of getting the home you want above anyone else.
What you shouldn't do is wait too long, especially in a sellers market. This is not to say you shouldn't be cautious and think about the property, but when the time comes, make an offer right then and there because you never know when someone else is going to make an offer and get that offer in front of the sellers first. Your buyers agent will talk about the urgency on putting in an offer, when to do it, and how much to offer.
Terms.
The terms of the contract are also something to negotiate depending on the current market. If the property has been on the market a really long time and you're considering offering less than full price, chances are you'll get accepted or have some counter negotiations before mutual acceptance. If the home is been on the market for several months the power shifts to the buyer regardless of the current market. Because the seller is motivated to sell they may be more likely to accept contingent offers, tighter terms, or terms more in favor of the buyer than the seller.
"This really is a unique game and dance between the buyer and the seller but listening to your real estate agent is key to getting your offer accepted and on the table before anyone else." - Sydney Buyers Agent
Should you offer more than asking price?
This too is a tricky move but it can be beneficial. If you are offering more you might add in an escalation clause. This states that you will pay up to a certain amount in certain increments over the highest offer submitted. The seller must prove that they have another offer so that the buyer can offer higher than the highest offer currently on the table. However, this only works if the home can appraise for the increased value. If the buyer is financing the property the appraisal has to match up with the presented offer. If not, the seller either needs to come down in price or the buyer needs to make up the difference in cash.
Again, discussing negotiations and exactly what to offer and when to offer depends on the market, the house, the sellers, and your budget and all are factors in writing up a solid and tight offer.