Make a Winning Offer Without Going Overboard

Buying a Home 101 series – Week 7

This step-by-step series will take you through the entire home-buying process — from finding a buyer’s broker to closing day, and all the details in between. Every buyer will find this information-packed series easy to follow and understand. Make sure to tune in for the next few weeks!

You’ve done it … you found the home you want to buy! Now you’re ready to make an offer and tackle some of the next steps that will make you a homeowner.

First, it’s time to determine your offer price and the amount of your earnest money deposit to show you’re a serious buyer. You’ll need liquid funds for this deposit, so make sure you’re ready to write a check with your offer.

You also need to get prepared for some negotiation tactics. DO NOT forget about your deal breakers and the maximum amount you’d be willing to offer for a home. (Remember, you have a “monthly” budget in mind!)

Here are some smart tips on getting a home for a price you’re happy with in the end:

Step 1 – Evaluate the home and determine an offer price.

• Work with your broker to agree upon a competitive price. You’ll have to consider current market conditions.

• Don’t just accept the asking price. Homes can be overpriced or underpriced initially so you need to validate the price.

Use comps of homes similar to the one you are interested in for the same neighborhood or condo building. Calculate the difference between the asking prices and final sale prices to get a feel for market conditions. Also look at those final sales prices to get an average of the current market price for your type of home.

• Closely compare the features of this home to the others that recently sold. Determine if this home has any valued-added features that might make the price go up OR if it lacks something that would bring the price down.

• Consider ALL variables. Has this home sat on the market for a while or has it just been listed and may sell quickly? Is it more of a buyers’ market or sellers’ in this particular neighborhood?

• Find out about competing bids since these will affect your own offer.  If there will be multiple offers coming in, then going above the asking price is most likely required. You and your broker can determine how much to go over.

• Determine your walk-away price and stick to it. Know your own price ceiling if the sellers continue to counteroffer. Don’t get swayed to go over budget … you will regret this!

 Step 2 — Make an offer and be willing to negotiate.

• If you make an offer under the asking price, make sure you back it up. That helps to ensure that the sellers don’t view it as just a “lowball” offer. Show them current comps or indicate any valid issues that may decrease the home’s value.

• Keep your offer simple with as few contingencies as possible. This makes it easier for the seller to accept your offer and can help seal the deal quickly. 

• On the other hand, be flexible when taking into account any stipulations by the seller. If you can accommodate the seller, especially if it doesn’t cost you any money, do so if possible. For example, they may want a later closing date so their kids can finish the school year. Or they might want to close quickly because they need the funds for their next home.

• Be cordial and not critical of the home. Sellers can be sentimental and may select buyers for more personal reasons than just price. While you may have heard that your friends got their house because they wrote a “love letter” to the sellers, it’s important to not perpetuate unconscious bias. If you write a “love letter”, make sure it only includes why you love the house, not personal information about you, especially information about you may or may not be part of a protected class. You can say how much you love the garden and workshop, but not how your family of 2 small children will love the playground  along with a family photo. Focus on the house, not yourself.

I’ve got a great piece with more in depth information on “Love Letters” that I can send you.

• ALWAYS get access to a professional home inspection. This can happen before or after the offer, depending on the competitive nature of the property. An Inspection Contingency is the biggest Free-Out a buyer can get, so it’s great for buyers and terrible for sellers. You can renegotiate or back out for any reason.

Step 3 — Show you are a serious buyer.

• Include your pre-approval letter and put up a reasonable amount for your earnest money deposit. You want to show the sellers you are serious and capable financially to buy this home. In our area, earnest money is typically 3-5%. Increasing your earnest money is one way to look better to a seller without actually increasing the purchase price.

• Higher down payment amounts are encouraging signal to the sellers.  The down payment doesn’t change anything for a seller. They get the same purchase price regardless. However, there is reduced risk for a low appraisal problem with a higher down payment.

• Make your BEST offer based on that particular home’s situation. Offers should vary on the circumstances:

• If the home just came on the market and already has multiple offers, you may need to go higher in price and/or have fewer contingencies.  A seller is going to choose the best offer first and start negotiating with that offer.  So, give it your best shot right out of the gate in these circumstances.
• If the home has been on the market for a time, you can write a completely different offer — one that is more favorable to you versus the seller.  Always back up such offers with comparables to support a lower price.

With these tips in mind, you should be able to close the deal on our new home. Just a few more steps ahead and you’re almost there!

Negotiating for a home can seem overwhelming, but I have a very educational, step-by-step way of making sure you are knowledgeable, confident and comfortable with every decision along the way.  I’d love to share the way I do that and the steps I take to help you get the right home for the price.  Let’s chat at your convenience and I’d be happy to share my secrets with you! 😉

Next up is the in my 13-part Buying a Home 101 series. You’ll learn what you need to do once you’re under contract to buy a home in Under Contract: Locking in Your Mortgage Rate and Getting a Home Appraisal. These two very important steps can affect your sale and the interest rate of your loan. Stay tuned!