While putting in an offer on a house is exciting and nerve-wracking, it can be a smooth process with the right preparation. You’ll need to decide on how much you’ll need to buy the home, with costs ranging from the down payment to the earnest money deposit. The offer letter will also feature contingencies to help protect the buyer. Knowing what to expect ahead of time will help make the process less intimidating, so here’s what you need to know before and when putting in an offer on a house.
3 Steps Before Making An Offer
Before it’s time to make an offer, it’s important to take several steps first. To start, you’ll want to get pre-approved for a mortgage. This requires you to provide financial documents and undergo a credit check, which can take some time. Being pre-approved looks good to sellers, as it shows that you’re financially ready to buy a home.
The next step is to research the house’s market value and surrounding area. Doing so gives you a price range to aim for when making your offer. Additionally, ensure that all necessary inspections are done before putting in any offers—you don’t want to find out after making an offer on a home (and certainly not after buying it) that some issues went undetected.
Once all these steps have been completed, it’s time to prepare for the offer. A real estate agent can guide you throughout the entire process from start to finish.
1. Decide On Your Price & Earnest Money
Figuring out the right price and earnest money to put down on a new home is a huge decision that requires careful consideration. Be realistic when making an offer, and do not overestimate your financial capabilities—while a home in a community with water views or one that’s practically a mansion may sound like the dream, it won’t last for long if you can barely afford it. Here are four key steps for determining the right amount:
- Research comparable homes in the area to understand the market value of the house you are interested in buying.
- Be aware of any repairs or renovations that may be needed on the property, as this will factor into what you can realistically offer.
- Talk with a real estate agent or mortgage broker about loan options and the down payment.
- Consider factors such as annual taxes, HOA fees, insurance costs, and other expenses associated with owning a home before deciding on an offer amount and earnest money deposit.
In addition to determining your budget, you’ll likely be asked to make an earnest money deposit. This is up-front cash from your down payment that will be given to the seller if you back out of the deal for something not covered by a contingency. Earnest money shows the seller that you’re serious about the home and is usually one to two percent of the home’s price.
Knowing your budget upfront allows buyers to make informed decisions before submitting an offer on a house. This gives potential homebuyers peace of mind knowing they’re investing in something they can afford.
2. Come Up With Contingencies
Coming up with contingencies is critical, as it helps protect you in case unexpected issues arise during or after the transaction. Contingencies are negotiable conditions added to a real estate contract that allows buyers to leave the deal without losing their earnest money.
Common contingencies include a buyer’s ability to obtain financing and appraise the home for an acceptable value and the result of a home inspection. Buyers should use their own judgment when deciding which contingencies to include. Know where you stand financially and what risks you’re willing to take on before making an offer.
When negotiating with a seller, remember that they may have some requests they’d like included, such as a specific closing date. Review all documents thoroughly before signing anything to avoid confusion about what was agreed upon—otherwise, you could be making a costly mistake.
3. Write The Offer Letter & What Comes Next
Now it’s time to write the offer letter. A real estate agent typically handles this, but it will include all the purchase details, from the price to your earnest money amount to when you want to move in.
Once you’ve sent your offer, it’s the seller’s turn. They could accept your offer as is, make a counteroffer, or reject it outright. If they make a counteroffer, you can decide whether to negotiate further on things like contingencies and price or walk away from the deal entirely. Remember: you’re in control of the situation and don’t have to settle for something that doesn’t feel right. Don’t be afraid to stand by your original offer if you’re confident it was fair and competitive with other offers.
The seller may also be willing to negotiate on closing costs or other fees. Ultimately, how things go depends largely on how well each party communicates their needs and expectations during negotiations. Be sure to remain flexible but firm throughout negotiations so both parties are satisfied with the agreement at hand.
Get One Step Closer To Your Dream Home
Making an offer on a house can seem intimidating, but all it takes is the proper preparation and research. Before making your offer, make sure you decide on your price and earnest money, come up with contingencies, and then it’s time to write up your offer letter. Once everything is in order, submit it to the seller. No matter how the seller responds, you’ll be glad you put so much preparation into your offer.