Basics of Purchase Offers
- Has a realistic offering price, based off of available data
- Has terms of finance that factor in current market conditions
- Does not hold unrealistic expectations about the seller’s part, such as requiring a blank check for repairs
To Lowball or Not to Lowball
Sometimes buyers will make a very low offer, usually to test the seller’s limits and see how far he or she is willing to drop the price. Although this strategy can work at times, it is an action you should take at your own peril. It could either insult the sellers or, if accepted, secure you a great deal.
Middy’s Buyer Tip:
Consider including a deposit when you submit an offer. It’s not required, but it shows the seller that you’re genuinely interested because you’re willing to hand over money to substantiate your claim. Of course, the deposit amount can vary depending on what your agent advises and what you think is smart.
Why Your Agent Comes in Handy
- Market conditions (how many days local properties are typically on the market, number of committed offers, etc)
- The condition of the home
- Comparable homes on market in the area
Middy’s Buyer Tip:
Don’t try to write up your own offers or counteroffers unless you’ve had experience doing so before. Even then, have your agent or attorney look it over and get their expert opinion. Offers require very particular wording, and a mistake could cost you your deal.
How to Make an Offer
Typically states the basic information relevant to the offer, such as the offering price, property, parties involved, proposed close date, and so forth. The beginning of an offer to purchase is formatted much like a formal letter, and the remainder goes over the basic offer information.
Also known as a purchase agreement, this document gets into the nitty-gritty details of the offer and includes a description of the property, legalities for the property transfer, rights to sue, brokers’ fees, and more.
Things to Keep in Mind When Making an Offer
Don’t tell your agent your price cap for a home purchase. If an agent knows this number, he or she will work with it and pay less attention to your desired price point. It’s in your best interest to keep this to yourself and only commit to such a price if you’re absolutely sure that the home is worth it.
Just because you submit an offer does not mean that it has an indefinite termination date. You’re allowed to set a time restraint for your offer (i.e. tell the seller they have two days to accept before you withdraw).
Even though you primarily deal with the seller’s agent during the negotiations, there’s no “rule” that says you can’t contact the seller directly. Ask the seller what the lowest he or she is willing to sell for. The worst that can happen is all you get in response is “Talk to my agent–I’m not discussing the sale.”
Often the agents of sellers will respond to the potential buyer by saying that the offer was accepted with a few minor changes. Don’t let this fool you– any changes to your offer makes it a completely new counteroffer, and you have no obligation to accept.
An agent may urge you to give him or her more time–say a few extra days or even a few weeks–to convince the sellers to sign. This is not in your best interest and not something you need to agree to. It really only makes sense if the seller is out of town. Remember that the more time you give a seller to think about your offer, the more time they have to find things wrong with it.
Contingencies: Don’t Forget Them
- Low appraisals
- An illegal sale with someone who does not own the deed
- Buying a new home if your old property hasn’t sold
- Buying the home if you don’t get approved by the board (i.e. with a co-op or condo)