Making An Offer

You want to be as calm and objective as possible when you decide to make an offer on a house, but finally locating a place that says “home” to you is a pretty exciting and emotional experience.  And, it can get tricky.  If the price you say you’re prepared to pay is way too low, you run the risk of irritating the seller, who might respond indignantly by becoming completely inflexible.  On the other hand, you don’t want to agree to a price that’s higher than it should be, either.  Your mortgage lender is going to conduct an independent appraisal of the property before any loan is approved. Watch out, for instance, for the house that’s upgraded beyond the rest of those in the neighborhood.  While it might be great to own the best house on the block, an appraisal may not assign much value to the niceties the owner expects you to pay for.

Agent Advice:

Making your offer is the stage at which your real estate agent’s expertise is going to be invaluable.  An agent will be able to provide you with “comps” – comparative selling prices – for similar properties in the neighborhood.  Comps are very important because the lender’s appraiser is going to be looking at them, too. But make sure the comps you see are very recent – not more than 6 months old.  In today’s volatile real estate market, last year’s comps don’t mean much.  They’re already outdated and could be much too high or too low.  An agent also may be able to tell you how long the house has been on the market.  If it’s a new listing, chances are there’s less room to maneuver than if the house has been on the market for six months or a year.You’ll also want to take into consideration the condition of the property.  If major repairs need to be made, this should be reflected in the price you pay.  Your agent can advise the seller that your offer reflects these conditions.

What goes up…

Just remember, in your negotiations, you can always go up, but you can’t come down.  Because a little haggling over price is often necessary in real estate, be prepared for counter-offers, and general financial gamesmanship, and don’t let it get to you.  Remain patient. But don’t let the bargaining go on too long, or another buyer is liable to walk off with the prize before you know it.  And if you’ve found what you think is a real bargain, don’t hesitate.  If it’s a practice in your locale, be prepared to give a binder deposit. A binder, also known as “earnest money,” is a small sum that indicates you’re serious. It can be a few hundred dollars or a few thousand, depending on the asking price, and it will signal your good faith.  Then try to go to contract as quickly as possible.Going to contract means both you and the seller will sign an agreement outlining all the terms of the sale.  At this time, you will give the seller or your agent a deposit, a substantial sum of money, which goes toward the down payment that you will pay at closing time.  Before you sign a contract for sale, you may wish to have a competent real estate attorney look it over first to discuss it with you.  There are going to be words you will be hearing for the first time, or haven’t heard in a while, and you must understand what each means before you sign. In general, as a buyer, you want the contract to reflect your concerns and objectives.  If your purchase depends on securing financing, the contract should reflect this.  A closing date will be written into the contract and you will want to make sure the date is realistic.  Expect three to five weeks to put together your financing, and ask for that amount of time.  Your agent knows the local market and can advise you on this.  If you can’t meet a closing date, usually two to three weeks after securing financing, you won’t be penalized (unless the contract contains a “time is of the essence” clause), assuming you’re trying in good faith to complete all the requirements of your loan.  But you shouldn’t agree to a date you can’t possibly meet. You must, however, insist that the contract include a paragraph that states the house and land upon which it sits conform in every way to all local, state, and federal regulations regarding real estate. This information, incidentally, is standard in pre-prepared real estate contracts.

Don’t Get Stuck...

Don’t feel that a deposit means you can take your time with a contract.  Deposits, although they do carry some legal weight, are not necessarily binding. When you sign the contract, although procedures vary in different parts of the country, you’ll be expected to come up with a substantial down payment within a specified period of time, which usually means a few days or less.  The contract itself should make clear who gets this money to hold until the sale is actually concluded at the closing. You’re not home free quite yet, but you’re a lot closer to becoming a homeowner.