How to increase your chances of success when you make an offer on a home.
When you’re buying a home and you’ve found the one of your dreams after weeks or months of searching, you want to ensure you make an offer that gets noticed and gets you a great deal. Set yourself up for success with these important steps to making an offer and tips for making an offer that will leave both you and the seller happy.
What does the offer process look like?
The most important person at this phase of the homebuying process is your real estate agent. They will be able to communicate directly with the seller’s agent, gauge interest in the home, and advise you on an offer that is both competitive and will get you a good deal. Without years of experience in real estate, it’s difficult to be taken seriously at the negotiating table, so this is another place your real estate agent will shine.
Step 1 – Consult with the seller’s agent
Once you’ve determined that you’re interested in a home, talk to your agent about whether there are offers on the table. While the seller’s agent might not disclose what the actual offers are, they may offer a range that will make the seller happy. Your agent will adjust your strategy based on how much competition there is and the seller’s goals.
Step 2 – Set your strategy
Once your agent has done some reconnaissance on the status of offers, they’ll talk to you about setting your strategy. This is where your agent’s experience is especially critical (seller’s agents will not take you as seriously and might even try to take advantage of you if they know you’re working without an agent). Your agent will pull up the prices of comparable homes in the area and discuss what your maximum offer should be based on your budget and the home value.
If it’s a home you’re really interested in, you can talk to your agent about including an escalator clause. This sets a limit on your bid, like you would for an online auction. If another offer comes in that beats your current offer, you automatically increase your offer up to your set maximum amount.
Step 3 – Submit your offer
The next step is to actually make an offer. This will be a formal proposal drawn up by your agent that lays out all conditions of the sale, including contingencies, the amount of your earnest money deposit, and their deadline to respond. Your agent will submit it to the selling party, who will usually give you a quick response.
Step 4 – Receive a response from the seller
There are usually three scenarios that play out once you submit your offer.
- They accept it right away. If they’re very happy with your offer, they might accept it right away without any negotiation.
- They will reject it outright. This usually happens if another offer came in that was way above anyone else and they’ve accepted it right away, but this can also happen if your initial offer was low enough that they don’t want to consider negotiating with you.
- They counteroffer. They’ll come back to you with another price, typically higher than your initial offer. Sometimes the counteroffer will include amended contingencies.
Step 5 – Negotiate and finalize the offer
At this point, you can choose to accept the counteroffer or go back with another counteroffer. Your agent will handle the negotiations with your price limit, wants, and concerns in mind and continue to communicate with you throughout this process to ensure you’re aligned. Either you and the seller will find a middle ground that makes you both happy or one or both of you will choose to walk away from the negotiating table.
Once you both agree to an offer, while the deal isn’t closed yet, you’ve made the biggest step in purchasing a home. From here, there will be appraisals and inspections to ensure contingencies are met and loans are approved, paperwork to transfer ownership, and a closing date—typically 30 days from the offer acceptance—where the deal will be finalized.
Tips for making an offer
Know what comparable homes in the area are selling for. This can help you determine whether or not an offer might be too high or too low. Your agent will be able to provide you with statistics for list price vs. sale price in the areas you’re looking.
Check the price history and length of time on the market. This can give you a better idea of how urgently a person wants to sell their home and how open they might be to negotiating a better deal for you.
Don’t forget to negotiate for your terms of sale. Want repairs before you make the purchase? Want to move in by a specific date? Don’t want to pay closing costs? You can include these requests as part of your offer. Be thorough when it comes to laying out exactly what you want during this stage.
What are some things to watch out for?
Overpriced homes. Often sellers will try to set and keep the price of their home as high as possible. Working with an agent who knows the area and doing research can help you spot inflated prices.
Damaged goods. Hire a trusted inspector. Whenever you’re making offers and going through the steps to buy a home, learn as much about potential homes as possible. Not only will this help you determine whether or not it’s what you really want, you can make sure there aren’t any pre-existing problems.
Going over budget. If a home is out of your price range and you make an offer, keep in mind that the counteroffer will probably be out of your price range as well. Don’t get tricked into buying something you can’t afford by thinking you’re getting a great deal. Stay in your budget and know that you can always walk away.
Assuming you’re priced out. On the flipside, if a house is over budget, don’t be afraid to give them a low offer. You never know what the circumstance is and how much they want to sell. The worst that can happen is getting rejected, but if you’re lucky, they might just take it.
