BUYING A HOME: WRITING AN OFFER
You’re down to the last four steps to buying your dream house. Now, you need to write an offer and the seller has to accept it. Take into account the following factors when writing an offer to optimize the chances of acquiring the property you want at a reasonable price.
Consider market conditions in the submarket before writing an offer. Remember, there are submarkets within markets, and submarkets within submarkets. Just look at the market for the house you are buying. Speak to an agent to secure the valuable, accurate information.
Be specific with the amount you are willing to pay or the purchase offer. Look at the comparable sales (in terms of location, size, and amenities, among others) in order to know the fair price of the house in question. Different people have different views about a house’s fair value. For instance, if you find the property exceptional or something that speaks about your family, you can offer full price or higher than that. Generally speaking, giving full asking price with sensible terms may be sufficient to get your offer accepted right away.
Normally, you won’t have any idea if there are other buyers placing offers on the house. In the event the seller gets various offers, he may choose those with highest and best offers. So it is important to determine your highest and best price. Make sure this is the maximum amount you will be happy paying for the house.
Ask for the perks the seller can give in your offer. Perks may include credit a particular percentage of the purchase price toward the closing costs, gym membership, annual pest control treatment, or appliances/furnitures. If you have a limited amount of cash in the bank and are entering into the home buying process, you may opt to not acquire the property until you find a seller who will settle your closing costs. The seller may not be able to give you everything you ask for, but you do not have much bargaining power, either.
Indicate the date you will close or finalize the sale. In other words, the closing date. You cannot state you want to close on the house within a day or two due to financial and legal matters pertaining to the agreement. Such processes require at least one month to finish. And sealing a deal at the end of month will cut the amount of money needed because of prepaid interest, the interim interest accrued from the settlement day to the beginning of the 1st mortgage period. Basically, you obtain what you are paying for with this interest. Most buyers prefer having a 30-day cushion before making any mortgage payments.
And forget not to protect yourself. Inject your contingencies in the offer or the walk-away clauses. By doing so, you can cancel the purchase without resolving financial or legal penalties in some cases. An inspection contingency is one example of contingency which can be included in the offer, allowing you to walk away if the home inspection unveils substantial problems. There is a time limit on these contingencies.
Always have a counteroffer. Come up with at least two or three offers because normally, many sellers do not accept the first offer made to them. You also have the option to counter the counteroffer. Be reasonable, or abandon the entire proposal and move to another seller. Once your offer is accepted, the property will go into escrow. Under this process, you have to prepare a check or wire funds to the escrow firm as good faith money. This money will be considered in your down payment.
A word of caution: Read and understand the terms in the contract before signing it.
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