When buying a home, it’s important to think carefully about your offering price—but also your offering terms. Most purchase offers define both. And in some cases, terms and conditions can represent thousands of dollars in additional value for buyers—or additional costs.
Terms may include inspections, requests for specific property repairs, or timing considerations, such as a conditional purchase clause (if, for example, you must first find a buyer for your current home).
Here are a few of the most important thing to remember:
DETERMINING AN OFFER
Some buyers mistakenly believe there is a predetermined formula for offers—that offering prices should be X percent lower than the seller’s asking price or the amount they are really willing to pay.
In practice, your offer price actually depends more upon the basic laws of supply and demand. If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes even more.
If demand is weak, then offers below the asking price may be in order.
Its fair and also a good policy to obtain a reliable CMA (comparable analysis) from an ABR agent, of properties similar the one your interested in. This way, you will offer a reasonable, intelligent and accurate offer that the seller will consider.
Offering “low-ball” offers without any supportive information may be offensive towards the seller.
HOW TO MAKE AN OFFER
The process varies by state. In most cases, you complete an offer that your (ABR) representative presents on your behalf. The owner, in turn, may accept the offer, reject it, or make a counteroffer. Don’t be discouraged if they counter offer you!
Because counteroffers are common (any change in terms can be considered a “counteroffer”), it’s important that you remain in close contact with your representative during the negotiation process so that any proposed changes can be quickly reviewed.
INSPECTIONS
Inspections are common in residential realty transactions. Depending on your needs and where you live, they may include:
- mold inspections
- “green” issues, including energy efficiency and eco-friendliness
- surveys to determine boundaries
- appraisals to determine value for lenders
- title reviews
- structural inspections
Structural inspections are particularly important. During these examinations, an inspector evaluates the property for any material physical defects and whether expensive repairs and replacements are likely to be required in the next few years.
For a single-family home, these inspections often require two or three hours. You should plan to attend too. This is an important opportunity to examine the property’s mechanics (plumbing, wiring, etc.) and structure, ask the inspector questions, and learn far more about the property than is possible with an informal walk-through.
Inspections can be customized according to the buyers interest or concern (i.e. mold, radon, termite, electrical, foundation etc.)
Its recommended that, if your selling the property, that you leave the property at the time of inspection. You want the inspector work work without interference and bias opinions form you. Also, sellers may feel angry if an inspector finds issues that are not favorable towards a buyers purchase.
However, a buyer has the right and privilege to be present at the time of inspection, being the he/she is paying for the inspection and their concerns about specific areas/items may need to be addressed.
The Seller and Buyer should never be at the property together when the inspection is going on!
APPRAISAL
If your financing, this is one of the first things you should start working on besides the inspection. It is especially important to know what a property appraises for, because the appraisal will tell you how much your mortgage company will allocate money for your purchase.
If the property appraises for “lower” the asking or offer price, then you will have to supplement the money, out of your pocket, to satisfy the purchase agreed price.
If the property appraises for “more” than the list/offer price then that’s good! A full and complete mortgage can be expected and the buyer has no cash outlay.
If you are buying cash, then its irreverent to get an appraisal, because you will be paying for the property out of your pocket directly. However, the appraisal is still useful for your own knowledge and possible resale potential down the road.
