Making An Offer On A Home
Date originally published on: June 26, 2018
Next to shopping for a home, putting an offer on the one you want is one of the most exciting parts of the home buying journey. This is what you’ve be anticipating. The listing price of a home is an asking price, so it’s not set in stone. Which brings us to making an offer on a home. The journey doesn’t end at an offer though, because a possibility of scenarios can arise.
What happens if your offer is accepted by the seller? What happens if your offer is countered by the seller? What happens if your offer is among multiple other offers? Or worse, what happens if your offer is flat out rejected by the seller? In either case or scenario, you can and will forge on to becoming a homeowner with the guidance of your licensed REALTOR®, such as any one of our hundreds of real estate agents. Contact us today to get started with an agent.
When Can I Make An Offer On A Home?
When you’ve narrowed down your selection of potential homes, you may have to compare your choices based on your needs and wants. Once you’ve chosen the home that best fits what you want and you’re serious about committing, it’s time to push forward. Depending on the housing market, for example if it’s a sellers’ market, your REALTOR® might encourage you to act fast. You’ll know that feeling when you find the one. It’s everything you wanted and maybe more. There’s a sense of yearning. It’s time. Make an offer when you’ve found the home that you want.
How Do I Go About Making An Offer On A Home?
It can be especially overwhelming for first-time buyers when it’s the very first offer you’ve ever put on a house. It’s certainly a learning process. Making an offer on a home is all about negotiating. The buyer has a budget in mind and price they’re not willing – and probably can’t – go above. The seller also has a price they’re not willing – and probably can’t – go below without consequences. So you have to meet somewhere in the middle. Consider whether the market is balanced, a buyers’ market or a sellers’ market because this affects how much negotiating power a buyer and seller has on either side.
When you’re working with a RealtySouth REALTOR®, they largely take care of this part for you. Your agent will draw up a written offer – or general purchase contract – and help you determine your starting offer. You (the buyer) and the seller communicate through your agents. Your agent submits the offer to the listing agent who works with their client (the seller) on considering the written offer.
This is where contingencies can come into the mix. Depending on the buyer’s situation. The purchase of the home can be contingent on the buyer securing a mortgage loan, the home passing inspections, the buyer seller their home first to have funding for the current home, and the seller having a valid, legal title to the property for sale. These are common contingencies considered and often included in a purchase contract.
When An Offer On A Home Is Countered
Your REALTOR® contacts you about the offer and reveals the seller has responded with a counteroffer. Now what? This isn’t terrible news. It means the seller has considered your offer, but it may be out of range as far as what they’re willing to sell for. Remember how both parties (buyer and seller) of the deal have a number either can’t go below or above? Here comes a bit of a tug of war. You offered a price. The seller came back with another price, likely higher. At this point, you can either counter that seller’s counter offer, accept their offer or rescind your offer on the home altogether.
This is the house you really want. It has your must-haves and coincides with your deal-breakers. Depending on the market, this may be your only shot at this house. So now your REALTOR® helps you form a counteroffer if the seller’s counteroffer doesn’t work for you. This road can lead to the buyer and seller countering until a middle ground is met and a price is agreed upon.
If an agreement can’t be reached and you rescind your offer or the seller rejects your counter, then there is no negotiating and the search for a home continues. Should you accept the seller’s counteroffer, then you and the seller will sign the purchase contract solidifying the pending home sale.
When An Offer On A Home Is Rejected
As crushing as this outcome is, it’s possible. An offer can be flat-out rejected. Let’s as take a quick look at why the offer could be rejected, versus accepted or countered at the least. The offer may have been unreasonably low for the seller to consider – which would be an insult. Because of this unintentional insult to the seller, they may not take you seriously as a buyer.
Another reason an offer may get rejected is because it didn’t meet the seller’s needs. Maybe the closing date is too long or the earnest money amount is too low. Maybe the seller felt there were too many concessions demanded. A huge reason for rejecting an offer would be because the seller received a higher offer. Sellers would generally counter and offer before simply rejecting it – but the possibility of rejection exists. When this happens, it’s definitely time to continue your search for a home.
When There Are Multiple Offers On A Home
This scenario is far more common when it’s – yep, you guessed it – a seller’s market. What fun this is for the seller, who may receive multiple offers for a home priced just right in the right location with the right features. So you’ve stumbled into a bidding war over the perfect home you found because it happened to be perfect for other buyers too. With an experienced REALTOR® who has knowledge about handling this possibility, you can still land on top.
Once you’re informed there are other competing offers on the table, your agent will go over your options and the possibilities of what can happen. You’re free to walk away from the home. You may even doubt yourself and wonder if it’s worth it. But what if this is your dream home? You’ll fight for it.
The seller may counter or say something along the lines of “submit your best and highest offer.” What does that even mean? Well, it clearly means you should submit an offer significantly higher than your initial offer – but maybe not way out of range than what’s reasonable for the property and surrounding market. If they haven’t provided this yet, ask your agent for a comparative market analysis. This will help you reach a reasonable price number, by showing you what similar homes in the area have sold for.
It takes some strategy to win the bid in a multiple offer situation. When it comes down to it, money talks. Money talks more than ever in this scenario because there’s competition. Some tips to help you stand out from competing offers include:
Paying cash for the home is a boss move. If you’re able to pay cash for your home without the contingency of financing, you’re already ahead of the others. You’re already a top contender and the bid for multiple offers is likely to go in your favor. Paying cash for the home means the seller will not have to wait for loan approval and for financing to come through. This removes the uncertainty factor and scoots you to the front of the line.
Write your best offer and don’t expect much negotiation – if any – in a seller’s market. There’s homework that goes into pricing a home for sale. It may be possible the home was priced on the lower end of comparable sales on purpose. So there’s some homework that goes into providing a very attractive offer for the seller. It’s not unusual to go over the asking price of a home in this climate.
Provide a pre-approval for a loan, if you’re getting a mortgage to finance your home. Being pre-approved for a mortgage loan ups for your chances of getting financing. This puts the seller at ease also because it means you’re qualified and you’ve taken steps to securing a loan. It’s just a matter of the loan application being processed and moving through to closing.
Take a look at your purchase contract contingencies – your written offer. Is the closing date within good time and not too far away? What about the escrow, if that’s a big factor to the seller? Will you be covering your own closing costs? If you’re selling a home as well, make sure it gets sold. Are you asking unrealistic requests of the seller?
Perhaps a love letter will coax the seller. Buying and selling a home can be emotional. People sell their homes for many reasons, sometimes by choice, sometimes because there aren’t other viable options. Appealing to the seller in a letter that explains why you love this home and how this home may work in your favor. Your REALTOR® will be able to shed advice on whether to go this route. If it’s at all necessary.
The listing agent will offer suggestions and advise the seller on how to handle competing offers. Your agent will work with you on crafting your ‘highest and best’ offer to submit to the seller. There are no guarantees in this situation and patience is a virtue. The winner of the multiple offer bid will be notified and if that’s you – a ‘congratulations’ is coming your way from your REALTOR®. Hooray!
When Your Offer On A Home Is Accepted
Yay! Congratulations! Hip-hip hooray! This is it — this is what the anticipation has been building up to. The home search can come to a blazing halt now. The home buying process is taking off full-steam ahead now. Once the news has settled in that your offer has been accepted, it’s time to get with your REALTOR® about the next steps.
Earnest money is due. Once your offer is accepted, be prepared to seal the deal with earnest money. Earnest money is usually a percentage of the home’s purchase price that indicates you’re serious about the purchase and indicates your good faith. It’s generally applied to the purchase price when you complete the purchase, like a deposit on your home – but may be forfeited to the seller if you fail to complete the purchase.
Contact your REALTOR® to determine the appropriate amount of earnest money you’ll be providing. You should be prepared to pay based on your target home price and what you’re able to provide. You should have this amount available in your checking account so you can write an earnest money check on the day you sign your purchase agreement.
The next steps after your offer has been accepted include the following: Having your funds readily available for closing, home inspection, appraisal, home owner’s insurance, final walk-through and closing. There’s more in depth on these steps in the home buying process.
RealtySouth is a full-service brokerage firm of HomeServices of America Inc., and a Berkshire Hathaway affiliate. Headquartered in Birmingham, Alabama, RealtySouth serves the entire state and has been a member of the community since 1955. To better serve our community and provide a smooth and successful real estate transaction, our company offers a comprehensive package of real estate services. Our services include relocation through our Relocation Services Department, mortgages through HomeServices Lending, title search through TitleSouth, insurance needs via InsuranceSouth, Title Closing Centers, AHS Home Warranty for warranty services and of course connecting you with the real estate agent to introduce you to the home of your dreams. View homes for sale and contact us today to get started!
Connect with us on social media! Like RealtySouth on Facebook, stay updated with us on Twitter, check out images of our properties and local events on Instagram, virtually tour our latest listings on YouTube and get ideas for your home and all things lifestyle with us on Pinterest and Tumblr.