Now that your home search is complete and you are ready to make an offer to purchase, it is time to take a look at this phase of the transaction. Your REALTOR® will help you to prepare the right offer and help you to examine what terms should be included in your contract.
The home you are about to purchase is listed at a price that reflects certain market conditions, current demand for the home, the condition of the property, location and generally some room for negotiation. In some cases, sellers will price their homes to sell quickly. In these cases, the price the home is listed at is the lowest price they will accept. Other than in these cases, you can make a reasonable offer below the listed price of the home.
Your offer should always be made within both what you are willing to pay AND what you are able to pay. If your offer is accompanied by a letter of pre-approval from your lender, it will improve its chances of being accepted. Your offer should also include any contingencies or conditions that you need to meet prior to signing the contract.
Your REALTOR® will play a very big role in this phase of the transaction and they should be well versed in writing contracts and dealing with contingencies. There a several contingencies that should be included in your offer to buy.
If you are not paying with cash or liquidating another investment, this contingency is critical. This states that the contract is only valid if you are able to secure a loan to buy the home. Ideally, if you know you will be seeking a loan, a pre-approval letter is best. This contingency can affect whether or not the seller will accept your offer, depending on their feelings about your creditworthiness.
If you decide to make your offer contingent upon a home inspection, there is standard language in the sales contract to cover it. Please ask your real estate professional to review it with you. We can also provide you with a list of home inspectors familiar with the area.
You may have special circumstances, or terms, that need to be part of your contract, such as making the purchase contingent on the sale of your existing home, a 1031 tax deferred exchange, or if you want the seller to agree to paint the house before you will buy it, etc. These contingencies and others can all be easily placed in the contract. Your REALTOR® will help you draft a contract that protects your interests and accommodates your special circumstances.
Caution: When you present an offer to the sellers, they have the right to accept, negotiate or reject your offer. The more terms and hoops they have to go through to meet the contract requirements, the more likely it is that the contract will not be accepted. The specific contingencies we discussed are pretty standard, so you should be safe, but only include terms that are necessary to protect you.
When you work with a REALTOR®, they can make recommendations during negotiations based on market conditions, comparables and past experience, but the final decisions on terms are yours. Once you've made your offer, you need to be accessible to your agent because the seller may be willing to negotiate.
If they are willing to negotiate, offers and counter-offers will go back and forth until an agreement is made or either party walks away. By being available to your agent, you can negotiate quickly. This is important because sellers have the right to accept offers from other potential buyers until there is a signed contract in place. If the home you wish to buy is popular, you could lose the home to someone else if you are not available for negotiation.