You found it – after so many hours of searching, your dream home has crossed your radar and you want to jump to make sure it is yours. What steps do you need to take now to buy a home?
Too often, we see prospective buyers become emotionally attached to a home for sale that is priced too high. The buyer makes a fair market value offer (which the unmotivated seller deems as low-ball) but has no chance of getting the home without paying a price well above the market because of this emotional connection.
Working with your real estate agent, your offer should be made so compelling that the seller is concerned about losing you, the buyer. If the home is priced below market, do not be afraid to offer full price or more. If the home is right on the market, you need to make a decision based on the other homes that can be purchased if this one is lost. The key is to work with somebody who understands the real estate market in its current condition.
By eliminating all unmotivated sellers, buyers can comfortably shop for great buys in the market without fear of overpaying. This is most likely the greatest cause of stress for the buyer, so eliminating this fear is imperative.
Before you begin any serious home search, you should be pre-approved through a lender. Once you are given your approval amount, you will know the price range of the homes you should be searching for. From there, get in touch with your real estate agent. Not only will the agent help you in searching for your new home, but they will be available right away to contact the listing agent to make an offer. The big question is… do you offer what the seller is asking for? Do you go higher? Lower? Most agents do not recommend bidding at more than 10% below the asking price. If you are going to bid low, you may want to sweeten the deal with a larger earnest money deposit or close faster.
As long as the seller is still accepting offers, your agent will research and share similar homes that have recently been sold to help determine the best offer price. Depending on the market, there may be other offers on the house already. Your agent will contact you to discuss an offer strategy that includes an initial offer, plus room for later negotiations. If you need room to negotiate, you’ll want your initial offer to be lower than the maximum price you are willing or able to pay. You’ll also need to decide on your proposed closing date and what contingencies you will be including in the offer. In a competitive market where multiple offers are submitted, contingencies and timelines can be the deciding factors. If you’re buying in a sellers market, be sure to ask for your agent’s insight on what sellers are looking for in an offer. This is an important step, especially when you are up against other offers.
A major point of the offer is the earnest money. Let the sellers know you are serious about their home. Earnest money is usually 1-3% of the purchase price. Yet in some markets, it’s a flat amount around $500-$1,000. The point is to protect sellers from buyers who make too many offers on homes available on the market. From the buyer’s standpoint, it lets the seller know you are serious about their home. Make sure you do not back out of the contract for no good reason. If you do, you’ll lose your earnest money. Overall, there’s little risk if you’re a serious buyer. You’ll receive your earnest money back if your offer is turned down (your agent will make sure this is clearly stated in the purchase agreement). If your offer is accepted, the money goes toward the purchase price of the home.
Once you and your agent agree on a plan, a formal offer will be drafted and sent for your signature. At this point, it is submitted to the sellers agent for review and to be passed onto the current homeowners. Most sellers respond within 24 hours, though some sellers may take longer. Typically when making an offer, with the guidance of your agent, you can potentially set a deadline for acceptance. From there, the seller will either accept, reject, or make a counteroffer.
If a counteroffer is proposed, your agent will recommend a plan and then start negotiations with the listing agent. This can be one or two conversations or many, depending on the sellers decision. Price isn’t the only thing that can be negotiated. You might also find yourself asking for repairs, sellers contingencies like them covering some closing costs and a closing timeline.
After an offer is accepted, you and the seller will be in what’s known as mutual acceptance and will start the process of closing. The signed offer letter will become legally binding if the seller accepts. At that point, you’re buying a house, the purchase and sale contract will become a key part of your transaction paperwork.
If you are in the market to purchase a home or rental property, give us a call at (833) BP-CARES or contact us here. The Boeve Team has hundreds of 5-star reviews for a reason. Learn more about buying a house on the Boeve Way here.