There are several resources online that will help you prepare to make an offer on a home. Freddie Mac & HUD have many helpful tips and resources that will prepare you to make an offer, http://www.freddiemac.com/corporate/buyown/english/purchasing/offer/writing.html. A real estate professional can provide you with market statistics and recent sales comparables to help you make an informed decision. Feel free to email me for a buyer’s checklist.
- Homes Under Agreement, Sold & Market Statistics
- Before making an offer, buyers should ask their real estate professional for the latest market report on the area. Buyers should know what homes are selling for, as well as what homes are under agreement. If you hear the term “under agreement” or “under contract” that means the house has a signed contract or offer between the buyer and seller, but they have not executed a purchase and sale agreement. This gives the buyer the opportunity to do their due diligence. Many offers have contingencies, such as a home inspection contingency.
- Low-Ball Offers May Create Backlash
- It is not uncommon for buyers to submit low-ball offers in a down real estate market. The caveat is that the low offer may offend the seller and they may decide they would rather sell to someone else. I had a client that submitted a low-ball offer that made the seller so upset that they refused to do business with my client. After several conversations with the sellers broker, the seller did eventually negotiate with the buyer, but it took well over a week for negotiations to recommence.
- Review Contingencies with Your Real Estate Professional
- During the offer process, you should speak to your broker about contingencies that should be built into the contract. Common contingencies in Massachusetts are home inspection and financing. It is essential to have these contingencies built into your offer, so that you can back out of the contract should the house have serious issues or if you cannot get financing. You do not want to be stuck with serious structural, systems, or other expensive home repairs. If the home inspection reveals expensive repairs needed and you still want to buy the house, then you now have the leverage to offer a lower price, with the home inspectors report as your ammunition.
- Property History
- Ask your real estate professional to gather as much history on the property as possible. It would be nice to know the age of the appliances, hot water heater, roof, HVAC, electrical, and other high ticket items that come along with home-ownership. I tell my clients to budget for appliance repair and replacement in their first 2 years of owning their new home. This way when a hot water heater bites the dust, you have a little bit of extra cash socked away to cover the cost.
- Review Personal/Family Budget
- This is a good time to review your personal/family budget. Ask your real estate professional to give you a quick update on mortgage rates. Here is a link to Ginnie Mae that will help you calculate the mortgage payment you can afford: http://www.ginniemae.gov/2_prequal/intro_questions.asp?Section=YPTH. You can also visit http://www.bankrate.com/ for a rough idea on rates. Feel free to email for a free family budget spreadsheet.
- Get Pre-approval Letter
- When a person/family decides they want to purchase a new home, then they should start the process of looking for a lender. It would be wise to have a pre-approval letter in hand before you start to make offers. The pre-approval letter gives the buyer more leverage; because the seller knows that the bank has reviewed the buyers financials and are willing to lend them the money. It is a good idea to have your real estate professional, mortgage broker, or lender inform you often about current mortgage rates. I recommend working with your real estate professional or mortgage broker to get quotes from several banks. Below is a link to the HUD website, which has an informative brochure on getting the best mortgage. http://www.hud.gov/buying/booklet.pdf
- Concessions & Conveyances
- Think about what concessions you would like the seller to pay for or offer. For example, you may want the seller to pay for closing costs or a portion of the closing costs. You may want to ask for appliances to be a part of the sale. Make sure you put these in writing and in the offer.
- Offer Price
- Keep in mind that the seller may counter your offer with a higher price. Consider what is the most you are willing to pay for the property. It is a good time to review the sales comparables and homes under agreement with your real estate professional to ensure you are not overpaying for the home.
Remember, if your offer is accepted it becomes a legally binding contract, so think carefully about what you want and what you can afford.