Buying A Home: Write An Offer

  1. Buying A Home: Introduction
  2. Buying A Home: Choosing Your Location
  3. Buying A Home: Determine What Kind Of Home Suits Your Needs
  4. Buying A Home: Calculate How Much Home You Can Afford
  5. Buying A Home: Get Preapproved For A Loan
  6. Buying A Home: Find An Agent
  7. Buying A Home: Find A Home
  8. Buying A Home: Write An Offer
  9. Buying A Home: Go Through The Escrow Process
  10. Buying A Home: Get Properly Insured
  11. Buying A Home: Close And Become A Homeowner
  12. Buying A Home: Conclusion
By Amy Fontinelle

If you've found that perfect home, congratulations! You've potentially reached the end of the searching process - but first you'll have to write an offer and the seller will have to accept it. Here are some important factors to consider when writing your offer to maximize your chances of getting the property you want at the price you want.

Consider Market Conditions in Your Submarket
When evaluating the market, ignore the national and even regional and city news. What you need to know about is the market for the house you're buying. What is the market like for the neighborhood, price range and housing type you're buying?

Home prices may be depressed overall, but perhaps you're in the market for a bargain-basement foreclosure and that's the only segment of the market that's seeing multiple offers within days of listing. There are submarkets even within submarkets. Your real estate agent will be an indispensable source of valuable information on this topic. (To learn more, read Foreclosure Investing Not A Get-Rich-Quick Venture.)

What Are You Willing to Pay?
Think about how much you're willing to pay and what is a fair price for the home. By examining what are called comparable sales (homes similar to the one you want to buy in terms of location, size and amenities) you can get a sense of what the market says is a fair price for the home in question.

But what is a fair price to you? If the home is uniquely valuable to you, you might see nothing wrong with offering full price (or even more than the asking price) to make sure no one beats your offer. In many situations, simply offering full asking price with reasonable terms will be enough to get your offer accepted immediately.

Or maybe, if you like the home well enough but you don't love it, you could be convinced to love it at a low enough price. In this case, you might want to make a low ball offer and see what happens. Low balling can be risky, though, so for a house that you really love, it may not be a good strategy. (To learn more, read 10 Tips For Getting A Fair Price On A Home.)

Determine Your Highest and Best Price
You usually won't know if there will be other people placing offers on the home when you're writing your offer. If the seller gets multiple offers, he or she may go back to each potential buyer asking for highest and best offers. Decide at the outset, while you are still thinking somewhat rationally and before a potential bidding war arises, what the maximum you'd be comfortable and happy paying for the home is.

What Do You Want From the Seller?
In a slow or average market, it is normal to ask the seller for some perks in your offer. These could include having the seller credit you a certain percentage of the purchase price toward your closing costs or including the kitchen appliances with the sale of the home. If you're going into the home buying process with a limited amount of cash in the bank, you may decide at the outset that you're not going to buy a home until you find a seller who will pay your closing costs (which will total thousands of dollars).

The seller won't necessarily give you everything you ask for, but it doesn't hurt to ask unless you make such a ridiculous request that you offend the seller into not entertaining your offer at all. In a seller's market, though, you won't have much bargaining power.

Choose Your Closing Date
Your offer will state how quickly you want to close on the home. You may be thinking, "I'd like to move in tomorrow!" but because of the legal and financial aspects of purchasing a home, 30 days is standard. Also, a closing date at the end of the month will reduce the amount of cash you need to close the deal because of prepaid interest.

Mortgage payments are made on the first of the month to cover the previous month, so your February 1 mortgage payment will pay for the month of January. But if you buy a house on December 20, you won't make a partial payment on January 1 - instead, you'll pay that money on December 20 then make your first mortgage payment on February 1. There's nothing wrong with prepaid interest, because you're getting what you're paying for - it's just that many home buyers are tight on cash and would rather have that 30 day cushion before they start making any mortgage payments.

Decide on Your Contingencies
To protect yourself, you should include contingencies in your offer. These are clauses that let you walk away from the purchase without financial or legal penalties in certain situations. An inspection contingency means that if the home inspection reveals substantial problems, you can walk away. A financing contingency means that if you can't secure financing, you can walk away. (If you were paying cash, you wouldn't have a financing contingency.) There will also be a time limit on the contingencies, such as 14 days, to keep the process moving along and prevent the seller from losing too much time if you have to back out.

Understand the paperwork you will be required to sign. Your purchase offer probably will not be just one page, like you might think, but several pages of detailed (but boilerplate) legal documents. Make sure you understand everything you're signing, because it's a very important contract.

Be Prepared to Negotiate
Plan for a counteroffer. Sellers will commonly not accept the first offer you write, but come back to you asking for more money, different terms, or both. You then have the option of countering the counteroffer. It's usually a good idea to be reasonable during these negotiations as sellers can get emotional and not want to work with you if they think you're trying to take advantage of them. On the other hand, it's just business, and if you want to play hardball, there's no reason not to as long as you're willing to accept that some sellers may not want to deal with you as a result.

Once your offer gets accepted, you'll be under contract and the house will go into escrow. You'll need to write a check, get a cashier's check or wire funds to the escrow company as good faith money showing that you're serious about the purchase and aren't just going to waste the seller's time. The good faith money will be counted toward your down payment.

In the next section, you'll learn what happens during the escrow process.
Buying A Home: Go Through The Escrow Process