Having gone through the work of getting preapproved for financing, defining your search criteria, and finding your dream home in Minnesota, you are now ready to negotiate a deal!

Buying a Home in Minnesota Step 4: The Purchase Offer

One of the areas that causes much anxiety when buying a home is negotiating the agreement to purchase a home. It is simply something you do not do every day and at the same time is one of the most important financial decisions you will make. I’ve come up with some tips below as your offer relates to mortgage financing. When it comes to the actual terms of the contract, if you want legal or tax advice, consult a qualified legal or tax professional as the terms are legally binding once signed.

There are several items to consider when making an offer, the first being price.

Negotiating Price: So how much should you offer? This is an often asked question but one that has no pat answer. One way to come up with an offer price is to ask your real estate agent for a Competitive Market Analysis (CMA). In this process your agent will review similar properties in the neighborhood to find out how much they have actually sold for. By doing so they can show you a report containing data to help substantiate the type of offer you might make. Only you and your agent can truly know where to start with negotiating price.

Negotiation Concessions: Most first time buyers today will negotiate with the seller to pay some or all of their closing costs in the transaction. This financing strategy is very common today and sellers are generally prepared to look for it when you make the offer. The biggest key to keep in mind here is that when you negotiate for the seller to pay closing costs, this is in effect a reduction of your offer. When writing an offer below list price you might be more limited in terms of how much you can request for the seller to pay of your closing costs.

Closing Date: If you are offering on a foreclosed home you will want to be prepared to close within 30 days or less, while a traditional home seller might request a bit longer. When you set a closing date you will want to keep this in mind: loan rate locks get more expensive, the longer they need to be. If your closing date is within 45 days you will generally be able to lock in a good position to lock in a rate at loan application.

Also, it usually makes sense to try and set a closing date for near the end of the month for two reasons. 1) If you are renting, you will have prepaid for the month in which you are closing on your home. By closing mid-month you will have paid for two living spaces during the month, and 2) Your cash required to close will be lowest if you close near the end of the month.

Personal Property: When you negotiate on a home purchase, keep in mind that the appraisal will need to come in at least at the sales price or above. If you are asking the seller for personal property it’s a good idea to note this as having no value in the transaction. This is especially true of FHA and VA transactions. If you are using Minnesota Housing Finance Agency funds you will need a special addendum that I can provide to your real estate agent when making the offer. Substantial personal property (such as a car, a tractor, etc.) should be not be included in the purchase agreement at all.

Financing Contingency: If you are financing the purchase of your Minnesota home you will need a contract addendum that specifies the type of financing you will use. Real estate agents are accustomed to this and will help write it correctly.

Legally Binding: Your contract is legally binding. Be sure to review it thoroughly. The items I noted above are touching on some of the highpoints when it comes to the parts of the contract that relate to financing. Be sure to consult with your agent and/or a qualified attorney before entering into an agreement to purchase.