Making the offer
Recently, I had the pleasure of doing an adult ed. home buyers class for the Marietta Community School. I have decided to take some of my outline notes and form the into a blog series for home buyers.
The content is geared a little more toward first time buyers but will still be very relevant for move up buyers as well. Also, this is based on my own knowledge and experience in our local market. All real estate is local, so if you are reading this in another part of the country then some of the ideas may not apply or at least they may apply differently.
Making the offer:
There are some basic things that will be in every offer
- Price - This is the price that you are offering to pay for the home.
- Legal description and address of the property
- Closing date - Typically closings are at the end of the month but it is not required. Usually its about 30 - 45 days from the contract date.
- Closing Costs paid by seller. If you are asking the seller to assist with the loan closing costs this will be included on the offer. This usually will range from 0-3% of the loan amount.
- Due diligence (inspection) or "as-is". The Ga contract allows a due diligence period which can be used for home inspection, appraisal, termite inspection, or any other research that the buyer chooses. During the due diligence period the buyer has an option to move forward or cancel the contract for any reason. A longer due diligence period is more beneficial to the buyer but usually less agreeable for the seller. Somewhere in the range of 5-15 days seems to be most common, but it is totally negotiable.
How much less will they take? How much should I offer?
There is no hard and fast rule on this. Every home, every buyer, and every offer have different circumstances. I have had many buyers that I advised to offer less, sometimes waaaay less than the asking price. I also had a client last year that made an offer on a bank owned home. It turned out there were multiple offers on the home and we had to decide if we wanted to stick with our original offer or go up on the price. We decided to offer $2500 more than the list price! The offer was accepted, but why would we do that? It was simple. The buyers and myself both thought the home was a fantastic deal. It turned out the we were correct and the appraisal came in about $60,000 higher than our offer! The buyers were totally ecstatic to get that much equity for only an extra $2500 so this strategy really made sense.
In todays market I am seeing more bank owned homes being priced lower to sell fast. In this case there may not be as much room to negotiate. Just make an offer buy the house because its a good deal. However, like I said above, every offer is different.
Additionally, there are a few items that I attach to just about every offer.
- Financing contingency. This allows the contract to be canceled by the buyer if the financing falls through. I usually try to make the contingency period for the entire time frame of the contact. So if we are asking to close in 30 days then the financing contingency we would ask for is 30 days. Sometimes the seller will agree and sometimes they won't. It is all negotiable.
- Appraisal contingency. This specifies that the home must appraise for a set amount. If the appraisal comes in lower then the seller can reduce the price to the appraisal amount, order a second appraisal at their own expense, or cancel the contract.
There are a few other things that usually will be included and attached to your offer.
- A copy of your earnest money check. This shows that you are serious about your offer. If the offer is not accepted or you later cancel the contract under terms that are allowable, then your earnest money will be refunded to you.
- A copy of your mortgage pre approval or proof of available cash funds.
- The sellers property disclosure signed by you.
Everything is negotiable:
- Just because something is standard or common does not mean that it is the only way to structure an offer. You can literally ask for anything. Remember that just because you ask does not mean you will receive! In the past I have seen cars, boats ,lawnmowers, or furniture included as parts of the sale. Call me an I'll tell about the houseboat I got with a home!
- Some common things that may be fairly typical would be a home warranty or the refrigerator.
Making the offer can be both exciting and stressful. Remember that the offer is a contract. I think the most important thing is to take your time and be sure that you understand the terms and consequences of that contract. This is a huge decision and taking a few minutes to understand will without a doubt will be in your own best interest.
Next time: What happens during the appraisal and due diligence inspection period?
Read Part 1, Here - Is it a good time to buy and should I buy?
Read Part 2, Here - Should you buy a home if you currently have a home to sell?
Read part 3, Here - Getting Credit Ready/ How much house can I afford?
Read Part 6, Here - Appraisal, Inspection, and Due Diligence
Read Part 7, Here - To the closing and beyond
Bob Southard, e-Pro, Realtor ®, Solid Source Realty, Inc. Buy a home, Sell a home, in Powder Springs, Marietta, Kennesaw, Acworth, Dallas, Hiram,and Cobb, Paulding, Douglas, North Fulton, South Cherokee, County, Ga
Visit my website www.AgentBobSells.com
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