After a long search, you have finally found an excellent home for your needs. Now, it’s time to make an offer and compete with the other buyers. Even if you get selected as the winning offer, the deal isn’t guaranteed. Some deals fall through during negotiations and can prolong your house search.
We will share how to make an offer on a house and more details on the entire home buying process.
Submit an online application form to inquire about Angel Oak Mortgage Solutions financing options.
Buy a home or refinance your existing mortgage with Zero Mortgage.
Older homeowners can get peace of mind and added financial security with a reverse mortgage from AAG.
Get Preapproved For A Mortgage
One of the most common reasons deals fall through is because buyers can’t qualify for a mortgage. You don’t want to find the perfect home and go through the negotiation process only to learn your lender won’t provide the money.
Getting preapproved for a mortgage establishes a budget. You know how much house you can afford, and financing becomes less of an issue. Some people confuse preapproval and prequalification, sometimes using them interchangeably. These two terms have significant differences.
Lenders verify your credit score and financials during a preapproval process. Prequalification confirms you’re working with a lender. While it’s a good step, prequalification indicates the mortgage lender has not verified your financial documents yet. Preapproval requires an extra verification step and carries more weight than a prequalification.
Neither a preapproval nor prequalification ensures you’ll get the mortgage. Financials and economics can change over time. However, it shows sellers you are serious and can provide an estimate on how much you can afford.
Assess Market Conditions
Market conditions impact housing prices and competition. You will either find yourself in a buyer’s or seller’s market. Each market will influence your offer and how quickly you present it to a seller.
What Is A Buyer’s Market
A buyer’s market is when available houses outnumber buyers. Sellers will lower their prices to attract the few buyers away from many housing choices. A buyer’s market gives you leverage when making an offer for a home. Low demand can cause sellers to panic and meet you at your price point. As a result, you can select from many homes knowing few buyers will compete with you.
Fewer buyers mean fewer bidding wars. Most buyers know when it’s a buyer’s market, and many will make low offers on a home. A buyer’s market is a great time to buy a house and save money.
What Is A Seller’s Market
A seller’s market is when buyers outnumber available houses. Buyers feel desperate to land a deal and may overpay for a property. Some will take drastic measures such as waiving an inspection to ensure they win the bid.
Houses seem to go on the market and get sold just as quickly. You’ll have to make a higher offer to keep up with other buyers in a competitive market. FOMO tempts buyers to overpay and ignore issues in the home. Be prepared to pay more than usual, but don’t stretch out of your budget. Some people regret buying homes during a seller’s market because they rushed a major financial decision.
Some sellers rush to sell their homes during a seller’s market. They want to capitalize on the opportunity before the housing market slows down.
Find A Home You Like
Getting preapproval and knowing your market will put you in the right frame of mind. Now, it’s time to find a home you like. Establish criteria for your dream home so you can distinguish it from others. Consider these factors before you get started:
- Square footage
- Location
- Proximity to school, entertainment, and other places of interest
- Pool or no pool
- Flooring
- Move-in ready or fixer-upper
- Number of beds and baths
- Price
- Taxes
- Community
Submit an online application form to inquire about Angel Oak Mortgage Solutions financing options.
Buy a home or refinance your existing mortgage with Zero Mortgage.
Older homeowners can get peace of mind and added financial security with a reverse mortgage from AAG.
Decide How Much To Offer
Setting a budget before making offers helps you stay in line. Stretching out of your budget can help you secure a deal, but you may regret it if you struggle to make mortgage payments. You don’t want to overpay, but you don’t want to insult the seller either. Many homeowners get emotion when selling a home. Offering a low amount can end the negotiations immediately.
You should consider the following details when deciding how much to offer:
- Prices of comparable homes in the areas
- Previous real estate sales in the area
- Repairs and renovations you’ll have to take on after buying the home
- Current competition
These factors will help you present a fair offer for the home. You may have to raise your price and compete with several bidders in a seller’s market.
Decide On Offer Details
Offer details add extra complexity to buying a new home. Make decisions on these vital offer details now so you don’t get overwhelmed later.
Earnest Money Deposit
An earned money deposit establishes trust between you and the seller. The buyer’s earnest money deposit goes into an escrow account that no one can access until the transaction is completed. Some contracts let the seller keep the earning money deposit if you back out of the deal after the seller accepts your offer. Most buyers put 1% – 2% of the home’s price in an earnest money deposit. Offering more will make you more attractive to the seller.
Closing Costs
Closing costs are final fees you’ll pay at the end of the purchase. Buyers often pay these fees, but sometimes the seller will contribute. A high offer for the home will prompt the seller to help in any way they can. Buyers will have to pay more closing costs in a seller’s market.
Closing Date
Ownership gets transferred from the seller to the buyer on the closing date. Agree to a date with the seller so you can plan your move.
Offer Expiration Date
You don’t want to wait in limbo if a seller ignores your offer or remains on the fence. An expiration date entices a seller to act promptly instead of slowing down the process.
Common Contingencies
A property can look great on the surface but have several flaws. Contingencies protect buyers from these issues and take on more than they can afford. Consider these contingencies when making your offer.
Mortgage Approval
Mortgage approval often makes or breaks a buyer’s ability to complete a purchase. You will need this contingency if you need financing to complete the purchase. If your loan doesn’t get approved, the deal will fall through.
Appraisal Value
Appraisers estimate the value of a property to ensure the value matches up with the purchase price. A buyer can cancel the contract if the appraisal isn’t high enough.
Home Inspection
A home inspection can reveal issues that don’t show up on the surface. Some homeowners want to avoid fixer-upper properties, and this contingency provides that protection. The deal will only hold if an inspection doesn’t find significant issues in the home.
Current Home Sale
Some homeowners buy a new home while selling their current home. This is because selling your current home gives you extra funds for your new home. Some people need those funds to complete the purchase, while other homeowners want to avoid having two mortgages. This contingency lets you back out of a deal if your other home doesn’t get sold soon enough.
Decide On Using A Real Estate Agent
A real estate agent can help you draft an offer. They’ll create the documents and ask for your signature. While real estate agents provide expertise, they also ask for a commission after the transaction gets finalized.
You can also save costs by only asking an agent to draft your offer. If you find the property on your own, you’ll save money. You can also find buyers for your current home without any work.
Draft Your Offer
Drafting your offer cuts costs. You won’t pay a commission and can hunt for a home without help. You’ll have to decide your offer price and requested contingencies. A personal offer letter explaining what you like about the property and why you’re the right buyer will help your chances.
Negotiate Price And Terms
The seller may reject your proposal and present a counteroffer. You may go back and forth with the seller several times before finalizing the price and terms. Identify your non-negotiable terms and be willing to compromise in other areas.
Sign A Contract
Sign a contract once you agree to the price and terms. If contingencies don’t take effect, you’ll have your new home on the closing date.
