Many of you have already experienced it, and some of you can’t wait to try it. The process of finding your lender and getting your home loan, that nail-biting phone call, that signature the moment when you make on offer on your dream house.
There are so many questions, worries, and a healthy dose of heady excitement, that comes with making an offer. Can we really afford it? Will they accept it? Is it the right home? What if it ends up needing a lot of work?
We can put some of these fears to rest. Read on to learn about the top tips for making an offer on a house.
How to Make an Offer on a House that is Overpriced
If you are using Zillow or some other real estate app to do your research, you may stumble across a home that the app claims is priced above its actual value. Maybe the neighboring homes are a lot less expensive, and that makes you nervous.
Well, first, don’t panic. The best measurement to determine home value is price per square foot. If your home is larger than the neighboring homes, that might explain why it’s more expensive.
If the app you are using says the home is overpriced, remember that the app is a computer, using bots to crawl through the data and determine valuation based on that data. The bots don’t account for certain aspects, such as an update kitchen or great, modern architecture. It simply looks at data points like comps, square footage, whether there is a pool, lot size, and other easily mined information.
But, if you have taken both of these points into account and you and your real estate agent still feel the home is overpriced, consider making an offer based on the information you have gathered. See if the homeowners would consider a preliminary appraisal. It’s a strong point of negotiation when the bank won’t finance their portion of the purchase price because it’s much higher than the home’s value.
Whatever you do, don’t go into negotiations with a chip on your shoulder. People often value their belongings based on emotional importance. Your homeowner might be selling the home their brought their first baby home to. They may be selling a grandparent’s home or something they have spent a lot of time and money renovating. Giving them the impression that the home is garbage or less valuable than they think it is will just upset them and it’s likely to end the negotiation process cold.
Be humble, be appreciative of their time. Make an offer based on real evidence, but present it with care.
How to Make an Offer on a House that Needs Work
Does the home you have your eye on come with avocado appliances, old dingy carpet, cracking linoleum tiles, and five months-worth of yard work to do? If so, you are likely to find that the home is a great buy (if you have the time, money and energy to put into fixing it up).
Making an offer on a house like this is tricky. You don’t want to end up making $100K of renovations just to make the house livable. This means that if there are serious structural issues, foundation problems, old underground plumbing or ancient electrical systems, you might want to reconsider buying the home at all.
A good tip is to find a contractor friend or family member, or even just someone who knows construction, and bring them with you for an informal home inspection. Your final inspection will uncover major issues too, and long before closing, but having someone walk the house with you early in the process will prevent you from falling in love with the property and struggling to let it go if the final inspection shows serious problems. There are some obvious visual cues that can save you time.
When you decide that you want to make an offer, write down all the expenses that will go into fixing the house up. Don’t go crazy. Don’t include a new pool and subterranean garage, but consider reasonable expenses. A new kitchen, new paint and flooring, new bathrooms, landscaping, all of these would be considered reasonable upgrades in a fixer-upper.
Present this list to your seller. You don’t have to ask for the full cost to be deducted from the price of the home, especially since the home is probably already priced lower than the local comps, but propose that some of the costs are covered.
If done right, a home like this can be a goldmine. After spending a little money, not to mention blood, sweat and tears, you could find that you have increase the value of your home substantially.
How to Make an Offer on a House that is “FOR SALE BY OWNER”
Selling a home is tricky. There are a lot of tiny details that are easy to overlook. Hiring an agent is definitely advisable, especially as a seller, but some people opt out. Since the fees can be hefty, some think that they can avoid these fees and just sell on their own.
So, they go to Home Depot, buy a yard sign, write their phone number on it, and pound it into their front yard. Then they wait. The only visibility this homeowner gets is from people driving by, and possibly from posting it on open-source sites like Craigslist.
The Multiple Listing Service, or MLS, is only accessible to agents, and all the real estate apps mine their data from the MLS. So, a buyer MAY be able to buy a home without an agent, but a seller really needs access to that huge database to get visibility in the market.
If you happen to stumble across one of these homes, this can work to your advantage. It’s likely that the seller has no idea what their home is really worth and hasn’t been getting a lot of calls. So, they may be willing to accept less than someone who has hired an agent and done their homework.
But, beware, sometime it’s just the opposite. The seller has done a lot of research and feels he or she can sell the home at the right price without an agent’s help. So, go into it armed with all the information you can find, and preferably with your own agent.
How Much Lower Should I Offer Below Asking Price on a House?
There are a lot of factors that go into this particular question. But, a rule of thumb is to avoid insulting your seller while also getting the best deal possible. Coming in 30% under asking is likely to just shut them down. Sometimes a listing agent won’t even go to their client with offers that are too low.
Gather your research and put yourself in the seller’s shoes. If you were them, would you be offended or put off by your offer? If the market is sluggish, consider an 8% below asking offer. If the market is hopping, you may want to come in at full asking in order to show the seller you are serious. Sellers in a good housing market are often very confident and even arrogant, so you have to play by their rules.
Also, if your state has real estate public records, check to see what the home was purchased for when the seller bought it. This isn’t a perfect method of determining what the seller actually owes on the house, because they could have refinanced it, but estimate how much they owe if the home was never refinanced. This could help you know what their bottom line is in terms of mortgage liability.
Getting An Offer Accepted on A Home is Possible, Don’t Give Up
It’s not always easy to put in an offer, but if you don’t try, you will never own a home. It’s a scary and sometimes difficult process, but it’s worth it if you know what you are doing. Remember to do your research and hire an agent who knows the ins and outs of real estate in your desired area. And remember, have fun with it!