Making and Negotiating an Offer
So, you’ve found a home that fits your needs and lifestyle and are ready to make an offer. Good for you! So what comes next?
Because you have already been pre-qualified, you know what your loan amount and purchase price cap as well as your payment tolerances, so you will feel comfortable enough with the numbers to determine an offering price. Your Agent will pull recent neighborhood comparable sales to suggest an appropriate value/offer for the home. You should also discuss the listing history, any price changes, etc, to get an idea of what kind of offer may be most acceptable to the Seller. After all, if you like the home the goal is to write an offer that is acceptable to both you and the Seller – if the Seller says “no way”, then no deal!
One way to strengthen an offer for the Seller is to increase the earnest money deposit you write with the offer. The earnest money assures the Seller that you are indeed a “real” Buyer, that you are committed to purchasing their property and will follow-through with the terms of the contract. Be sure to offer enough earnest money for the Seller to agree to take their home off the market and not seek other offers. This amount is also held by the Broker and the Seller usually agrees to accept this amount in the event of Buyer default (it needs to be enough that they will, in fact, accept it in event of Buyer default rather than sue the Buyer to perform). The Seller will weigh an offer with $100 earnest money differently than with $1000 (a Buyer is less likely to be willing to break a contract and walk away from $1000). NOTE: Your earnest money check will most often be deposited upon contract acceptance, so funds must be available at the time the check is written!
Review the home warranty options available. The Buyer may purchase this at closing, ask the Seller for one in the purchase offer, or the Seller may have already offered one to the Buyer. In the event you would like a home warranty included, consider your offer price, how much your price is off the asking price and other factors in the contract. This is a relatively inexpensive item to purchase for either party, but depending on the offer can be the straw that breaks the camel’s back (and the deal!). It’s ok to ask for a home warranty, especially with a strong offer, but be prepared to pay for it yourself also if the Seller baulks.
The closing date may be another way to strengthen an offer. For example, if you are offering on a vacant home, more than likely the Seller will not look favorably on a closing date that is 2-3 months out. If you can close quickly, this will weigh with the Seller, as their ultimate goal is to get it off their books.
What about counter offers? Hopefully there will not be too many. Ideally, the offer was close enough to what both parties want to come to an agreement with no more than one counter-offer. Be ready to give something to get something! If there is too much back-and-forth, one or both parties may become agitated or be more likely to become offended, which can endanger the deal and lessen the chance of a successful agreement!
Don’t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to “win” by getting an extra-low price may lose you the home you love.
NEXT: Applying for the Mortgage
Buying and Selling homes in Eastern Idaho made simple.
09 February 2010
10 Things to Take the Trauma Out Of Homebuying - Installment 4
Looking for the Perfect Home?
It’s perfectly natural when you are shopping for a new home to look for your ideal, “perfect”, home. It’s not just a roof over your head, but where you will spend much of your personal time, hard work and sweat (if you plan to improve it), and host events with family and friends. You will build memories there.
So how do you shop for the perfect home? Well, you can’t. But if you follow the guidelines below, you will likely find that you are able to shop for the right home for you, and you may even find looking back that it was the ‘perfect’ home for you at that time in your life.
Consider how long you plan to live in your next home. Do you think you will be relocating within 2 years? In that case, you probably don’t need a home that will fulfill all your needs for the next 30 years. Or look at it in reverse: how long will the home you are considering will meet your needs, and is that long enough for your current timeline?
What features do you require in a home to satisfy your lifestyle now? Five years from now? Depending on how long you plan to stay in your home, you'll need to ensure that the home has the amenities that you'll need. If you are looking at a two bedroom home, that may be fine if you are single or a couple with no children. However, if you plan to expand your family, you could outgrow the space more quickly than you think and perhaps should consider a home with room to grow (it will likely not be cost effective to move every two years, when you consider transaction costs as well). If there is a basement, could it be turned into a den and extra bedrooms? Is it an historic home where the upstairs/attic could perhaps be turned into a master suite? Have a list of "wants" vs "needs."
Contrary to popular belief: this is a process of elimination, not selection! You can only choose from what is currently on the market in your price range.
Do consider resale, even if you think right now that you will live there for many years. If there is one constant in life, it is change, and the average homeowner only lives in their home for five-seven years.
We’ve all heard about the three most important aspects of real estate: location, location, location! But seriously, don’t get so caught up in the physical aspects of the house itself (room size, kitchen, etc.) that you forget such issues as neighborhood amenities, noise levels, and other factors that will have a big impact on what it would be like to live in your new home. Even in our smaller local community there will be locations that will better work for you and your lifestyle. Consider where you work, where your children go to school, and your preferences in terms of commuting, shopping, recreation and other factors that are important to you or other members of your household. In other words, you may find what you otherwise would think is the home for you and your current needs, but it does not exist in a vacuum, and these lifestyle needs are an important part of your decision.
Who is making the buying decision for your next home? Is it just you, or you and your spouse/significant other? Have you decided that you want your mom to see the home first and approve of it, or you Auntie Grace? This can quickly get out of hand as more and more friends and family members get added or add themselves to the list of people to see the home first. Don’t ask for too many opinions. It’s natural to want reassurance for such a big decision, but too many ideas will make it much harder to make a decision, and at the end of the day it will be you living there, not Auntie Grace. And it’s happened more than once to my own personal clients that while they are touring with various family members and delaying their decision, someone else has come along and purchased the home. This can happen in any market, as sooner or later houses will sell if priced correctly.
Start now, don't wait! Especially if you are a tax credit Buyer, in which case you have a built-in deadline along with most of the other buyers shopping in your same price range (under $150k in our market). The longer you wait, the higher the home prices will be as you will be competing with these other buyers. Not to mention the impact on your buying power of potentially rising rates…
NEXT: Making and Negotiating an Offer
It’s perfectly natural when you are shopping for a new home to look for your ideal, “perfect”, home. It’s not just a roof over your head, but where you will spend much of your personal time, hard work and sweat (if you plan to improve it), and host events with family and friends. You will build memories there.
So how do you shop for the perfect home? Well, you can’t. But if you follow the guidelines below, you will likely find that you are able to shop for the right home for you, and you may even find looking back that it was the ‘perfect’ home for you at that time in your life.
Consider how long you plan to live in your next home. Do you think you will be relocating within 2 years? In that case, you probably don’t need a home that will fulfill all your needs for the next 30 years. Or look at it in reverse: how long will the home you are considering will meet your needs, and is that long enough for your current timeline?
What features do you require in a home to satisfy your lifestyle now? Five years from now? Depending on how long you plan to stay in your home, you'll need to ensure that the home has the amenities that you'll need. If you are looking at a two bedroom home, that may be fine if you are single or a couple with no children. However, if you plan to expand your family, you could outgrow the space more quickly than you think and perhaps should consider a home with room to grow (it will likely not be cost effective to move every two years, when you consider transaction costs as well). If there is a basement, could it be turned into a den and extra bedrooms? Is it an historic home where the upstairs/attic could perhaps be turned into a master suite? Have a list of "wants" vs "needs."
Contrary to popular belief: this is a process of elimination, not selection! You can only choose from what is currently on the market in your price range.
Do consider resale, even if you think right now that you will live there for many years. If there is one constant in life, it is change, and the average homeowner only lives in their home for five-seven years.
We’ve all heard about the three most important aspects of real estate: location, location, location! But seriously, don’t get so caught up in the physical aspects of the house itself (room size, kitchen, etc.) that you forget such issues as neighborhood amenities, noise levels, and other factors that will have a big impact on what it would be like to live in your new home. Even in our smaller local community there will be locations that will better work for you and your lifestyle. Consider where you work, where your children go to school, and your preferences in terms of commuting, shopping, recreation and other factors that are important to you or other members of your household. In other words, you may find what you otherwise would think is the home for you and your current needs, but it does not exist in a vacuum, and these lifestyle needs are an important part of your decision.
Who is making the buying decision for your next home? Is it just you, or you and your spouse/significant other? Have you decided that you want your mom to see the home first and approve of it, or you Auntie Grace? This can quickly get out of hand as more and more friends and family members get added or add themselves to the list of people to see the home first. Don’t ask for too many opinions. It’s natural to want reassurance for such a big decision, but too many ideas will make it much harder to make a decision, and at the end of the day it will be you living there, not Auntie Grace. And it’s happened more than once to my own personal clients that while they are touring with various family members and delaying their decision, someone else has come along and purchased the home. This can happen in any market, as sooner or later houses will sell if priced correctly.
Start now, don't wait! Especially if you are a tax credit Buyer, in which case you have a built-in deadline along with most of the other buyers shopping in your same price range (under $150k in our market). The longer you wait, the higher the home prices will be as you will be competing with these other buyers. Not to mention the impact on your buying power of potentially rising rates…
NEXT: Making and Negotiating an Offer
05 February 2010
February Financing Updates
Good news for our local market!
For those of you that do not follow me on Twitter, here is a recap of financing changes over the last week designed to help move some inventory.
Last Friday, Jan 29th, Fannie Mae announced it would pay up to 3.5% of Buyers closing costs for purchases of foreclosed homes in it’s inventory. You must close on the purchase between January 28th and April 30th, 2010 and Buyers must be owner-occupants (investors are excluded). If you do not use the entire amount for closing costs, they may also be used towards the purchase of Whirlpool appliances purchased by Fannie Mae, but however you use the credit, the limit is 3.5% of the final purchase price. For more information, visit http://www.homepath.com./
In related news, as of February 1st, FHA suspended it’s anti-flipping rules, opening the FHA-backed foreclosure market to investors. The rules were that you could not buy a home and flip it within 90 days if it was purchased with FHA insurance, in order to stem fraud losses at FHA. However, many foreclosures are in need of repair, and the reality is that investors can purchase these homes, fix them quickly and resell the renovated homes to first-time buyers and other purchasers who might not otherwise buy a home in need of repair. It should also help stabilize values in neighborhoods that have been hard-hit by foreclosures where homes have been sitting vacant and uncared for. The rule suspension is expected to be in effect for at least a year. For more information, read this Washington Post article or the press release on HUD’s website.
If you are interested in foreclosures or short sales in our area, please contact me today!
For those of you that do not follow me on Twitter, here is a recap of financing changes over the last week designed to help move some inventory.
Last Friday, Jan 29th, Fannie Mae announced it would pay up to 3.5% of Buyers closing costs for purchases of foreclosed homes in it’s inventory. You must close on the purchase between January 28th and April 30th, 2010 and Buyers must be owner-occupants (investors are excluded). If you do not use the entire amount for closing costs, they may also be used towards the purchase of Whirlpool appliances purchased by Fannie Mae, but however you use the credit, the limit is 3.5% of the final purchase price. For more information, visit http://www.homepath.com./
In related news, as of February 1st, FHA suspended it’s anti-flipping rules, opening the FHA-backed foreclosure market to investors. The rules were that you could not buy a home and flip it within 90 days if it was purchased with FHA insurance, in order to stem fraud losses at FHA. However, many foreclosures are in need of repair, and the reality is that investors can purchase these homes, fix them quickly and resell the renovated homes to first-time buyers and other purchasers who might not otherwise buy a home in need of repair. It should also help stabilize values in neighborhoods that have been hard-hit by foreclosures where homes have been sitting vacant and uncared for. The rule suspension is expected to be in effect for at least a year. For more information, read this Washington Post article or the press release on HUD’s website.
If you are interested in foreclosures or short sales in our area, please contact me today!
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