Home Buying 101: Making An Offer
Figure out your needs
Monthly cost of owning a home
Ideal Neighborhood
Financing Your Purchase
The FHA Mortgage
The Conventional Mortgage
The Adjustable Rate Mortgage
Department Of Veterans Affairs Mortgage
Pre-Qualified vs Pre-ApprovalPhase 2: Looking
Looking at homes
Types of homes
Single Family Homes
Town Homes
Condominium
Twin Homes
Multi-Family Homes
Types of sellers
Traditional
Short Sale
Foreclosed
Researching A Home’s Public InformationPhase 3: Buying
The Purchase Agreement
Buyer Letter to Seller
Inspections: Why get one?
Radon Testing
Sewer Line Scope Inspection
Fireplace Chimney Inspection
Mechanicals
Phase 4: Closing
Closing Costs Explained
Title Work
Appraisals
Underwriting
Utility Bills
Preparing for the Closing
The Closing
Once you have found the home you wish to purchase, you will need to determine what kind of offer you are willing to make for the home. To communicate your interest in purchasing a home, we will present the listing agent with a written offer.
When an offer is accepted by the seller, it becomes a firm and binding legal contract. When you write an offer, you should be prepared to pay a small deposit. Typically, most people put 1% to 2% down as the initial deposit, called earnest money. This is to show your genuine intention to purchase the property. The seller can stop considering other offers knowing yours is valid and serious.
Once your offer is presented, the listing agent, in consultation with the seller, will either counter, reject, or accept your offer. If it is countered, then we will further negotiate the terms and conditions of the contract until a win/win situation is achieved.
The Purchase Agreement document and all of the various addenda is a set of standard “fill-in-the-blank” forms created by the Minnesota Association of Realtors, in conjunction with lawyers. The document is actually very easy to understand, and you should familiarize yourself with it before it comes time to write the offer. That way, when you fall in love with a home, we can sit down and write the offer quickly.
Comparable Market Analysis
Usually I can help provide data so that we can sit down together and come up with an offer price that makes sense. Price ranges can range from well below the asking price to above the asking price! The latter is usually the case in multiple offers. But a normal market analysis (CMA) consists of looking at recent sales along with currently active homes. I usually go with homes within a 1/2 mile radius, within the last year (or half a year), a similar style, and similar square footage. With this data, we can determine what your favorite home can be bought for.
Multiple Offers
It is important to remember that the more competition there is for the house, the higher the offers will be, usually exceeding the asking price. When there are multiple offers, we almost always will NOT know the amount of the other offers. The listing agent will usually set a deadline for everyone to submit their highest and best offer.
There are various strategies to winning in multiple offer situations. Some involve playing off emotions and others play off strength of the terms. Each situation is unique and requires a unique solution.
A Personal Letter
Oftentimes, I will have a buyer write a personal letter to the seller. The main reason for this is that selling a home / buying a home, although a business transaction, is also an emotional time. A personal, handwritten letter to the seller can really help them understand who you are. It can make them remember when they were in a similar situation, and the seller thinks, “I would love for this person to have the same opportunity that I had.”
See this page for more information on a personal letter to the seller.
Additional Resources:
Homebuying 101: Chapter 6: Inspections, Why get one?
Sample Documents (password protected, contact Steven Hong for access)