John Rea Realty

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Top 10 Things Every Home Buyer Should Know Before Making An Offer

You are finally done with house hunting, and you think you're ready to make an offer. What are the things you have to consider in settling on a price? Here are the top 10 things you should know to successfully close the deal with your offer.

1. Your budget

Before even thinking about looking at houses you might one day call your own, this should have already been settled. Knowing how much you can realistically afford should always be the number one consideration.

Getting a loan is difficult enough. If you're still finding it difficult to chip in cash for a down payment and still have to look into other savings for this investment, you might want to think twice or even thrice if you are ready to purchase a house at this time.

2. Your dream house's price

What's the price of the house? After making sure that it fits your budget, investigate further if it seems too high or even too low. The following items on this list will help you with that investigation.

This will also help you estimate the price you're willing to offer for the property--whether to add more to the asking price, or haggle with a lower-priced offer.

3. The property's value

To be sure of the property's value, you may want to get a legal evaluation. You may also want to consider adding (or even decreasing) its cash value for its unique traits. For example, the property's architectural design is outstandingly your style, or maybe you're enthralled by the design of the kitchen. It may also be something as personal as its location being close to a dear relative. For rare features like these, you can show the owner your eagerness to own the house by adding a specific amount on your offer (especially if you're caught in a bidding war).

On the other hand, if there are some things on your dream property that you are not comfortable with, you may also mention these to the seller, and offer a lower price.

4. Prices of other houses

Look at comparable houses ("comps") in the area, and see how much they are/were sold for. These properties should be in the same neighborhood with the same dimensions, age, and number of rooms. If it has been sold, the purchase should not be older than six months.

5. The market

If the real estate market is doing well, there's a chance for other bidders to price their offers too high. This may cost you the house if you don't strategize well. Not to mention that in most cases, giving an offer that is higher than the asking price may easily give you a better (if not sure) chance of owning the property. But if the market is down, you can opt to offer less than the asking price and still have a high chance of winning the bid.

6. The seller

Based on your encounter with the house's seller, do you think he/she is the type of person who would price the property irrationally? Does the property have sentimental value to him/her? Is he/she the type who would be offended if you gave an offer lower than the asking price?

On making your move, remember that you're not only dealing with legalities, but personalities too. If you still can, try to win the heart of the seller. Sometimes, people choose a buyer regardless of the amount of their offer, as long as they think that you are able to take care of the property when they legally transfer all its rights to you.

7. Conditions to be set

Upon making your offer, you must already mention your closing conditions to the seller. These include requesting for a home warranty, the type of deed you are obtaining, and asking for assistance with home repairs.

Payment conditions are also very important in this transaction. Will you be paying in full on a specific date? Are you offering earnest money and are willing to pay with interest? These are some things the seller needs to know off the bat.

8. Flexibility with terms

If you are in a bidding war, more than the price, you can also haggle with your versatility with the offer's conditions. For example, you can't offer a higher price, but you can haggle that you can pay your offer in full and on the spot. This may be quite attractive to the seller, and instantly gives you leverage on any other higher bid.

In cases where the seller gives you a counteroffer, make sure that you study it first before accepting or rejecting. You may still give your counteroffer if you study the terms and conditions wisely.

9. Sending necessary letters

If you received a loan to pay for the property, obtain necessary documents as proof like a pre-approval letter from your lender. This ensures the seller of your paying capabilities, and gives your offer a higher worth.

Another thing to consider is writing a personal letter to the seller of how much you appreciate the property. Especially for sentimental sellers, a mover like this will give you an invaluable leverage over anyone else who's bidding for the house.

10. Don't give up too easily

If you think that the property is really your dream house, don't give up on it even if your offer fails. Most times, very high offers do not push through upon appraisal. In other times, buyers take back their offer, because he/she made bids on other houses.

You are still in the game as long as there has been no final transaction yet.