Make an Offer
You've finally found the home of your dreams. You are finally ready to make an offer. But before you do, go through the following steps:
Find out again the selling prices of similar properties in the area to use as a guideline to set your sales price. These comparable properties should:
Once you, your real estate agent, and the owner have come to an agreement on the sale price of the house - put it in writing.
- Sold within the last six months
- Be around the same age and condition
- Have the same number of bathrooms, bedrooms and square footage
- Be in a similar location and on a similar lot
- If you still don't feel comfortable setting a price, consider having a professional appraisal done. Appraisers look at what the home is worth today and how the neighborhood may affect future property value. They provide a realistic figure for the true market value of the property
Don't reveal your strategy and don't make oral offers. You know you want this house, but don't hand over your money until you are sure the seller is legally capable of conveying a good title and meeting other conditions.
With your real estate agent's assistance, offer the seller a written contract
setting out the commitments and promises that you and the seller need to agree
on and fulfill in order to make the sale. A well-drawn contract should protect
The first contract you submit should be comprehensive and include everything
of any importance. Keep in mind, once the seller accepts the contract, it may
be too late to add or change anything. In some states, there may be standard
real estate contracts. However, you should make sure that your contract includes
at least the following:
- The offering price
- Down payment
- Legal description of the property
- Method of conveying the title
- Fees to be paid and who will pay them
- Amount of deposit
- Conditions under which the seller and buyer can void the contract
- The settlement date
- Financing arrangements
- A list of items being sold with the home
After you have come up with an offer price, the next step is to determine how
large a deposit you want to make with your offer. You want the "earnest
money deposit" to be large enough to show the seller you are serious, but
not so large you are placing significant funds at risk.
One recommendation is to make sure your deposit is less than two percent of
your offered price. The reason for this is that if your deposit is larger than
that, the lender will pay particular attention to how you came up with the funds.
You might have to provide a copy of a canceled check along with a bank statement
showing you had the money to begin with. Normally, this is not a problem, but
if you have a short escrow period or are barely coming up with your down payment,
it could pose an inconvenience.
Another reason to limit your deposit is "just in case." Although
significant problems are the exception and not the rule, they do occur. "Just
in case" there is a nasty or prolonged dispute between you and the seller,
the less money you have tied up in a deposit, the fewer funds you have placed
As with practically everything in real estate, there are exceptions to this
rule, too. During a hot market, there may be multiple offers on the property
that interests you. A large deposit may impress a seller enough so they will
accept your offer instead of someone else's, even when your unknown competitor
is offering the same price or slightly higher.
Since large deposits do impress sellers, you may also find that by making a
large deposit you can convince the seller to accept a lower offer. More money
up front may save you money later.