How to Write Up an Offer and What to Offer
If you've never written a real estate offer before the process might seem overwhelming and confusing but it doesn't have to be. One of the biggest things I tell any potential homebuyer is to make sure you have your own buyer's agent before jumping into the real estate market. Buyer's agent works solely for the homebuyer helping them throughout the process, offering tips, suggestions, and advice not just on placing the offer, but on home inspections, financing, appraisals, and anything else that might come along during the process.
If you're confused as to how to place an offer and even what to offer, there are different places to start.
First up you need to understand exactly what the market value is of the home. While this might be impossible to know exactly, your buyer's agent will be able to tell you what are average and median home prices for a particular neighborhood and if the property seems overpriced or underpriced. Most homes are not underpriced to begin with unless they are either a short sale or foreclosure. But they can be overpriced, especially if they are new on the market. It helps to know how half the market is, what your competition is and if they are priced accurately. From there, you can make a more informed decision on where to start your offer.
Your real estate agent will figure out several different factors that can play into what you might offer on a property. How long the home has been on the market? Has the property already decreased in price? Is the home vacant? How many similar homes are on the market? And if possible, how much did the seller originally pay for the home?
A lot of these items are easy to figure out with the use of a buyer's agent but some are not; Many require communication between the buyer's agent and the listing agent for different facts about the seller, including, how fast does the seller need to close? How much money do the sellers already owe on the property? Has the home already been on the market?
The biggest factor as to what to offer is how many similar properties have sold in the past 3 to 4 months and what they have sold for.
By determining these factors you can feel more confident about your offer. For instance: if you find a home you love listed at $500,000 yet similar properties around the area are listed at $400,000-$460,000, and this is the highest-priced home within its comparable range, more than likely it's priced too high. However, the sellers might need to get at least $500,000 in order to pay back a loan. While this is not something you need to be concerned about, it does tell you whether or not the sellers are willing to accept a lower offer. If you know that the home is overpriced and yet the seller is unwilling to go any lower, it's probably not worth placing an offer.
If the seller is simply testing the market trying to get the highest price, you're more than welcome to submit a lower-priced offer but if it's a new listing, be prepared for either rejection or a counteroffer. Your buyer's agent can mention to the listing agent that the home is overpriced for its comparable sales. Of course, the seller is free to reject or accept any offer but they may find themselves sitting on the market for quite some time. It's at this time that buyers can scoop back in with a similar offer and have it finally accepted. But, are you willing to wait that long?
The condition of the home is also a factor when placing an offer. If the home is similar in size, lot size, bedroom, and bathroom quantity and location but is quite run down from its comparable sales, you probably will not want to offer as high as a similar property in better condition. Within the offer, you can make certain stipulations such as repairs, money off, or of course, a contingency to a home inspection. The contingency states that you're not willing to close on the property until you've conducted a professional home inspection. At this time you can choose to either reject the transaction and move on, ask the seller for certain items or repairs, ask for a lower price or accept the property as-is.
A purchase and sale contract will have several basic features: the property address that's being purchased, the offer price, the close date, the address and contact information for the buyer and the seller, financial information from the buyer or borrower, and any contingencies that might come along with the purchase including home inspections, financing contingencies and perhaps a contingency to sell another home in order to purchase this one. This contingency is very risky, however, and may not get your offer accepted.
As a home buyer, it's important to know the seller's motivation for selling. Many sellers can reject perfectly well-put-together offers and other times may accept an offer that seems quite low. The key is to have a reputable, experienced, and skilled buyers agent to facilitate the transaction, offering tips, suggestions, and advice throughout the process.
For more information on writing up the perfect offer or if you have a Denver home for sale in mind you'd like to offer on, give us a call!