Practical Tips on How to Make an Offer on a House
There are certain rules and tips to follow on how to make an offer on a house. This is if you want to make an impression on the seller. Of course, you want to make an offer that stands out. However, you also want to make an offer that benefits you as the buyer. It’s almost an exact science. There’s no room for estimates and half-hearted efforts. If you’re really serious about buying a house, you have to follow these steps and tips.
Do a Comparative Market Analysis
More popularly known as the CMA, this is the very important first step because it will allow you to make a very calculated offer based on the market. Using this analysis, you can formulate the true value of the property that you’re looking at. It’s basically like shopping. You compare the house with similar houses in the market.
Using this, you can get the estimated value of the house based on the houses with similar characteristics namely the following:
- The number of bedrooms and bathrooms
- How many square feet the home and the lot have
The CMA will compare the house with the houses of similar characteristics that are currently on the market or have been sold recently.
You have to do this with the help of a realtor. The realtor will access MLS and do a search for houses that have similar characteristics. The realtor will search for active, pending and sold homes, ideally in the past half year. The realtor should also check for homes located within a half mile radius, or a mile radius at the most.
The realtor will then create a report based on what he’s found out. Make sure to check out both the sold price and the list price. While you’ll base your offer on the sold price, you have to check the difference between the two prices to see the asking price and the price that the house actually sold for.
In addition, make sure to check the adjusted average sales price. A good realtor will do the comparison for the adjustment. On your part, make sure to check how similar or different the property that you’re looking at is with these properties.
Understand the Trends of the Market
Learn and understand the market trends. First of all, is it a buyer’s or seller’s market? It’s easy to know. Just listen to conversations happening in the real estate market. If buyers have been making dozens of offers before finally getting accepted, then it’s unfortunately a seller’s market. If you’ve been hearing of buyers getting a great deal on a great house that’s been in the market for months, then you’re in luck because it’s a buyer’s market.
Of course, it’s also a good idea to look at numerical facts. This is where the CMA and MLS can help you. The realtor should also have some good information for you. Discuss the competition among houses available for sale. What is the average DOM or days on the market? What is the present interest rate? Are there any issues that are very specific to this season? Do homes sell for below or above asking price? These numbers will give you a good idea about the market trends.
Look Further into the Property
In addition to the details provided by the steps listed above, you also have to know about the facts specific to the property that you’re looking at. Your realtor should conduct an interview with the agent listing the property. This interview can help determine the motivation of the seller to sell the house. The seller’s motivation is very important because there are some sellers who are looking to sell their home fast and their main motivation is to sell the house, period. You can save tens of thousands of dollars with this information.
Let’s say that the realtor found out that the seller is looking to buy fast because he’s already bought a home and is already in the process of making mortgage payments. You can make a lesser offer that will close in just a couple of weeks and that will be more attractive than a higher offer that will close in a month and a half.
Consider the Other Competing Buyers
Don’t focus too much on the seller. You should also focus on the other competing buyers. This is especially true if homes are getting multiple offers. So if you want to to make an offer and not get multiple rejections, you should know the motivation of the other buyers.
You should also position yourself as the ideal buyer to deal with. The traditional approach is more ideal since if you’re going to let the lender control the sale, it’s going to take months and the other buyers can swoop in.
When making a traditional approach, it’s not just about your offer price. It should also be about your approach. You should make a good impression especially in a seller’s market. It starts with sending a letter of introduction. Since selling a home is usually emotional, take this chance to compliment the home. Don’t bad-mouth the property in the hopes of the seller lowering the price. Don’t say something like the house badly needs a new paint job so he needs to lower the price.
You should also accept the fact that it’s going to be a negotiation. Now’s not the time for a take it or leave it offer. Be reasonable with your offer. Arm your offer with an iron-clad pre-approval letter and give terms that help your offer stand out. Basically, show that you’re a serious buyer. You can do this by offering attractive terms like a fast closing or a lengthier rent-back.
As you can see, your realtor will play a very important role. With these tips, it will all boil down on how the realtor reads the market, the seller and the other buyers. This is especially helpful when making an offer. You wouldn’t want to make a low-ball offer, but you wouldn’t want to reach too far in the hopes of scaring off the other buyers when you could’ve made a lower offer and still be accepted. Follow these tips and the chances of the seller accepting will be improved.