The offer is a critical part of the home buying process. It's when you, as the buyer, say to the seller: "Here's what I'm willing to pay for this house."
This home buying guide will explain the five factors of a smart offer.
1. Base the offer on hard evidence
Before making an offer, you should have a good idea of the home's estimated value. This knowledge will come from understanding your market conditions and knowing what comparable homes are selling for in your area. Making a realistic offer will increase your chances of acceptance, while preventing you from overpaying.
If you agree to a price higher than the home's value, and the subsequent home appraisal comes in lower than that price, you'll have trouble getting financing. That's time wasted!
2. Make the offer contingent
It's a safe practice to make your offer contingent on two things -- loan approval and inspection. Even if you've been pre-approved by a lender, there's a chance you could get turned down for the actual loan (especially if the price you agree to pay is higher than the pre-approval amount).
The home inspection is also critical, because you won't know the true "health" of the house based on a casual walk-through. Only a qualified home inspector can dig up the facts. Your offer should be contingent on both of these things.
3. Set a time limit
The last thing you want to do is sit around wondering when you'll hear back from the sellers (if at all). For this reason, it's common practice to put a time limit on a home buying offer. It shows the seller you're serious and prevents the process from dragging on. Some buyers limit their offer to 24 hours, some for 48 hours, and others even longer. It will depend on your comfort level and unique circumstances.
4. Hope for acceptance, but plan for everything
Of course you want the seller to accept your offer. But there's always a chance they won't, so you need to have a plan in place so you can react quickly. Discuss this with your agent before making the offer. Have a plan for three different scenarios -- an acceptance, a rejection, and a counteroffer.
5. Know your limits
If you've been pre-approved for a certain loan amount by a mortgage lender, then you have a pretty good idea of your limitations. Be careful making offers that exceed your pre-approval amount (unless you can make up the difference in cash).
Keep this home buying guide in mind when making offers. Practice the five factors of a smart offer. Good luck and happy home buying!
* Copyright 2006, Brandon Cornett. You may republish this article if you keep the byline and author's note, and also leave the hyperlinks active.
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