8 Tips To Write An Offer
Making an offer on a home is usually your chance to make a first impression on the seller. You don’t want to just throw out a random number and cross your fingers. Even with it being a buyer’s market right now, you still need to make a well thought out offer once you find the home of your dreams. Here are 8 tips on how to write a clear offer, and prove to the seller that you know what’s fair, competitive, and likely to result in a solid transaction moving forward.
1: Have A Solid Pre-Approval
We’ve said this many times, but it is absolutely worth repeating: a pre-approval should be your first step in the home-buying process. Sellers want to know that their buyers are pre-approved because they know that will lessen the chances of trouble or termination later into the transaction. Work with your Mortgage Advisor to have your pre-approval in hand before you start shopping for or making offers on houses.
2: Act Fast
A “normal” real estate market has a 6-month supply of homes listed for sale. This means if no new homes came on the market, the current supply of available homes for sale would last approximately 6 months. According to Federal Reserve Economic Data, the current national housing supply is just under 6 months as of April 2019. This means buyer demand currently outpaces the supply of homes for sale, which means buyers have to compete with each other for their homes. It’s anticipated that now that we’re in late spring, approaching summer, the national market will flip to a buyer’s market. Portland-area real estate markets are already more favorable for buyers. However, knowing this information, your game plan should be for you and your real estate agent to act quickly and write a solid offer as soon as you find your dream home.
3: Be Competitive and Realistic On Price
Typically when a seller receives an offer, the first thing they’ll look at is the price. If you offer too low, you run the risk of insulting the seller. In a competitive market, you’ll likely eliminate yourself from the consideration pool by submitting an offer that’s too low. However, this doesn’t mean you need to make an offer at or above asking price. Your offer just needs to be competitive, based on an analysis of the current market. Your real estate agent should be able to help provide you with some recent comparable sales in the neighborhood to determine the average price for the area.
4: Write an Offer
Once you’ve determined the price, your agent should draw up a written offer, also known as a purchase agreement, and submit it to the seller’s agent. A written offer is taken more seriously than a verbal one. The offer will include all the terms and conditions of the transaction. Your offer should also include the information that you are pre-approved, and your mortgage banker’s contact information. Often, you’ll include a copy of a pre-approval letter that your mortgage banker writes up for you. This information is not required as part of the offer, but it can strengthen the offer by proving you’re well-prepared and serious about following through on the transaction.
5: Write a Letter to Accompany Your Offer
It’s important to remember that even though this is a business transaction, the sellers are human beings. Sometimes it helps to remind them that you’re a human being as well. Consider writing a carefully thought out letter to accompany your offer. Tell the seller a little bit about yourself and your family. Outline specific features of the house or location that appeal to you. None of this is required, but it might be the extra step that catches the seller’s attention and gets your offer considered over someone else’s.
6: Consider a Higher Down Payment
Mortgages are available with low to no down payment. However, sellers might be more interested in seeing a higher down payment. A typical down payment ranges between 3-20%, depending on the market. If the market is particularly competitive, offers that have higher down payments are seen as stronger due to less risk of the deal falling through because of financing. If you have the funds available to make a larger down payment, that can pull your offer to the top of the stack.
7: Consider Limiting Contingencies
In a really competitive market, another way to make your offer stand out is to consider limiting the contingencies in your offer. Common contingencies include a home inspection, sewer scope, radon testing, financing contingencies, etc. While many of these are for your own protection, sometimes there are extra contingencies that may not be necessary. Carefully examine your financial situation and the risks involved before you remove a contingency. Ultimately, you should understand that offers with fewer contingencies are considered more favorable.
In a competitive market, it’s quite common for the seller to counter your offer. Typically this would be to ask for a higher purchase price, a different closing date, or negotiate the seller credit toward closing costs. When this happens, the seller’s agent will submit a counteroffer to your agent, listing out their desired changes. You then have the opportunity to accept, decline, or re-counter their offer. Each time changes are made, both buyer and seller have the option to accept, reject, or counter again. Once all parties agree to the terms, everyone signs the full agreement, including all the counter offers.
Bottom Line When You Write an Offer
Regardless of how many houses you’ve bought, having a great real estate agent on your side is a critical part of writing a successful offer. If you make sure your agent is an expert in their market, then your process should go smoothly. Best of luck to you on your house hunting journey!
Are you looking for a house and preparing to make an offer? Can we help you with the financing portion of the transaction? Fill out the form below or contact us today!
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