Making the Offer

Making the Offer

You've chosen a home - now it's time to get the best deal you can.

The offer is the first step in negotiating the purchase of your new
home. Try to consider all of the relevant facts when determining
your offering price. Homes often sell for negotiated figures that are
below the asking price - sometimes considerably below, so give
serious consideration to your initial offer.

Consider Market Conditions

Home pricing and sales activity is strongly affected by the strength
of the underlying market. In a weak market purchasers may be able
to negotiate substantial reductions from asking prices. Conversely,
it is risky to make a low offer in a strong market - another buyer
may appear suddenly and pay full price.

Review the Specifics of the Property

Does the home suffer from a lack of curb appeal or other problems?
If so, you may want to be more aggressive in your negotiations -
chances are there will be less competition, even in a strong market.
If the house needs renovations or repairs make sure you know
exactly what to expect so you don't have any unanticipated
expenses after closing.

How Badly Do You Want the House?

Will you (or your family) be extremely disappointed if you lose the
house? If so, consider being less aggressive in your negotiations -
especially in a strong market. Conversely, if you are willing to take a
chance you may be able to get a better deal.

Evaluate the Seller's Motivation

A homeowner who is under pressure to make a sale is more likely to
accept a low offer. Recognizing a motivated seller is a major step
toward making an advantageous purchase. Common causes of
pressure on a seller include financial difficulties, divorce, or the need
to move by a certain date.

Consult with Your Agent

Your realtor is an experienced professional with deep knowledge of
the local market, so make the most of this resource. Your agent can
tell you how long a home has been on the market and can provide
comparable sales for review. It's even possible that your agent may
know of a motivated seller.

Are You Buying a New Home?

Many builders have a general policy of not negotiating prices
(particularly in major developments), so if you are buying a new
house you may have to pay full price. Nevertheless, you may be
able to get a deal occasionally - particularly if the market is weak or
sales in the project are slow. You have little to lose by trying.

Writing the Offer

An offer can be in the form of either a letter or an actual purchase
contract (the preferred format when working with an agent).
Whichever format you choose, make sure that you clearly specify all
of the required information and terms in the offer. If you are
pre-qualified for a mortgage, offer to provide a copy of your
approval letter to strengthen your hand.

Counter-Offer and Negotiation

Instead of accepting your initial offer the seller will probably respond
with a counter-offer. After reviewing the counter-offer you are
essentially back to the beginning of the offer process - but with a
better idea of the seller's negotiability. Consider all of the
information and decide if you are willing to increase your price. This
offer and counter-offer phase of the negotiation is often done
verbally - through the agents or even at a meeting of buyer and
seller - with revised contracts signed after price and terms are
accepted by both parties.

1. Get prequalified
for your mortgage
before you begin the
search. Advise the
seller that you are
pre-qualified and do
not require a
financing
contingency in the
contract.

2. Be prepared to
close title quickly.
Have all of your
preparations in
order so you can
move swiftly. It is
important, however,
that you do not
neglect inspections
or other activities
that are essential to
protecting yourself
in the transaction..

3. Be willing to
overlook minor
repairs and
problems that would
be a hassle for the
owner to correct. Be
careful, however -
never extend this to
cover major
problems without a
complete
understanding of
what is involved.
Make sure that you
have considered the
cost of correcting
these items
yourself.