Buying your new home: making and negotiating an offer
Congratulations! You’ve found a home you want to purchase! Now, its time to make an offer and have it accepted. These are some tips and suggestions for how to form your offer and to negotiate terms that the seller will accept. We are not talking about making an offer that is accepted immediately with no negotiation. That is easy; you just offer the seller cash equal to the amount they ask. Rather, our goal at Tellus Real Estate Solutions is to negotiate terms that meet your goals in buying a home.
Some of these tips are for the initial offer, but most apply to the entire negotiation process:
- Know what is important to you: List out the priorities from your home requirements and any other requirements that have come up while looking at the property. Note which things you must have and which things you are willing to give up during negotiations.
- Know what the property is worth: Check recent sold comparables and estimate the amount for which you think the property will appraise. This will help you recognize a good deal and to know when the seller’s asking price is actually reasonable. Expect your final price to be somewhere close to the value you estimated from sold comparables.
- Know what is customary in the market: Be familiar with the real estate process in your market. For example, trying to get the seller to pay for something that is typically the responsibility of the buyer is likely to cause a problem. Think about alternative ways to achieve the same affect, like asking for the seller to give the buyer a credit for their closing costs. The result is the same, but it more closely matches local market customs.
- Come prepared: You should come pre-approved for a loan or have proof-of-funds ready if you are paying cash. Many sellers will simply reject offers that don’t come with this information. You should also be ready to move forward with inspections, feasibility, etc. Sellers want buyers to move quickly once the contract is signed, so be sure your offer implies that you are serious and prepared. Keep time periods for inspections, financing and other due diligence as short as possible, while still making sure you can have them completed on time.
- Limit the contingencies: The fewer contingencies the better, from the seller perspective. Don’t open yourself up to risk unnecessarily, but use only those contingencies you need. For fixer uppers, land or other complex transactions, use a feasibility addendum as a blanket contingency.
- If the seller gives instructions, follow them: Many sellers, especially banks, give specific instructions about offers. Perhaps there are certain forms, escrow companies or title companies that need to be part of the offer. Unless there is a specific reason to negotiate on these items, don’t fight them.
- Ensure that paperwork is correct and complete: If you want an offer to be accepted without modification, make sure the offer paperwork is completely filled out, the dates are correct (make sure the year is right!), and the numbers make sense. Nothing will invite a counter offer quicker than forcing the seller or their agent to correct your paperwork.
- Respond to counter offers: If the seller doesn’t accept your first offer, don’t walk away. At Tellus Real Estate Solutions, we feel you should always respond to counter offers, even if it means you respond with your last offer terms.
- Let the seller win something: Let the seller win some term on the negotiations. You can’t have a win-win negotiation if only one side can win. This is easier if you know what is really important to you. Check with the seller or their agent to find out what is really important to the seller. They just might tell you.
- Make an offer!: The most important rule of all is “Make an offer”. A seller can never accept an offer you don’t make.