3. Making and Negotiating Offers
Making and Negotiating Offers
When you've found a home that you like, we'll help you prepare, present, and negotiate a great offer. Like all homebuyers, you probably have questions, so we've answered some of the most commons ones here.
How Much is a House Worth?
A house has three values: what the seller thinks it's worth, what the buyer thinks it's worth, and what the appraiser thinks it's worth.
What the seller thinks his home is worth is the list price. Hopefully, the seller has worked with their agent to set a fair list price with the expectation of getting a reasonable offer and selling in a timely manner. Sometimes, though, a seller can be unrealistic about the value of their home compared to other choices on the market. We'll help you craft an offer to help the seller understand what it will take to sell.
What you are willing to pay for a property is based on what you want in a home. If you need a four bedroom home with a yard, you're to unlikely to consider a three bedroom condo no matter how cheaply you could buy it. On the other hand, if you don't care about a home's huge patio and pool, then you are unlikely to pay for those improvements no matter how much the seller thinks they're worth.
We spend significant time and effort determining a property's value before you make an offer, so we can accurately assess what the appraised value is likely to be. If you're planning to get a mortgage, the amount that you can finance will be based on the appraised value. If you want to purchase a home regardless of the appraisal price, then you can make up the difference with a larger down payment. Either way, we'll help you prepare for the likely outcome.
How Much Should You Offer?
The price you offer to start a negotiation is your decision. Based on hundreds of negotiations for buyers and sellers, we will give you the best possible information to help you meet your goals.
If the list price of the property is reasonable, it's best to make an offer with realistic terms and conditions. To be taken seriously and avoid unnecessary stress, make the offer price reasonably close to what you're willing to pay.
If you want to make an offer on a house that you feel is genuinely over-priced compared to comparable properties, we will include our detailed market analysis when we submit the offer. The written analysis will make your case and take the burden off the listing agent to explain it. But if the seller literally can't sell for less than list price, e.g., if it's over-mortgaged or burdened with tax liens, it's best to know that before getting your hopes up.
We're not fans of low-ball offers to see what you can get from the seller. Provoking a seller with an unrealistically low offer might make them stubborn and resentful, which isn't a great place to start a negotiation.
Preparing and Presenting Your Offer
An offer is more than just the price that you say you'll pay for the home. All the terms and conditions must be written into the paperwork of the offer, including:
- Offer price
- Earnest money
- Closing date
- Tax proration
- Financing or cash terms
- Contingency dates
- Home sale/home close contingency
- Special requests
- Signed disclosures
Consider the Seller
Consider what the seller might want in addition to a reasonable price. Sometimes the listing agent will share the seller's situation, time frame for moving, or other specific requirements. Doing so is especially helpful in a hot market where the seller might be considering multiple offers.
The seller must believe that you can close on a home purchase. A serious offer has a pre-approval with verification of credit, assets, and income. If you are paying cash, you need to provide a solid proof-of-funds. In either case, you'll need a written letter from a reputable financial institution so that the seller will seriously entertain your offer.
We can't over-emphasize the importance of presenting a complete offer. Show that you'll be easy to work with by sending an offer that has everything the seller needs to make a decision.
Negotiating Your Offer
When you make an offer to purchase a property, the seller can:
- Accept the offer.
- Decline the offer. This usually means the seller doesn't think your offer was close enough to their expectations to negotiate.
- Counteroffer. The seller offers you different terms.
There aren't any laws about how long either side has to respond to an offer or a counteroffer. Unless the listing agent says otherwise, you should hear back in a few hours or within a day.
The agents typically negotiate by phone, conferring with their clients at each step of the negotiation. Most people don't enjoy negotiating, but you can rely on us to expertly and faithfully do so on your behalf. We always operate under your instructions and never share confidential information. We don't engage in single-agent dual agency (representing the buyer and the seller in the same transaction) because doing so could compromise the interests of our client.
When you and the seller agree on price, terms, and conditions, you sign and initial the revised contract and send it over to the seller, who signs last.
When the seller signs, you're under contract, and the clock starts ticking. We send a copy of the contract to your attorney and lender, and then get to work on getting the property closed!
Between contract acceptance and the final closing, you'll be protected by our representation and careful attention to the "contract escape routes". Learn More Here