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Buying guide

Making an offer

Whether it’s a buyers or sellers market, it’s sometimes difficult to know just how much a house is worth and how much to offer on a home. Investigating your local market is key to deciding on a number and sticking to it.

One great way to find out and track condition of homes and sale prices is to attend open houses in the area of interest. Keep the handouts you are given and watch for the property to be sold. You can then look up the sale price at the courthouse or on our Recent sales database. You can also look up other sale prices in the area the same way, which should give you an idea of the prices in that area.

Obviously, issues with the house such as an older roof or massive repairs will affect the price as well. If you can, it’s a good idea to try to get an inspection of the home either before you make an offer or after making an offer with a contingency of having an inspection done first.

Comparative market analysis

A comparative market analysis, or CMA, is a guess as to how much the property's market value is. These are usually done to establish a reasonable selling price when a property is put on the market. The price is established by comparing the property to similar properties that have sold in the area within the past year. A real estate agent who has easy access to area sales records normally does it. Although it’s more time-consuming, sellers in the US can find the same information by visiting their county courthouse or even on the web.

There is a big difference between a home’s “estimated value” and its “worth”. While either an appraisal or a CMA determines the estimated value, the worth is established by how much buyers are willing to pay for it. Most agents agree that a CMA is the best way to get the most accurate assessment.

What to expect

With sellers wanting to get the most out of their home and buyers wanting to get the most for their dollar, there is bound to be some conflict when deciding on an offer amount. This can often be the most intimidating aspect of buying a home, but there are a few helpful tips. A buyers agent will play a key role here – they should provide the seller with all the available facts that could influence the decision and will also offer research materials. They should assist in almost all aspects of the closing process including everything from inspections to working with the closing attorney.

The home inspection can also be a source of stress. If there are problems with the home, the sale price may come down or the bank may not approve the loan at all if the cost of repairs is going to put the seller way over their budget.

Writing an offer – what to include

An offer letter is the first step toward negotiating a sales contract with the seller. Your agent can help you draft the necessary documentation in order to present the offer to the seller, but you should keep in mind all the things you would like it to include and start your documentation process before speaking with your agent.

It is a good rule of thumb to try to put yourself in the seller’s shoes and imagine their reaction to everything you have included. Imagining a seller’s reaction can help you to attain your goal of getting what you want – price, fixtures, appliances, etc. Other details are added to the document as well, like how you intend to finance the home, your down payment, who pays the closing costs, what inspections are performed, timetables, whether personal property is included in the purchase, terms of cancellation, repairs you want performed, when the buyer receives possession, and how to settle disputes should they occur.

The offer process

An offer on a home is made by submitting a written and signed purchase offer, which, after signed by both parties, becomes a sales contract. Once signatures have been made, both parties are bound by the contract conditions.

The selling broker registers the offer and notifies the listing broker of the offer. The listing broker then arranges an appointment with the seller, and with the seller’s broker. The buyer does not attend this appointment.

Either the selling broker or the listing broker presents the terms of the offer. Part of the presentation is determining that the buyer is qualified financially to make the purchase.

Included in the presentation of the offer are a number of issues and concerns. After all, once the contract is signed, it becomes binding. It should include things like the amount of the earnest money deposit, the size of the down payment, and other provisions. Numbers are then added together which allows the seller to consider the bottom line.

A decision on the offer should be made at the presentation, if possible. The seller has three options – accept the offer, make a counter offer on anything unacceptable (these are written in the margin of the contract or in an addendum and are initialed – the buyer can withdraw, accept or counter), or reject the offer, if it is totally unacceptable. In the event that there are multiple offers, the sellers will review them in the order received.

After an offer is accepted and signed by all principals, the offer then becomes a legal and binding contract.

Tips and talking points

If a seller is particularly eager to sell due to a divorce, an empty house, or other circumstances, you are in a great position to talk down the price, especially if you have money in hand and do not have another home to sell before completing this transaction. Obviously, these things will change depending on the market climate. If it’s a buyers market, you can argue that the home has been on the market for however many months and that the price you’ll offer is more than fair based on the condition of the home and market. However, if it’s a sellers market, it might be wiser to offer a higher amount than the asking price in order to beat out other early offers.

It’s important to think of the negotiation process as a game instead of a war and in order to win the game you must do all the research you can. Research involves going to other open houses that will help you track the condition of other homes on the market. This is also useful in order to track sale prices of homes. Watch for the For Sale signs to come down and then go to the courthouse to see what the house sold for. Another way to look at sale prices is to go to the courthouse and ask the staff to explain how to find deeds and other records to help you figure out sale prices. Luckily, an easy way around this is to look at our Recent sales database. Here you can see not only the recent sales price of a particular home, but you can see the entire history of sales on the home. Having this knowledge will help you to feel confident offering the right price for the home you intend to buy.

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