What Makes a Good Offer?
You found a home you’d like to buy. Now how do you put together an offer the owners will accept?
Start with a number.
Obviously, the amount you initially write into the contract has much to do with whether the seller looks favorably on your offer. How do you come up with that figure? There are several factors to consider.
You will want to determine how the home compares to similar properties in the area. The most reliable way to make this evaluation is to look at homes that sold recently in the same neighborhood. Market conditions and property values can change rapidly, and what a home across town fetched has little to do with what this property is worth.
You would expect to pay less for a home that’s smaller than the neighborhood average, but there may be other variables to take into account. A smaller property with desirable upgrades can be worth more than a larger house that needs serious updating.
What type of market you’re in also plays a part. If you’ve lost out on three bidding wars because of an insane seller’s market, you will be more likely to make an offer at or above the asking price. A buyer’s market gives you a little more leeway. Keep in mind, though, that it only takes one other offer to knock you out of contention.
The amount is just the starting point
Hitting the seller’s “magic number”—the amount at which he is willing to sell—does not guarantee he will accept your offer. Several other aspects of your offer can improve or sink your chances.
For starters, the homeowner will look at the amount of earnest money in the proposed contract. A higher number shows your seriousness about this purchase and may place your offer above other similar offers.
Some sellers may have a strong preference for when they close on the sale. If you can meet their timeline, your offer gains strength.
When you can help it, stay away from contingencies. When you can’t help it, make those contingencies as moderate as you can. Why? Put yourself in the seller’s shoes. Even a slightly lower offer may be more attractive than a higher offer that’s contingent on the buyer first selling his own home.
The more you ask for from the seller, the weaker your offer. That’s not to say that you shouldn’t make a purchase contingent on selling your home first, or that you shouldn’t ask for the patio furniture to convey if that’s important to you. Just know that each request may take a bit of luster off your offer.
Give yourself options
There’s a provision in the standard residential contract where you can pay an amount for an option period. This period gives you the ability to conduct inspections and otherwise evaluate whether you want to proceed with the transaction. If you choose, you can terminate the contract for any reason during the option period. The amount of the fee and the length of the option period are negotiable.
While you don’t want to propose an option period that’s so long the seller will reject your offer, be sure to give yourself enough time to schedule inspections and weigh your decision before proceeding.
Many things combine to make an attractive offer. Your Texas Realtor can help you determine how to put together an offer that gives you the best chance of getting the home you want at terms that are favorable to you.
Source: Texas Association of REALTORS®
Reprinted with permission.