Homebuyers

How to Make an Offer on a Home in 2024

When you find your dream home, the next step is making an offer. This is a formal process where you put in writing how much you're willing to pay for the house. In your offer, you'll include details like the purchase price, down payment, and loan you plan to take. It’s important to get these details right.

Your real estate agent will be crucial in this process. They understand the local laws and regulations for buying a house and will make sure your offer is compliant and competitive.

There are three main outcomes once you make an offer. The seller might accept it, leading to a binding contract. They could also counteroffer, which means you'll enter into negotiations. Or they might reject your offer altogether. In the 2024 housing market, being prepared for any of these outcomes is key, and your agent will guide you through each scenario.

Preparing a Smart Offer: Essential Research Steps

To make a smart and competitive offer on a home in 2024, thorough research is key. This not only increases the chances of the seller accepting your offer but also makes sure you're making a well-informed decision. Here's how you can prepare:

1. Understand the Seller's Motivation: Try to find out why the seller is listing the property. This information can give you insights into their urgency to sell. For instance, a seller looking for a quick sale might be more open to negotiation or a cash offer for a lesser amount. However, remember that the listing agent may not readily disclose this information.
2. Assess the Market Conditions: Determine whether it's a buyer's or seller's market. In a buyer's market, you'll face less competition and may find sellers more flexible on price and terms. In a seller's market, expect the opposite: more competition and sellers who are firm on their terms and prices. In a seller's market, your offer needs to be particularly strong to stand out. Your real estate agent will be able to give you a better picture of the current market in your local city.
3. Ask for a Comparable Market Analysis (CMA): Ask your real estate agent for a CMA. This report compares similar properties to the home you're interested in in terms of features, age, and location. Use this data to guide your offer price.
4. Examine List-Price-to-Sale-Price Ratios: Review the selling prices of homes in the last six months compared to their list prices. This ratio indicates whether homes generally sell above or below the asking price. Your agent can provide this information, and it's likely the seller will have this knowledge too, to manage their expectations of the offers they are likely to receive.
5. Check How Long the Home Has Been on the Market: Homes that have been listed for a longer time might have sellers who are more willing to negotiate on price and terms. Be aware that some agents may temporarily remove listings and then relist them to make the property appear as a new listing.

Key Elements Included in Your Home Offer

Here are the basic components that your real estate agent will help you with to make sure your offer is complete, legally binding, and competitive in the current market:

1. Property Details and Price: Clearly state the property's address and the price you are offering. This price should be a strategic decision based on market analysis and your budget.
2. Title and Financial Adjustments: Include a clause about the seller providing a clear title. Outline how you and the seller will adjust expenses like taxes, utilities, and rents.
3. Cost Responsibilities: Specify who will cover costs for title insurance, surveys, termite inspections, and other related expenses. This clarity prevents future disputes.
4. Legal and State-Specific Requirements: Make sure your offer complies with state-specific legal requirements, such as disclosures about environmental hazards and attorney review periods.
5. Contingencies: Protect your interests by including contingencies like a professional home inspection. This step is crucial for uncovering potential issues with the property.
6. Earnest Money Deposit: An earnest money deposit should go with your offer to show you are serious about the offer. This can be in various forms, such as cash, check, or promissory note.
7. Timeframes: Set clear deadlines for various stages of the process, like offer acceptance, loan procurement, closing the deal, and move-in dates.
8. Financing Clause: If your purchase depends on securing a loan, include a financing contingency to protect you from being forced to buy if you can't obtain the financing or sell a current property.
9. Inclusions in the Purchase: List any additional items you expect to be included in the sale, such as appliances, furniture, or specific fixtures.

Incorporating these elements creates a solid offer for your home purchase. It shows the seller that you are both serious and well-informed and increases the likelihood of your offer being accepted. Remember, a well-structured offer is your first step toward securing your dream home.

Negotiating Your Home Offer

Understanding what parts can be negotiated in your home offer is key. As a buyer, it's important to understand what is non-negotiable and areas where flexibility is possible. Successful negotiations often involve a give-and-take approach. For example, a full-price offer might allow you to negotiate more favorable terms elsewhere.

1. Price: Your real estate agent and your initial research are valuable tools in price negotiations. To stand out in a seller's market, be prepared to offer a competitive price, potentially above the listing. However, if the property has been on the market for an extended period without offers, you may have room to negotiate below the listing price. It's a delicate balance: offer a reasonable price that reflects market value without offending the seller.
2. Down Payment: A significant down payment and mortgage preapproval can strengthen your negotiating position. This combination lets the seller know that you're a serious buyer with a high likelihood of securing financing, making your offer more appealing.
3. Earnest Money: Including earnest money with your offer is a sign of good faith and seriousness. Typically ranging from $1,000 to 3% of the home's price, this deposit can be a negotiation tool. A large earnest money deposit may offer you some leverage, showing the seller your commitment to the sale. It's important, however, to have clear terms in the contract regarding the conditions under which the earnest money is refundable.
4. Closing Date: Your flexibility regarding the closing date can be a significant advantage. If the seller has already moved, they may want a quick closing. On the other hand, they might prefer a more extended timeline if they are still living at the property. Adapting to the seller's needs in terms of closing can make your offer more attractive.

Navigating Counteroffers

Let's say that in general the seller finds the offer suitable but doesn't like the proposed sales price or the requested closing date. You will probably receive a written counteroffer explaining the changes the seller would like to see made before they accept. You can accept, reject, or make another counteroffer (this is where negotiating comes in).

Every time either party makes a counteroffer, the other side is free to accept, reject, or counter the offer once again. The offer does not become a binding contract until one of the parties officially signs the contract.

Tactfully Withdrawing an Offer

If for whatever reason, maybe you found a better home or upon a home inspection needed repairs were found that the seller doesn't want to cover, you can withdraw your offer. If you withdraw before the offer has been accepted (technically still in negotiations), the usual process is to have your real estate agent draft something up to send to the seller's representative, and that should end the matter.

If you withdraw after the purchase contract has been signed, it gets a bit tricky. Depending on the time frames, and the contingencies and conditions stated in the contract, you may face losing your earnest money. In this scenario, it's wise to have an attorney look at the contract and help you navigate through this process.

Next Steps After Your Offer is Accepted

Once your offer is accepted, the agreement becomes a legally binding contract. This is a key moment in your homebuying journey. You will provide your earnest money to your agent, who will then transfer it to the title or escrow office, making sure the next steps in your home purchase proceed smoothly.

Don't forget to explore our previous blogs for more insights. They cover important topics like getting preapproved and the key players in the homebuying process. These resources can be invaluable for you and your family or friends who might be navigating the journey of purchasing a home. Sharing this knowledge can make their experience more informed and successful.