Making an Offer on a House - What's Included?
Making an Offer
What goes into making an offer on a home?
While each offer will be crafted to meet the individual needs of a buyer and the particular home that is being purchased, there are a few components that remain consistent throughout most offers.
The first thing that comes to most people's mind when making an offer is price. How much am I going to offer? This is a very good question!
It's important to remember that the price the house is listed for is what the seller is hoping to obtain. In reality, it may sell for more or less than the list price
That being said, there are really four main things to consider when coming up with an offer price:
1 - General current market conditions. Also known as macro-market trends.
2 - Surrounding market data and comparable sold properties. Also known as micro-market trends. We’ll provide you with this data and information.
3 - Your level of desire for the house.
4 - Your particular financial situation.
Putting all of these pieces together will help us come up with an offer price.
Now that we’ve decided on an offer price, we’ll also need to include your down payment amount and your financing type.
For example, you may be putting 20% down and have a conventional loan or maybe you are one of our many veteran clients who's using their VA loan benefits and will be putting 0% down.
The pre-approval letter that indicates your financing type and amount of down payment will be included with the offer to indicate you are a well qualified buyer. Including the pre approval letter with the offer documents is required!
If you are purchasing with cash, you won’t have a pre approval letter. Instead, you will need to provide a proof of funds letter from your bank indicating the amount is available in liquid funds to cover both the purchase price plus closing costs.
Earnest money is the next piece of our offer. No matter the type of loan or your price point, you will need to put down an earnest money deposit. This is your good faith deposit which shows the seller you are serious as a buyer and is usually around 1% of the total purchase price of the home. We will indicate the total amount of earnest money in the offer.
The earnest money will serve as a credit and be applied towards your down payment and closing cost total at the end of the purchase. Your earnest money is at risk of forfeiture if you breach the contract.
Next, we’ll include your proposed inspection period which is usually 5-10 days. During this time you’ll order a general home inspection and any other relevant inspections such as septic, well and water, termite or radon test. Also, if there is any city, county, or HOA information you have questions about, now is the time to do your research.
After the inspection period ends, an appraisal will be ordered. The lender will require an appraisal be completed and a value assigned by the appraiser that meets or exceeds the purchase price.
The contract is contingent upon both an acceptable inspection and an appraisal that meets or exceeds value.
The contract will also outline what is included and excluded from the sale. For example, maybe all the kitchen appliances will stay but there's a freezer in the basement that Seller will be taking.
The general rule of thumb is if it takes a screwdriver or tools to remove from the house it will stay, anything else will go with the seller. It is important to make sure everything is outlined clearly.
We will include our proposed closing date. This is the day the property will officially become yours. Closing typically takes place between 30 and 45 days after the offer is accepted, often depending on how much time your lender requires to get everything completed.
If you're purchasing with cash, the process can happen much quicker.
And while we're on the topic of closing date, we’ll outline any occupancy for the seller if they need to remain in the home for a period of time after the closing date. As an example, maybe the seller is building a new home and it will not be ready for an additional month after the closing date. We’ll include the length of proposed occupancy, even if it's 0 days.
There may be other Items included in the offer such as an appraisal guarantee or free occupancy, but we’ve covered the main items you’re going to see in every offer.
Once we have all these pieces, we’ll put your offer together and send it to you for review and signature.
Be sure to read and review the entire offer and documents. The contract you are signing is between YOU and the Seller, so it is extremely important you are aware of what you’re signing!
If you have questions, just ask!
Once you’ve signed the offer, we will get it to the listing agent who can present it to the Seller.
We will usually hear back from the Seller 24-48 hours after submitting the offer.
In a perfect world, the Seller would agree to all of our terms as outlined in our offer and we would simply finalize signatures and go under contract.
Sometimes however, that isn’t the case and there may be a few points of the contract the Seller would like to adjust.
In this situation, you will work with your agent during this “give and take” process to find common ground with the Seller. Once you reach an agreement, you can then finalize the contract.
If no agreement can be reached, you will continue looking for suitable homes.
Now you know the process and what goes into placing an offer! - You’re ready!