When purchasing a house, your offer to the Seller is a critical step. There are protocols to follow, and you want to make sure that you complete the process correctly.
The current market conditions can also dictate how you will write your offer. Buyer’s markets are very different from seller’s markets. The following tips show you how to structure your offer in either…
Buyer’s Market Offer
A buyers’ markets exist when there are a lot of homes on the market and very few buyers. If inventory, the number of homes on the market in your neighborhood, has been rising, it’s likely that the days on market (DOM) have been increasing as well. Couple that with declining sales figures over previous months, and home buyers are in a strong position to negotiate. Here is how you can write a buyer’s offer to your advantage.
1) Arm yourself with comparables (similar properties). Your agent can look up and print out comps of houses that have sold in the same neighborhood. Use the pricing information from the most recent sales when determining what you are going to offer.
2) Use contingencies. In a buyer’s market, write your offer contingent upon the property appraising at the agreed upon sales price and on obtaining your loan. Check with your attorney to find out if you can ask for a loan contingency that will protect you all the way to closing. Ask for a reasonable period to conduct inspections and to approve title, geological and pest reports.
3) Ask for Seller concessions and closing cost help. You can negotiate allowances for upgrades to the house, or simply have the seller agree to pay all or part of the closing costs (depending upon your loan program).
4) Renegotiate after a home inspection (more on inspections later). If the home inspection comes back with additional work or repairs needed – that you did not factor in your original offer – then go back to the seller, and renegotiate the deal.
5) Request extras, like a home warranty plan that covers the mechanicals in the house. In a buyer’s market, sellers realize that they will need to sweeten the deal to sell their house.
6) Ask for a shorter acceptance period. Give the sellers 24 hours to make a decision on your offer. There is no reason for you to wait around on slow-moving sellers in a buyer’s market.
Seller’s Market Offer
A seller’s market exists when there are a lot of buyers competing for a low inventory of active listings. With this scenario, houses can end up selling for more than the list price. But price isn’t always everything, and the following detail how to write an appealing offer to a seller.
1) Include a Pre Approval Letter with your offer. Sellers only want to deal with serious buyers, that can follow through. Show the seller you can with a mortgage pre approval. Your letter will give the seller confidence that the deal will go through.
2) Write a friendly offer. Do not make demands of the seller that are not customary for your area (i.e. asking them to pay for certain taxes typically paid by the buyer). You are likely to anger them, and cause them to pass on your offer.
3) Write your very best offer. You might get only one chance to make an impression on the seller, so don’t make a low ball offer hoping the seller will give you a counter offer. If the seller has received multiple offers, the low offers most often are not even considered.
4) Put down a healthy Earnest Money Deposit. A down payment of 3% vs. 1% or $5000 vs. $500 shows that you are serious about the house. Again, you want to convey to the seller that you mean business, and your offer should be taken seriously.
5) If it makes sense, try to waive contingencies and shorten your timeframe for having inspections done. This will help to move the deal along quicker – which will make the seller happy.
6) Write the seller a personal letter. If the seller has eight offers to consider, and yours has a handwritten letter from you on top – it will get more attention. Try appealing to the emotional side of the seller. Let them know why you fell in love with their house.
7) Offer to close quickly. Other than price, the most important thing to a seller is getting to closing as quickly as possible. Many sellers would prefer to close in 30 days or less. If that is physically possible for you, try to accommodate them.
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