So You Want to Buy a House? Step 6: Perfect the Art of the Offer
We’ll get right down to it: Shopping for a home is fun. But once you find “The One,” things start to get real—real fast. Think of making an offer on a home as setting the roller coaster in motion: You might have sharp drops in emotion and slow, trudging climbs to success, but the ride won’t end until the car slows down and the safety bar is lifted. (OK, this metaphor is now officially over.)
You need to learn how to make the right offer, the one that will end with your receiving the keys to your new house. So check out this installment of our weekly 2016 Home-Buying Guide for some agent-approved negotiation tactics to make the process a whole lot less bumpy.
Pick the right price
Just because the home is listed at $300,000, it doesn’t mean it’s actually worth that much. It all depends on the market. If you’re buying somewhere hot—especially places with low inventories—offering substantially below asking price is “probably wasting your time,” says Mindy Jensen, a Realtor® with Equity Colorado. But if the place has been sitting unsold for a few months, even the sellers probably don’t expect full price. Your best reality gauge are comps, or what similarly sized homes nearby have sold for recently.
Work with your real estate agent to determine a fair asking price; he or she will have the best read on pricing and marketplace dynamics, and can walk through the comps with you. Your agent can help you determine what a fair discount would be without offending the seller. While specific numbers will depend on your market, experts estimate that it’s unrealistic to go below 5% of the list price unless it’s been sitting on the market for months. Which leads us to…
Lowball with care
Sometimes a home is priced just too high—no ifs, ands, or buts—or perhaps it’s been sitting unsold for half a year. In those situations, a lowball offer well under asking price might be the right strategy to get the home you love for a bargain price. However, this is a tool to be deployed rarely and with great care—especially if the current owners have lived there for many years.
“Longtime owners usually have tons of pride in their home, and want the new owners to love it like they do,” says Jodie Burns, a Realtor with McEnearney Associates. “Buyers who lowball run a risk of angering the seller and losing the house. Ideally, you’re looking for a closing where both sides feel like they got a fair deal.”
So don’t lowball unless both you and your Realtor agree that it’s the best strategy for the occasion. Think about the big picture: “If a couple of thousand dollars is going to keep them out of a home they love, I remind buyers how little that amount translates into a monthly payment,” Burns says.
Write a letter
If the market’s tight and you’ve decided that you must have that stunning Colonial, you can boost your chances by writing a personal letter. Maybe you’ve heard this before? It helps, really.
“Top dollar will typically win the bid, but the sellers get to choose which offer they like best,” says Jensen. “Including a letter can sway them toward you, or at least give you the opportunity to match the highest offer.”
Jensen recommends scouting the house to figure out what’s important to the sellers and mentioning it in your letter. For example, a dog shed in the backyard means they’re probably canine lovers—and more likely to respond to your excitement over little Humbert’s potential new backyard. If they’re mountain bikers, they’ll love that you’re excited about the nearby trails, too. And, of course, parents who raised their (now grown-up) kiddos in this home will appreciate your intentions to do the same.
Along with the price, you’ll also want to factor contingencies into your contract: For example, do you need to sell your own home first, requiring a selling contingency? Work with your Realtor to decide what you’ll ask for off the bat—and consider dropping some requests if the market is hot.
As Jensen explains, “Your chances are best if you ask for the fewest things.” Don’t put yourself at risk to get the home you love, though. Some people might advocate dropping the inspection clause to sweeten your offer, but that can be dangerous, especially in older homes.
Keep your emotions in check
Yes, the search seems to have dragged on forever; yes, this home has everything you need. But keep your wits about you.
“Don’t fall in love,” Jensen says. “Falling in head over heels with a home can make you do ridiculous things, like overpay.”
Plus sometimes, even an “excellent offer may not be accepted,” says Vici Boguess, a Realtor with the Burke Boguess Zimmerman Group in Alexandria, VA. Don’t assume a rejection is an insult—the sellers might just dislike some of your contingencies or are holding out for a better offer. So, don’t assume it’s over until it’s over.
But if your offer is accepted, it’s time to perform your due diligence. Keep an eye out next week for the next step in our Home-Buying Guide: getting the property appraised.