Simply finding the perfect house isn’t enough to make your home buying dreams come true. Before you sign on the dotted line and receive the keys, you’ll likely need to put in some work to get your home offer noticed by the seller— especially in today’s hot market.
How to Make an Offer on a Home
Sellers may be getting dozens of offers and have bidding wars on their home—so how do you make your offer stand out from the crowd? Here are seven things to consider when making an offer on a home.
1. Work with the right professionals from the start.
The home buying process can be a little intimidating and confusing at times. This is why it’s always advisable to work with professionals that can help you navigate the housing market landscape. Start by hiring a real estate agent that can represent and look out for your best interests. It’s also a great idea to find a local mortgage lender before you even start putting in offers. They can help you get prequalified.
2. Get prequalified for a mortgage.
Getting prequalified for a home mortgage is powerful in many ways, including:
- It can help you set a budget for house-hunting
- The process can help you discover ways to improve your credit history before applying
- You’ll be able to provide a prequalification letter to the seller’s agent.
Providing a prequal letter lets the seller know your finances are in order, which gives you an advantage over another prospective buyer that hasn’t shown their purchase power.
When you get prequalified, you’ll work with a lender who will look over all of your financial records, including your credit history. The lender will assess whether or not you would qualify for a loan and, if so, how much the bank would loan you. Prequalification is not final approval, so it’s important to be as truthful as possible during this stage.
Offers with prequalification will carry more weight than one without. They can move forward with a prequalified offer knowing that the buyer will likely go through the financing process without any issues. This decreases the chances that the deal will fall through, which can be a major headache for sellers.
3. Understand your seller’s motivation.
If you have the opportunity, learn what you can about the seller and their current situation. Understanding the motivation for selling can help you craft an offer tailored to the seller’s needs. It’s not likely that you’ll talk to the seller directly, but your real estate agent might be able to provide information.
For instance, the seller may have gotten a job in another city and is looking to sell quickly so that they can relocate. In this case, they are probably looking for a quick and easy sale— even if it’s not the largest offer. A clean offer with a shorter period to closing may look best. On the other hand, the seller who has outgrown their home may be looking for an upgrade. In this situation, the seller may be more concerned with the offer numbers that are coming in.
Once you understand the reason behind the sale, you can adjust your offer to meet their needs and goals.
4. Price the offer right.
There’s an art to submitting the perfectly priced offer.
Some people lowball on their first offer in hopes that a seller will come back with an amount that is still under the original asking price. This may work in a slow market, but in a seller’s market, this usually isn’t advisable. If a seller has a higher offer on the table already, yours won’t even get considered.
Offering too much could cause problems, too. You may be tempted to offer the amount that you are prequalified for. The problem is that the interest rate with prequalification is not locked in. If the economy changes and interest rates go up, you may no longer qualify for that amount. Always consider how much you can actually afford and be sure to leave some wiggle room between what you prequalify for and how much you offer on a home.
5. Submit a clean offer.
Purchase contracts usually come with a number of contingencies that protect the buyer in certain situations. For example, the inspection contingency allows the buyer to back out of the contract without penalty if the home fails inspection. A financing contingency gives buyers the opportunity to back out of the contract if they are unable to get financing.
An offer without a ton of contingencies may look more attractive to a seller that is anxious to see the deal go through. But be aware that there are risks when you waive contingencies. Before doing so, be sure to discuss it with your real estate agent and lender to fully understand the implications.
6. Shorten the due diligence period.
If you don’t want to do away with your contingencies completely, you can always shorten the contingency timeframes.
One of the most common time frames to shorten is the due diligence period. This is the period in which a buyer will complete a home inspection and decide whether they want to proceed with the offer. Under normal circumstances, the due diligence period may be anywhere between fourteen and thirty days. However, a shorter seven-to-ten-day period may look more favorable to a seller.
7. Add extra perks with your offer.
Don’t be afraid to think outside the box with your offer. Here are some ways you can add extra perks:
- If you have money to spare in your budget, offer to pay your seller’s closing fees.
- Add an escalation clause that raises your offer if someone else submits a higher offer.
- Allow the seller to occupy the home for a certain period of time after closing.
- Agree to do the cleaning after the seller moves out.
Your real estate agent and lender will be a great resource for learning about other things you can add to your offer.
A Good Offer is in the Details
Don’t let your dream home slip away because of small but important details. If you are smart about what you offer, you will reap the rewards. To ensure you make the best choices in your home offer, work with real estate and lending professionals who can guide you and look out for your interests.