Finding a Home, Making the offer and Negotiations

Picking the Perfect Home

Okay, you’re getting closer. So far, you’ve gotten your financials in order, you’ve spoken with your loan officer and received a preapproval letter for an amount you’re comfortable with, your loan application has been submitted and documented, and your loan officer has told you to start shopping, knowing all you need to do is find a home. But last time you looked, there were more than a few potential homes for sale, right?

Real estate agents are professionals at putting a home for sale in its very best light, from when you first pull into the driveway to walking away after a personal tour. Professional real estate agents hire “home stagers” who stage homes with new furniture and stash old furniture in a storage unit to make the home look larger. All the lights will be on, it will seem bright and cheery throughout, and it will be sparkling clean from floor to ceiling. Don’t get too excited; keep your needs versus wants list in your purse or pocket as you tour potential homes.

At some point, both you and your real estate agent will say, “This one just might be it.” It’s the home that has all your needs, plus most of your wants. So, what do you do? It’s time to make your offer.

Crafting an Offer

Your real estate agent will help put together an ideal offer that is a combination of the most you’re willing to pay compared to what your agent thinks will be the least the seller will accept. On the other side, the seller’s real estate agent has prepared no shortage of data that supports both the listing price of the home, as well as a discussion of the lowest the seller is willing to accept.

Here are a few things to consider

  • What are the current market conditions?
  • Is it a buyer’s market or does a seller have the upper hand?
  • How many days has this house been on the market?
  • What are comparable properties selling for?
  • How motivated is the seller?

Your agent will be able to tell you what your offer could be and the likelihood of the seller accepting the offer. At the same time, there needs to be a minimum you’re willing to offer and a maximum. If you go over your maximum, be careful, it might be your heart talking and not your head.

You want to start low but not so low that it’s an insult to the seller. Your agent will help with this initial offer amount, but there will likely be some push-back on your first offer.

Both the buyer and the seller can go back and forth with negotiations and beyond price, the buyer could also ask for more.

Standing Out From Other Offers

Your preapproval letter is the most important, but some buyers also invite the seller, as well as the seller’s real estate agent, to contact your loan officer directly to talk about the status of your loan application.

While your loan officer won’t provide them with any credit scores, what your loan officer can say is that your credit has been reviewed and approved, you have more than sufficient funds needed to close, and your income and employment have been documented. Your loan officer will be good at painting your financial picture and will be motivated to do so.

Here is a little-known secret that buyers need to know about. When a seller’s real estate agent receives an offer and asks for a preapproval letter, encourage the agent to contact your loan officer. Agents can be very skeptical of your preapproval letter if the agent doesn’t know who the loan officer is, and this is very often the case. Too many times, the agent has experienced receiving a letter from a buyer, only to have the deal fall through.

Backup Offers

When an offer is accepted and the home is temporarily taken off the market, it’s not getting very many views during this period as potential buyers write it off as a prospective purchase because there’s a pending contract.

However, in very hot markets, backup offers can be accepted. In this instance, the multiple listing service will say something to the effect of, “Pending: Accepting Backups”, letting other agents know it’s okay to submit an offer while the home is in escrow.

Final Steps

After the back and forth, you will ultimately arrive at a price you’re willing to pay and an amount the seller is willing to take. Now, the clock begins to tick, and an escrow date is set.