by Brandon Cornett
The offer is a critical part of the home
buying process. It's when you, as the buyer, say to the seller: "Here's
what I'm willing to pay for this house."
This home buying guide will explain the five factors of a smart offer.
1. Base the offer on hard evidence
Before making an offer, you should have a good idea of the home's
estimated value. This knowledge will come from understanding your
market conditions and knowing what comparable homes are selling for in
your area. Making a realistic offer will increase your chances of
acceptance, while preventing you from overpaying.
If
you agree to a price higher than the home's value, and the subsequent
home appraisal comes in lower than that price, you'll have trouble
getting financing. That's time wasted!
2. Make the offer contingent
It's a safe practice to make your offer contingent on two things --
loan approval and inspection. Even if you've been pre-approved by a
lender, there's a chance you could get turned down for the actual loan
(especially if the price you agree to pay is higher than the
pre-approval amount).
The
home inspection is also critical, because you won't know the true
"health" of the house based on a casual walk-through. Only a qualified
home inspector can dig up the facts. Your offer should be contingent on
both of these things.
3. Set a time limit
The last thing you want to do is sit around wondering when you'll hear
back from the sellers (if at all). For this reason, it's common
practice to put a time limit on a home buying offer. It shows the
seller you're serious and prevents the process from dragging on. Some
buyers limit their offer to 24 hours, some for 48 hours, and others
even longer. It will depend on your comfort level and unique
circumstances.
4. Hope for acceptance, but plan for everything
Of course you want the seller to accept your offer. But there's always
a chance they won't, so you need to have a plan in place so you can
react quickly. Discuss this with your agent before making the offer.
Have a plan for three different scenarios -- an acceptance, a
rejection, and a counteroffer.
5. Know your limits
If you've been pre-approved for a certain loan amount by a mortgage
lender, then you have a pretty good idea of your limitations. Be
careful making offers that exceed your pre-approval amount (unless you
can make up the difference in cash).
Keep
this home buying guide in mind when making offers. Practice the five
factors of a smart offer. Good luck and happy home buying!
*
Copyright 2006, Brandon Cornett. You may republish this article if you
keep the byline and author's note, and also leave the hyperlinks active.
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