Buying a home can be an overwhelming process. From finalizing a preapproval with your mortgage lender and scouring the real estate listings to home inspections and staying within budget, it is easy to see the challenges of buying a home. Unfortunately, most buyers do not research and prepare for the process of making an offer once they find a home they want to purchase. Instead of only relying on what an agent believes is the right price to offer, proper research and preparation before finalizing an offer is smart. Using these tips, you will understand how to make a smart offer that suits your needs.
Research the Local Market
The seller's agent should price the home based on the local market. This ensures that the home will not be sold for more or less than similar homes in the area. While the seller's agent should know the local market, many homeowners will ask their agent to price the home higher than other homes because they believe their home is more valuable.
In some instances, this is correct. If the home offers unique, appealing elements, such as a fence, outdoor living space, or energy-efficient upgrades, the property will be more valuable than others in the area that don't have those features. In addition, if the number of available homes on the market is low, the seller may price the home higher than usual because there is less competition.
Investigate the homes that have sold in the area before determining a price to offer. Then, consult your real estate agent for their recommendation on an offer. Make comparisons and adjustments before finalizing an amount to offer.
Get a Preapproval Letter
Technically, a preapproval letter is not needed when making an offer, but it is helpful if you want a seller to take you and your offer seriously.
It is smart to talk to your lender before beginning the home search process. Utilizing paystubs, credit reports, and statements showing your monthly bills, your lender will determine how much of a home you can realistically afford. This helps you narrow down the long list of homes that are available for sale.
Once your lender completes this calculation, a more thorough investigation of your finances and credit will be conducted before they will provide you with a preapproval letter.
A preapproval letter will show real estate agents and sellers that you are ready, willing, and able to make the home purchase. Not only will the letter show that you can afford the home, but it will also show the seller that you have already been approved to buy the home, which can make the purchase process less time-consuming.
If you are making a cash purchase, a letter from your bank or attorney showing proof that you have the funds will be necessary.
Write a Check
Lastly, if you want a seller to take your offer seriously, offer earnest money.
Earnest money is a small deposit, usually 1 to 2 percent of the purchase price, that shows your seller you are interested and ready to sign papers. A personal check or cashier's check in the amount should accompany the offer letter.
If the seller agrees to your offer and you close on the home successfully, the earnest money will be credited towards your closing costs. If the sale falls through for some reason, the seller will most likely be able to keep the earnest money, since it is not usually refundable.
In certain markets, where inventory is low or there is a higher amount of competition, earnest money may need to be higher to prove your interest and capability to pay.
Real estate is an excellent investment, but you should never forego the importance of the offer. With these tips, you will be able to make a smart offer on your home purchase.Share