What You Should
Know About Making an Offer
By Michele Dawson
Once you're preapproved for a loan and you've survived
the rigors of house hunting, the time will come
when you find a house that you'd like to call home.
But first, you'll need to make an offer.
The offer is the first step in the negotiation
process. A good basic offer includes the price
you're willing to pay for the house, your financing
terms, and contingencies, such as specifying what
will happen if negative findings come up during
the inspection.
Purchase contracts vary from state to state.
Regardless of where you live, if you're making
an offer, you want it to be carefully worded and
well thought out.
In the book "Home Buying for Dummies (Hungry
Minds Inc., 2001)," authors Eric Tyson and
Ray Brown say there are three key elements to
a good offer.
Begin, they say, with a realistic offering price.
Your agent will help you with this, but basically
you want to come up with a price based on similar
houses sold in the neighborhood in the past six
months. You'll also want to keep the local conditions
in mind. In other words, if houses are selling
quickly and many houses are receiving multiple
offers, you'll need to bid competitively.
That would be the case in some regions of the
country, including Pennsylvania.
"The market is strong for sellers,"
said Maureen Clay, a Carlisle, Pennsylvania Realtor.
"Homes that are being placed on the market
are selling quick with multiple offers being presented.
There is a high demand for homes up to $220,000.
With supply low and demand high, buyers are being
caught in a bidding war."
But if you're in a market in which houses are
on the market longer, like Denver, Colo., then
you can be proceed a bit more cautiously with
a bit more wiggle room for negotiation.
"In past years, selling a home in Denver
was about as easy as putting a for sale sign in
your front yard and waiting for buyers to come
in droves," said Denver Realtor Laurie Erb.
"The economy was hot, high tech jobs were
plentiful and, as a result, homeowners got top
dollar and plenty of offers. Not any more. Like
the jobs that fuel home buying, the days of easy
sales are gone."
The second element to include in your offer is
realistic financing terms. If you're pre-approved
for a loan, be sure to include that in the offer
so the seller knows you're serious. It will also
give you an edge over any other offers that don't
have a pre-approved loan.
And finally, include a property inspection clause.
What if it's determined the roof needs to be replaced,
or the heating and cooling system is faulty and
it will take $3,000 to fix it?
"It's smart to use property inspection clauses
that enable you to reopen negotiations regarding
any necessary corrective work after you've received
the inspection reports," the homebuying Dummies
book says.
Meanwhile, Freddie Mac says there are additional
items that should be covered in the offer:
- Any concessions you'd like the seller to make,
like paying part of the closing costs or providing
an allowance to get worn carpet replaced.
- Financing contingencies. If you're in a hot
seller's market, your loan should already be
approved. But if it's not, you may choose to
make the offer contingent on approval of a mortgage
with a specific rate and terms.
- Conveyances. This includes what is included
in the sale. For instance, a refrigerator.
- The amount of your deposit.
Also, most offers include a deadline for a response,
perhaps three days.
Finally, put everything in writing. Don't rely
on verbal agreements. If the seller tells you
he'll provide a carpet allowance for the shabby
avocado-colored carpet but it isn't specified
in the offer, then you may not get the money -
and be stuck with green carpet.
The Realty Times
Published: June 10, 2003
www.RealtyTimes.com
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