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Make An Offer On A Home

You’re a potential home buyer in the real estate market and you’ve looked at all the homes you’ve wanted to see.  You’ve found the home that’s in the local market you want to live in and it has all of the amenities and modern conveniences you desire in a new home.  You’ve decided that you want to make this home yours and the next step is the most challenging and exciting in the home buying process – negotiating a price and making an offer to the current homeowner.

If you’ve gotten this far in the process of buying a particular home, be sure that if you are going to make an offer that you are fully prepared to honor it and know you have the means to fulfill it with your lender.  An offer may just be a hypothetical figure to start, but if it is accepted by the selling party, it becomes a legally binding contract.  Always be sure you absolutely want the home you are making an offer on before making it.

Anyone making an offer on a home must be sure and have their finances detailed and planned out.  Before making any offer, always know what you would like to pay and already have a price ceiling in mind in case the owner comes back with a counter-offer.  Just because you have been pre-approved for a certain amount of money does not mean you need to negotiate all the way up to that price.  It’s important to know what price would constitute paying too much for the value of a home.  Just because a bank pre-approves a value does not mean it all has to be or should be borrowed for a home purchase.

Negotiating a Price

      A negotiation on the price of a home is a standard practice in real estate sales.  Rarely is any home sold for the price it is listed.  Almost all sellers will inflate their asking price so that they can negotiate it down with a potential buyer to give the buyer a sense of a bargain when they are really just paying the real market value of the home after the reduction of the overinflated price.

Before entering into any negotiation for the purchase of a home there are a couple things you should know to be best prepared for the negotiating process.  First, you should gain a perspective on whether you or the seller will have the stronger positioning going into the price negotiations.

        The seller of the home will likely have the stronger negotiating position if:

  • They are in no rush to sell the home; can sit on the asset until a buyer pays what they want
  • Comparable homes in the same area have sold for the same price or higher
  • The local market for home sales is thriving and homes are moving quickly
  • The buyer will likely have the stronger negotiating position if:
  • The seller needs to move the home quickly; is desperate to sell
  • The asking price is significantly higher than comparable homes in the area that have sold for less
  • The house has been on the market for a long time
  • The local real estate market is not strong; homes for sale are sitting idle

In a negotiation of the sale of the home, having more information is better.  When you did a walkthrough of the house and took notes of any and all things that need repaired, replaced, or updated; use this list to your negotiating advantage.  Include the estimated cost of these repairs or replacements as deductions from what you expect to pay for the home.

If there are certain appliances or fixtures in the home that you wish to be included in the purchase of the home, be sure to include them in any formal offer.  If applicable, you may want to make the offer contingent upon obtaining financing for the home if you are not already approved for a loan(which is not recommended; always try to be pre-approved for a loan so you can shop like a cash buyer) or contingent upon a professional home inspection which is highly recommended if the home is more than fifteen years old.

         There are three steps to a negotiation and making yourself familiar with each will be helpful:

   The Homeowner’s Asking Price

    This is the initial public offering for the sale of the home by the home’s owner.  In a minority of cases, this initial price may be underestimated to the actual market value so be prepared to know how much more than the asking price you can and are willing to spend if you really want to purchase the home and the owner has received multiple offers over the asking price.  In more cases, the initial price is an overestimate of the home’s real market value to test the market.  A majority of the time, this asking price value can be successfully negotiated down especially in a strong buyer’s market.

    Make an Initial Purchase Offer

    This is your first offer to the homeowner.  This is where the previously mentioned contingencies can be attached to an offer.  If your first offer comes close to the real market value of the home, is satisfying to the homeowner, and is the best or only offer the homeowner has received, it will often result in an agreement between you and the seller to purchase the home.

   The Seller Accepts or Counter-offers

    Ideally, you would like the seller to agree to your initial offer, but in their own negotiating interest it is possible that they will make a counter-offer if they feel the home has more value than you’ve offered to pay for it.  These negotiations will continue until a medium between parties is reached that is satisfying for both sides.

    Keep in mind that if your offer is accepted with a contingency on a professional house inspection and the inspection reveals that there are major deficiencies in the home that decrease value, you should submit a counter-offer even if you have not received one and make the new offer the same initial offer minus the estimated costs to repair the home’s newly discovered deficiency.

Also, if you find yourself in a market that is moving quickly and at prices that are above your means to repay, don’t get caught up if you get outbid on a number of homes.  The perfect home is not just one that gives you the most comfort, but is also the one that gives you comfort that you can afford.

Making an Offer

Now that you have an understanding of how the negotiating process works and that in order to create a negotiation you first need to make an offer; you need to understand how a formal offer is submitted and what it should include.  The verbiage in the formally written offer is very important because it will outline all of the specific details of the sale of the home from seller to buyer.  Be sure that anything that is written in your offer is something you can fully and comfortably comply with in the transfer of ownership.

      A formally written offer for the purchase of a home will usually include items like the following:

      The Proposed Purchase Price

    This is simply the amount of money you expect to pay for the home.  Remember that the seller may make a counter-offer for a higher price so be sure to start with a price you are more than comfortable with and give yourself room to negotiate to a higher price without sacrificing your ability to repay your loan.


    Concessions are costs that you are asking the seller to cover in the process of the transfer of ownership from one party to the other, like closing costs.


    These stipulate what personal property is to be included or excluded from the sale of the home.  This is most commonly a reference to whether major appliances like the washer, dryer, or refrigerator are going to be included in the sale.

    Home Inspection Contingencies

    As mentioned before, this is where the sale of the home is contingent on a professional home inspection.  If the seller is confident in the home representing its true value this should not be an issue and if something is found that will be a necessary and expensive fix, it is usually expected that the seller will come down off of the initial price by the amount it will take to rectify the repair cost.

    Earnest Money

    This is just the real estate terminology for a deposit on the home.  Making the deposit shows that you have full intention on purchasing the home.  Keep in mind that if at any point you cannot meet the language of the contract in the home buying process, you may lose the deposit.  This deposit is often put towards the closing costs once the transaction is final between the parties.

    Expiration of Acceptance

    This is a clause to any formal offer that should be included.  This will state the time period that the seller has to respond to the offer before it becomes null and void.  Once the expiration date has been met with no response from the seller, nothing can be legally binding until another formal offer is made.

    Mediation and Arbitration(Optional)

    For the most formal of offers, this section of the written offer will stipulate with what legal methods any and all contractual disagreements will be handled.  As a buyer, if the seller agrees to your offer in full but wants mediation and arbitration clauses included for contractual disagreements, you DO NOT have to agree to those terms as they may not be beneficial to you.  As a buyer, you also do not have to include these clauses. 

Now that you understand how a negotiation ensues in a home purchase and how to make a formally written offer and what it should include, you’re ready to get out there and get this process started on the home you want to purchase.  Once you have your offer in paper and it has been accepted in full by the selling party, you’re ready to make it a binding contract.  Once your offer and acceptance of the offer is a legally binding document, you’re on your way to being the proud owner of your new home!

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