Making an offer on a house is a big decision that you shouldn’t approach lightly. Many states require you do it through a real estate professional or on certain forms. These forms must have information such as the property address, legal description, and a mandate that the seller must provide a clear title. If you do not have a real estate agent, then you may need to get forms from one so that it has all pertinent information on them.
An offer on a house is potentially a legally binding contract, so you need to ensure the forms are prepared appropriately. That is why it is always advisable that you have an agent represent you. The only time your offer is not legally binding is when the seller rejects it. Here are some tips to help explain the offer process.
Secure Financing
You probably already know that should have a lender’s pre-approval before you attempt to make an offer on any house. The letter just states that you meet the lender’s initial criteria for receiving financing. The house also must meet certain conditions and pass required inspections, and you will still have to close on the house. Many people get a pre-approval letter and make an offer on a house, which the seller accepts, and the buyer celebrates with a new car to match the trendy house. Then they learn that they can’t close because the new vehicle was added to their debt-to-income ratio and they no longer meet the minimum qualifications.
Earnest Money
When you are submitting an offer on a house, you need to be prepared to put down some earnest money. This money, which you do not get back, ensures that the seller holds the house for you so that it can’t be sold to someone else. Suppose you submit an offer with earnest money on June 1 with a proposed closing date of July 15. Your earnest money is what essentially holds the house between June 1 and July 15. If your offer is accepted, your earnest money will come off the price of the house. It typically isn’t much, usually either $500 or $1,000, depending on where you live. If the seller is not asking for one of these standard amounts, then it is typically 2 or 3 percent of the purchase price.
Do Your Market Research
Even if you are working with a real estate agent, you still need to do your own market research. Ask your realtor for neighborhood market analysis (CMA) and use at least three other houses that are comparable to the one for which you are putting an offer, in terms of square footage, number of bedrooms, number of bathrooms, and everything else right down to the lot size. Average out the prices to ensure that the offer you’re making is not only valid but also fair and that you are getting a decent deal. You’ll find many things, such as neighborhood trends, only through research, so don’t skip it.
Making an offer does not have to be scary, but for many buyers, it is. This part of the process is where everything “gets real,” where people find out that the home they want might not be the home they get. Fortunately, unless the offer is totally unreasonable, then the house will be theirs.
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