Chapter 8 - Making An Offer

Once you have found the home that you want and are ready to make an offer, you should consider the following:

ｷHow long has the home been on the market?

ｷWhy is the seller moving?

ｷHow many other homes like this are also on the market?

All three of the above criteria are important because the affect the price that you can offer the seller. Let’s take them one step at a time and see why they are so important:

How long has the home been on the market?

If the home has just been listed, chances are that the seller is going to want to wait it out a bit to see if someone will come in with a good offer. They are not likely to take the first offer that comes along if it is lower than the asking price. And in this market, you want to be able to offer significantly lower than the asking price.

If the home has been on the market for a long time (in this market, that is greater than 9 months) than chances are that there is something wrong with the property (such as structural damage) or that they just won’t budge off their asking price. You can try to make an offer, but chances are that you are not the first to do so and that they will not take a low offer. In today’s market, you should take at least 10 percent off of the asking price in your offer.

Why is the seller moving?

If the seller has already vacated the house, and it has been vacant for a while, it may be that the seller has already relocated and is not in a hurry to sell. If the seller is still living in the house, you should note why the seller is selling.

There are a number of different reasons why a seller decides to sell a house. They should all have the following significance to you:

Empty nesters. Their children are grown and they are downsizing. This means that they can afford to wait it out a bit and you’re probably not going to get the deal of the century. They’ve probably paid off the mortgage and want the biggest profit they can get.

Transferred. This means that they have to get out within a certain period of time. They are more apt to make a deal.

Divorce. Either the court decreed that they have to sell or they are selling to pay their lawyers. Look for potential cosmetic damage when they finally leave as they will be unhappy about leaving their home. You can, however, get a good deal when there is a divorce going on. You may have to wait a bit longer for an answer as the two attorneys for the couple duke it out.

Bought their dream house. This means that they are motivated and dying to get rid of their home so that they can move. This is an excellent opportunity and this house, unlike the divorce house, will have good karma - if you believe in that sort of thing. It’s always nice to get a bargain off of someone’s good fortune (similar to the empty nesters) than someone’s misery (as in the divorce).

Foreclosure or about to be foreclosed upon. If they are in the process of foreclosure, then you can offer significantly less for the home. If the house has already been foreclosed upon, it will be vacant. There might be cosmetic problems with the house such as a mess all over the place, light fixtures removed and holes punched in walls. People are not happy about getting tossed out of their homes. These are usually just cosmetic damages, however, and can easily be repaired. If they are in the process of foreclosure, they will be glad to have you buy the house before the bank takes it to save their credit. Even if it means that they have to bring a check to closing. You can make an offer of about 20 percent less than the listing price. You can always come up, you can’t go down.

How many other homes like this are on the market?

If you are looking for a home in a coveted area and this is the only one for sale, guess what? Youfre going to pay a lot more than if you are looking for a home in an area where every other house on the block has a gfor saleh in front of it. The more supply, the less money the home is worth. Remember that when you make your offer.

When it comes to making an offer, you need to have two things:

ｷA contract

ｷEarnest money

Both of these prove that youfre serious about making a deal. The contract can be a real estate form contract that is used in your state, a George E. Cole legal form or a contract prepared by an attorney. Unless you have sufficient knowledge about real estate contract law in your state, you should have the real estate agent prepare the contract for you or your attorney.

If you are buying a foreclosure, you will need a contract as well as a cashierfs check for the earnest money and a pre-approval letter from your lender. It will take longer for this process as the bank reviews all bids and selects the best one.

If you are making an offer for a gfor sale by ownerh property, then you will need an attorney to draw up the contract, unless you understand real estate law in your state. An attorney will usually charge a few hundred dollars to facilitate the purchase of your home and will give you a peace of mind that everything was done correctly. If you are unfamiliar with real estate law, get an attorney.

If you are using a real estate agent, he or she can draft the real estate contract for you. This is one aspect of real estate law that they can practice and they will also be able to explain the contract terms to you. Again, do not allow the real estate agent to dictate the price to you. Come up with a price that you feel comfortable with so that you can get a bargain.