You have searched through listings and identified your ideal neighborhood. The next step is to find the perfect home you always wanted and make an offer.
As a first-time homebuyer, you will want your offer to be accepted over other offers, but you may be a bit confused about the moves to make. So, whether you are buying a house in a seller’s market or dealing with a cautious seller, here are some strategies that can help you make a confident and informed offer and realize your dream of homeownership.
1. Stay Objective
Purchasing a home can be both exhilarating as well as taxing. Sometimes, you fall in love with a home that meets your home’s wish list and overlook some obvious defects. Therefore, you need to take time to reflect and stay focused on the most important things. Also, trusted professionals like your loan officer and real estate agent are there to offer their support and help you make the right financial decisions. No matter how much you love the home, you will not always win. So, be prepared to walk away rather than regretting your decision later on.
2. Know Your Finances
Understanding your finances and what you can borrow is very essential in the home-buying purchase. So, you should get a pre-approval offer letter from your lender which will state how much house you can afford and show the seller that you are a serious buyer. Remember that the pre-approval amount is the maximum that a lender is willing to loan you and it is not binding that you put down the entire amount as an offer. If you go all out on your first offer then this will eliminate any “leeway” for future negotiations. Also, if the interest rates increase then you may not qualify for the mortgage and will have to back out of the deal.
3. Do Not Low-Ball Your Offer
While it is natural to want the best deal, you also need to be careful about pitching a low-ball offer. Freddie Mac warns that if you submit a significantly lower offer than the listed price then the seller may think that you are not serious about purchasing the home. So, do not submit an offer that will be tossed away as soon as it is received. Work with your real estate agent and assess the market value of the home through a CMA (competitive market analysis) to make a competitive offer.
4. Be A Flexible Negotiator
After you submit your offer, the seller may accept, reject, or ask for certain changes. This is where you need to put on your negotiation hat. Remain flexible and work with your real estate agent to counter offer a “deal-breaker” price that you will not go above, or adjust the closing or moving dates. This will increase the chances of your purchase being finalized and getting the home you want.
5. Reduce Contingencies
When buyers make an offer they can include a few standard contingencies. These are conditions that must be met to close a deal. It also benefits the buyer to avoid any costly surprises down the road. However, too many contingencies can turn the seller off. So, your offer must have the fewest contingencies by forgoing contingencies that do not matter to you such as move-in-date, non-essential repairs, and credits. Or, maybe you can consider waiving the contingency related to the sale of your current home if you can. But, do not get rid of contingencies that are important to you like home inspection and major repairs.
Otherwise, you will be stuck with a home that you cannot afford to fix
Increase Your Earnest Money Deposit
Earnest money is usually 1-3% of the purchase price of the home and eventually gets applied towards the buyer’s closing costs and down payment. It also shows the sellers that the buyer is serious about their home because if the buyer walks away from the deal the seller gets to keep the earnest money. Increase your earnest money deposit to garner more attention and show the seller that you are interested in purchasing the home. Consult your real estate agent who will help you with this. Also, be sure not to back out of the deal without a reasonable cause or you will lose your earnest money.
There are many different ways to make an offer of a home more competitive. It depends on your unique situation. Therefore, do not get discouraged by multiple offers or a limited budget. You must do some research, make a list of your “must-haves” and work with your home buying team to make the home-buying process less stressful and you get the keys to your new home before you know it!
If you are planning to purchase a home shortly take the first step by getting a pre-approval letter. Click here to know how much home you can afford.