66 Questions to Ask When Buying a House

As a first-time homebuyer, it’s easy to feel overwhelmed even before you begin your homebuying journey. After all, this is a new process for you and, simply put, you don’t know what you don’t know. First off, there are no silly questions you can ask during any stage of the homebuying process. So always feel free to ask a question, no matter how trivial you think it might be. You owe it to yourself – and your family – to find out everything you can about a home, especially since it will most likely be the largest investment you’ll ever make. To help you get started, we’ve created a list of 66 questions to ask when buying a house, broken down into each stage of the homebuying process to help keep you informed.

11 questions to ask before you go house hunting

As you well know, buying a house is a significant investment. Before you start house hunting, think through your goals for homeownership. Why do you want to buy a house? 

  1. Do you want to earn equity and build wealth by owning a house? 
  2. Do you expect you might need more space for a future family? 
  3. Do you have a pet or see one in your future and you want a backyard? 
  4. Do you want to live in a quiet, established area or somewhere more lively? 
  5. Do you enjoy yard work, gardening? How much backyard space do you require?
  6. Have you considered the local schools and neighborhoods? 
  7. Have you looked at crime rates around the neighborhoods you’re interested in? 
  8. Is it essential for you to live close to your work? Or, is a commute ok? 
  9. Have you narrowed down a range of purchase prices you can afford?
  10. How much money do you need for a downpayment? 
  11. Are you pre-approved for a mortgage

When you’re wrapped up in the excitement of house hunting, you may forget which questions to ask when buying a house.. If you are a pet owner looking at condos, you’ll have to be sure the homeowners’ association allows pets. Or, let’s say you want to live in a popular downtown neighborhood, but plan to have children in a few years – will this neighborhood still suit your needs? It’s always worth giving some thought to the type of home and area to help focus your search. 

Also, be aware that being approved for a home loan saves time for everyone by ensuring that you, as the buyer, can actually afford the home and be able to follow through an offer. 

7 questions to ask when you interview agents

Contacting the agent listed on the for-sale sign of a house you’re interested in may not be the best way to protect your interest as a buyer. When you work with your own agent, that agent’s job is to represent your interests. They help research the house, find answers to all of your questions, and serve as your professional intermediary for communicating with the seller’s agent and homeowner.

Naturally, you will want to choose a great real estate agent that you are comfortable with and feel like they have your best interests in mind. Most real estate experts recommend that you interview at least three agents identified by recommendations from friends and family who have bought or sold a house recently. Here are some questions to ask potential agents to see if they are the right agent for you.

  1. How long have you been a real estate agent? 
  2. What kind of experience do you have in this specific market area?
  3. Do you usually work with buyers or sellers? 
  4. How do you usually communicate with clients? What should I expect for response time? 
  5. How will you help me search for homes? 
  6. What days and times are you typically available for showings? 
  7. How will you ensure transparency about any issues you see with a house? 

When you set your expectations for communication, home tours, and other information you count on your agent to provide, you have a good chance to establish a productive relationship from the start – which will help you through your homebuying journey.

stylish living room

stylish living room

37 questions to ask when touring homes

This is an extensive list, and not every question applies to every situation. For example, if your goal is to purchase a single-family home, questions relating to condominiums don’t apply. However, this list of questions to ask when touring a house should give you an excellent start in making well-informed decisions when buying your first home. 

  1. What’s the reason for the sale? How long have the sellers lived there?
  2. How long has the house been on the market? 
  3. What is the neighborhood like?
  4. When was the house built? 
  5. What are the property taxes?
  6. Are there any upcoming condo or homeowners association fees?
  7. What are the average utility costs? 
  8. Have there been any major repairs to the property? If so, do you know if they provided a warranty?
  9. Are there any boundary disputes with neighbors?
  10. Are there any shared driveways or communal spaces?
  11. Are there any public rights of way passing through – or near – the property? 
  12. How old are the major appliances and systems?
  13. Are the appliances included in the sale?
  14. What is the sales history of this house, and how would it affect my offer?
  15. Is there enough storage space? Room to grow? 
  16. Is there any evidence of water problems? Can you see damp drywall, basement floors, or open leaks? Can you smell mildew? Or is there a smell of fresh paint that might be intended to cover up a water issue?
  17. Are the walls structurally sound? Look for cracks and look for evidence of cracks covered over by wallpaper that doesn’t look right or paint applied over filler.
  18. Is the chimney in good condition?
  19. Are the windows sound? Will any of the glazing need to be replaced?
  20. Do the ground floor windows have working latches to lock the windows? 
  21. Is the attic insulated? If so, when was the insulation installed?
  22. Is there any soundproofing in the house? (Try viewing the home at different times to hear road noise or neighbors.)
  23. Are there working smoke alarms and carbon monoxide alarms?
  24. Is there adequate cell phone reception indoors? How’s the broadband service in the area?
  25. What type of system is used to heat and cool the house? 
  26. Ask to see the circuit box – does the wiring look up to date?
  27. How is the condition of electrical outlets and switches? (You can bring something to plug into try outlets.) 
  28. Do all of the lights work? If not, why not?
  29. Does the property have any lead pipes? Do you see any issues with pipes in need of repair?
  30. What kind of drainage system does the property have? Is it on the city sewer, or is there a septic tank? 
  31. Is there any asbestos in the property, or has there ever been an asbestos survey completed?
  32. What kind of roof does the property have? When was it last replaced, and what is its current condition? 
  33. Do you see any gutter leaks? Are the gutters cleaned out, or do they need work? 
  34. Are there any trees growing within 15 feet of the property? Can you discern if roots are likely to be a problem? 
  35. Which way does the yard face, and is there any part of the yard that doesn’t receive sunlight throughout the day? 
  36. Would the real estate agent buy this house? If not, why not?
  37. What’s the lowest price you think we could offer for this house and still close the transaction?

You can ask these questions when buying a house – and others as applicable – to understand your likely overall costs to own this home. When you understand all of your costs, you’ll confidently be able to make an offer you can afford

open concept new kitchen

open concept new kitchen

11 questions to ask when making an offer and closing on a home

Real estate agents make offers on homes every day. Their job is to help you make the best offer while protecting you against potential risks with the transaction. 

  1. How does the offer work? Do we communicate with the seller or seller’s agent? 
  2. What contingencies do you recommend including in the offer? 
  3. How much earnest money should we put in the offer? 
  4. When do we need to provide earnest money? 
  5. When should we expect to hear back from the seller? 
  6. If we receive a counter-offer, when do we need to reply? 
  7. How can we sign the paperwork? Digital? In-person? 
  8. If the offer is accepted, what are the next steps? 
  9. How far out is the potential closing date from an accepted offer? 
  10. What are our next steps once the offer is accepted?
  11. What do we do at closing? 

Your real estate agent wants to make the home buying transaction as smooth as possible. If they do not provide this information upfront, be sure to ask. 

You should prepare a list of your own questions to ask when buying a house. It can include any given here, or others that represent your own interests and concerns. Answers to these questions will ease your mind and help you understand what you can expect during each stage of the homebuying process. Completing your research is perfectly acceptable, but don’t skip asking questions of your mortgage broker, real estate agent, and title company. When you gather enough information, you can make the best decision buying your first home. 

Source: redfin.com

66 Questions to Ask When Buying a House – Redfin

As a first-time homebuyer, it’s easy to feel overwhelmed even before you begin your homebuying journey. After all, this is a new process for you and, simply put, you don’t know what you don’t know. First off, there are no silly questions you can ask during any stage of the homebuying process. So always feel free to ask a question, no matter how trivial you think it might be. You owe it to yourself – and your family – to find out everything you can about a home, especially since it will most likely be the largest investment you’ll ever make. To help you get started, we’ve created a list of 66 questions to ask when buying a house, broken down into each stage of the homebuying process to help keep you informed.

11 questions to ask before you go house hunting

As you well know, buying a house is a significant investment. Before you start house hunting, think through your goals for homeownership. Why do you want to buy a house? 

  1. Do you want to earn equity and build wealth by owning a house? 
  2. Do you expect you might need more space for a future family? 
  3. Do you have a pet or see one in your future and you want a backyard? 
  4. Do you want to live in a quiet, established area or somewhere more lively? 
  5. Do you enjoy yard work, gardening? How much backyard space do you require?
  6. Have you considered the local schools and neighborhoods? 
  7. Have you looked at crime rates around the neighborhoods you’re interested in? 
  8. Is it essential for you to live close to your work? Or, is a commute ok? 
  9. Have you narrowed down a range of purchase prices you can afford?
  10. How much money do you need for a downpayment? 
  11. Are you pre-approved for a mortgage

When you’re wrapped up in the excitement of house hunting, you may forget which questions to ask when buying a house.. If you are a pet owner looking at condos, you’ll have to be sure the homeowners’ association allows pets. Or, let’s say you want to live in a popular downtown neighborhood, but plan to have children in a few years – will this neighborhood still suit your needs? It’s always worth giving some thought to the type of home and area to help focus your search. 

Also, be aware that being approved for a home loan saves time for everyone by ensuring that you, as the buyer, can actually afford the home and be able to follow through an offer. 

7 questions to ask when you interview agents

Contacting the agent listed on the for-sale sign of a house you’re interested in may not be the best way to protect your interest as a buyer. When you work with your own agent, that agent’s job is to represent your interests. They help research the house, find answers to all of your questions, and serve as your professional intermediary for communicating with the seller’s agent and homeowner.

Naturally, you will want to choose a great real estate agent that you are comfortable with and feel like they have your best interests in mind. Most real estate experts recommend that you interview at least three agents identified by recommendations from friends and family who have bought or sold a house recently. Here are some questions to ask potential agents to see if they are the right agent for you.

  1. How long have you been a real estate agent? 
  2. What kind of experience do you have in this specific market area?
  3. Do you usually work with buyers or sellers? 
  4. How do you usually communicate with clients? What should I expect for response time? 
  5. How will you help me search for homes? 
  6. What days and times are you typically available for showings? 
  7. How will you ensure transparency about any issues you see with a house? 

When you set your expectations for communication, home tours, and other information you count on your agent to provide, you have a good chance to establish a productive relationship from the start – which will help you through your homebuying journey.

stylish living room

stylish living room

37 questions to ask when touring homes

This is an extensive list, and not every question applies to every situation. For example, if your goal is to purchase a single-family home, questions relating to condominiums don’t apply. However, this list of questions to ask when touring a house should give you an excellent start in making well-informed decisions when buying your first home. 

  1. What’s the reason for the sale? How long have the sellers lived there?
  2. How long has the house been on the market? 
  3. What is the neighborhood like?
  4. When was the house built? 
  5. What are the property taxes?
  6. Are there any upcoming condo or homeowners association fees?
  7. What are the average utility costs? 
  8. Have there been any major repairs to the property? If so, do you know if they provided a warranty?
  9. Are there any boundary disputes with neighbors?
  10. Are there any shared driveways or communal spaces?
  11. Are there any public rights of way passing through – or near – the property? 
  12. How old are the major appliances and systems?
  13. Are the appliances included in the sale?
  14. What is the sales history of this house, and how would it affect my offer?
  15. Is there enough storage space? Room to grow? 
  16. Is there any evidence of water problems? Can you see damp drywall, basement floors, or open leaks? Can you smell mildew? Or is there a smell of fresh paint that might be intended to cover up a water issue?
  17. Are the walls structurally sound? Look for cracks and look for evidence of cracks covered over by wallpaper that doesn’t look right or paint applied over filler.
  18. Is the chimney in good condition?
  19. Are the windows sound? Will any of the glazing need to be replaced?
  20. Do the ground floor windows have working latches to lock the windows? 
  21. Is the attic insulated? If so, when was the insulation installed?
  22. Is there any soundproofing in the house? (Try viewing the home at different times to hear road noise or neighbors.)
  23. Are there working smoke alarms and carbon monoxide alarms?
  24. Is there adequate cell phone reception indoors? How’s the broadband service in the area?
  25. What type of system is used to heat and cool the house? 
  26. Ask to see the circuit box – does the wiring look up to date?
  27. How is the condition of electrical outlets and switches? (You can bring something to plug into try outlets.) 
  28. Do all of the lights work? If not, why not?
  29. Does the property have any lead pipes? Do you see any issues with pipes in need of repair?
  30. What kind of drainage system does the property have? Is it on the city sewer, or is there a septic tank? 
  31. Is there any asbestos in the property, or has there ever been an asbestos survey completed?
  32. What kind of roof does the property have? When was it last replaced, and what is its current condition? 
  33. Do you see any gutter leaks? Are the gutters cleaned out, or do they need work? 
  34. Are there any trees growing within 15 feet of the property? Can you discern if roots are likely to be a problem? 
  35. Which way does the yard face, and is there any part of the yard that doesn’t receive sunlight throughout the day? 
  36. Would the real estate agent buy this house? If not, why not?
  37. What’s the lowest price you think we could offer for this house and still close the transaction?

You can ask these questions when buying a house – and others as applicable – to understand your likely overall costs to own this home. When you understand all of your costs, you’ll confidently be able to make an offer you can afford

open concept new kitchen

open concept new kitchen

11 questions to ask when making an offer and closing on a home

Real estate agents make offers on homes every day. Their job is to help you make the best offer while protecting you against potential risks with the transaction. 

  1. How does the offer work? Do we communicate with the seller or seller’s agent? 
  2. What contingencies do you recommend including in the offer? 
  3. How much earnest money should we put in the offer? 
  4. When do we need to provide earnest money? 
  5. When should we expect to hear back from the seller? 
  6. If we receive a counter-offer, when do we need to reply? 
  7. How can we sign the paperwork? Digital? In-person? 
  8. If the offer is accepted, what are the next steps? 
  9. How far out is the potential closing date from an accepted offer? 
  10. What are our next steps once the offer is accepted?
  11. What do we do at closing? 

Your real estate agent wants to make the home buying transaction as smooth as possible. If they do not provide this information upfront, be sure to ask. 

You should prepare a list of your own questions to ask when buying a house. It can include any given here, or others that represent your own interests and concerns. Answers to these questions will ease your mind and help you understand what you can expect during each stage of the homebuying process. Completing your research is perfectly acceptable, but don’t skip asking questions of your mortgage broker, real estate agent, and title company. When you gather enough information, you can make the best decision buying your first home. 

Source: redfin.com

Can You Sell a House and Buy Another at the Same Time? We Explore Your Options

When you are in the process of moving, the process of buying your new home and selling your old one usually involves choosing which one comes first—to buy or to sell. Selling your old home first is often a more sensible option, as this ensures you have the needed down payment to cover your new property. But if you sell and don’t have a new home waiting for you, you might end up scrambling for a place to stay and someplace to store your belongings. For a family with kids or with pets, that can be especially inconvenient.

Buying before selling is an alternative, but when market demand is low and you can’t sell your old home quickly, you might end up with a lot more obligations than you can handle. You now have two homes to maintain and two mortgages to pay. If you’re on a tight budget, this could put you in hot water. 

What if you decide to buy and sell at the same time? This strategy can work well if you have reserves or some investments to sell to come up with the needed amounts to buy your new home if that occurs before your sell your old one. But if you’re someone who doesn’t have a lot of extra cash to spare, you need to develop some ideas to push through. 

Selling and buying simultaneously will require some ingenuity on your part as this strategy calls for thoughtful planning to time your sales and purchases. While you may not control the entire housing market, there are steps you can take to make sure you pull off both transactions. 

We’ll fill you in on some of the options to make sure you succeed in selling your current property and seal the deal to your new home at the same time. We’ll also cover some contingencies just in case you encounter a gap between selling and buying so that you won’t end up homeless at the very least.  

Options for Buying and Selling at the Same Time 

As mentioned, there are several options you can explore when you plan to buy and sell at the same time. These alternatives can help you manage not only the buying-while-selling process, but it can also keep your stress levels at a minimum.

#1 Find a Cash Buyer for Your Home 

Selling your house requires exact timing and demand from the market. Some markets, like the Florida housing market, are quite in demand right now, but others may not be, so plan out your timeline accordingly and take that extra time you may need to sell into account. You can sell your house fast in areas with high demand if you partner with an instant home buyer or a real estate investment company that offers to pay in cash rather than waiting for buyers to have their mortgages approved. 

This way, selling your house gives you the needed resources to fund your next move when you’ve already closed the deal. If ever you’re still looking, accessible funds ensure you can find temporary arrangements until you’re ready to find a new home.

#2 Talk to a Lender 

In case market demands are low and you can’t sell your house quickly, you would need to consider if owning two homes are feasible for your budget. While cash reserves can get you as far as a few months of the double mortgage, you may need to sell a few of your assets to maintain both properties. 

If you find your savings or income insufficient, you can consider talking to a lender to generate some funding. They can provide you with several loan offers that use your home’s equity as a down payment for your purchase. 

One of them is a bridging loan, short-term financing that can work great when you’ve already chosen your new property and acquiring it is in the works. You can even add a contingency clause that your purchase will only go through if your bridging loan gets approved so you can walk away without any additional obligations.

Another option is to take out a home equity line of credit (HELOC) that gives you greater flexibility to repay only the amount you use for buying your home. A HELOC uses your home’s equity as a basis to issue amounts you can use based on agreed terms that will help you get by until you sell your former home.

However, while these loans can give you access to immediate funds, they often come with considerable interests and lengths. It would be best to give it some careful thought before you take out any of these loans

#3 Make Attractive Offers 

Part of a successful strategy is to make attractive offers for the home that you want and the one you’re selling. Contingency offers help secure your intentions without you having to pay for unnecessary obligations. You can include a condition for the upcoming purchase if your current house sells. This can work to your advantage when you’re in a buyer’s market. It can also work if there is less demand for the home you desire. 

While having a contingency clause may at times weaken your offer, you counter this by offering a higher bid so the seller can wait until you’ve sold your house. You can even add in non-refundable earnest money to win the deal on your next dream home. 

#4 Make Gaps Work to Your Advantage

Sometimes circumstances do not work as planned, but don’t get disheartened. These are just momentary setbacks that may even give you time to improve your current home and increase its current market value. 

If you find yourself in your new home and stressing how to manage the former, you can consider renting it out to cover maintenance and mortgage costs. You can use Airbnb and other similar platforms to gain additional income from your property while the market is on a low. Once the conditions are right, you can sell your house for the price you want. 

If you take out a home equity loan, you can use it to renovate your old home and increase your home value. Some key features to spend on that have high ROIs include enhancing your curb appeal, taking care of house repairs early on, and updating your kitchen to give it a modern look. Spending considerable time and effort on your former property will surely enhance its chances of getting sold in the coming days. 

Conclusion 

Selling and buying are some of the less-traveled paths for homeowners because of their inherent risks. Taking on two mortgages when you do not have sufficient funds can be too much to handle, and taking out loans can add stress. 

You can make this strategy work to your advantage if you find the right tools to help you pull off both transactions simultaneously. Partnering with an instant house buyer can give you cash for your next purchase, while loans can provide you enough leeway to facilitate your move. Adding contingency offers allows you to address gaps as they happen without having to take on additional burdens or leaving you homeless at the very least.

Keep reading

Do You Pay Taxes When Selling Your House?
Great Ways to Increase the Value of Your Home: the 3 Areas with the Biggest ROI
Considering Buying a Home with a Crawl Space? Here’s What You Need to Know
A Brief Guide to Buying Real Estate: The Main Players in Your Next Home Search

Source: fancypantshomes.com

5 Ways to Win a Real Estate Bidding War without the Highest Bid

You may shortly find yourself in a real estate bidding war if you’re one of the many first-time homebuyers looking to buy in competitive markets like Austin, TX or Denver, CO. You may also think the only way to win the house is by putting in the highest offer. While this sounds like the right and possibly only strategy, you might be surprised when a homeowner selects a lower bid. 

Winning a real estate bidding war doesn’t always come down to price – there are actually many other tactics that are extremely effective. All-cash offers, pre-approval letters, and flexible timelines are all strategies that can beat out the highest offer. When you’re planning your bidding strategy, consider the following tactics to help make your offer stand out amongst the competition.

1. Get pre-approved for a mortgage

One of the first steps you should take towards purchasing a house is obtaining a pre-approval letter. A pre-approval letter states that a lender is willing to lend money up to a certain amount. These are typically acquired from a mortgage company or a bank. 

Getting pre-approved is almost always beneficial when buying a house, but especially if another buyer puts in a large offer during a real estate bidding war, but isn’t pre-approved. By having this letter, you can show the seller that you’re a qualified and serious buyer, even if you don’t have the highest bid. Pre-approval letters typically have an expiration date of 30 to 60 days, however, they can be updated with reverification of your information.

2. Go in with an all-cash offer

We’ve all heard the term “cash is king,” and when it comes to real estate bidding wars it’s no different. Having cash on hand means that mortgage companies don’t need to get involved, escrow closes faster, and you don’t have to worry about appraisals. All-cash offers show the seller you mean business and are ready to buy the house today.

3. Provide a flexible timeline

Flexibility around specific details in real estate transactions is nearly as good as offering the highest bid. Sometimes sellers need more or less time in the home than the typical 30-day closing period. If you are not in a rush to move, be flexible with your closing timeline and let the seller decide when works best for them. This can go a long way in a real estate bidding war especially if competing offers come in with hard deadlines. 

4. Eliminate contingencies during a real estate bidding war

Of course, there will always be contingencies when buying a house. Home inspections, financing, and appraisals are all important, however, you want to make sure that you aren’t overwhelming the seller by asking for too much. If you want to be the victor in a bidding war without the highest offer, you should remove as many contingencies as possible. However, it’s important to note that as you eliminate contingencies, you’re effectively taking risk off the home seller (which is why it’s a winning strategy) and putting it instead on yourself. 

5. Write a personal letter about why you are the perfect homeowners

Almost all sellers want to make sure their home is going to people that will take care of it and love it as much as they do. Including a personal offer letter, complimenting recent renovations, stating why you would be the perfect caretakers, and sharing what you love about the home, will help you stand out. It won’t always make a major difference, but this personal touch can help compliment an offer even if it’s not the highest bid. 

Real estate bidding wars can be extremely competitive, but implementing these five strategies can help your offer stand out. You should also consult with your real estate agent, as they may have additional insight on how to make your offer more attractive. In the end, the sellers are going to choose the offer that’s most attractive to them, so do whatever you can to make your offer the best on the table.

Source: redfin.com

The Most Common Home Buying Real Estate Contingencies

Contingencies in Real Estate Explained

Do you know what a real estate contingency is and how it works? Real Estate contingencies are when some defined action or outcome must occur before a contract becomes legal and binding.

From a buyer’s perspective, a real estate contingency is an escape clause that can be used under defined circumstances. We will take an in-depth look at the most common real estate contingencies you need to understand when buying a home.

Many buyers and sellers are not well educated about the intricacy of some real estate contingency clauses. Given they are significant legal terms in a purchase and sale, it is essential to have a strong working knowledge of how they work.

Some of these clauses can benefit you when purchasing a home, so we will look at some of the contingency clauses you might encounter when buying a property.

If you are buying your first house, it will be especially beneficial to understand real estate contingencies.

Home Buying Contingencies
Home Buying Contingencies Explained

What Are The Most Common Real Estate Contingencies

These are some of the clauses that you may encounter when buying a house. The home buying contingencies below should be completely understood before signing on the dotted line of a purchase and sale agreement.

  1. Home inspection: often called a due diligence contingency, will give the buyer rights to have the house inspected. Most buyers will have a home inspection contingency in their contract. In extreme seller’s real estate markets, it is not uncommon for buyers to waive a home inspection as a way of sweetening their offer.
  2. Obtaining financing: allows the purchaser to get the funds to buy the property from a lender of their choice. Unless a buyer is paying cash, the mortgage contingency clause is almost always found in a purchase and sale agreement.
  3. Appraisal Contingency: You are waiting for a valuation and getting your loan from the bank. You need the real estate appraisal to be at a specified amount. An appraisal contingency will protect you by ensuring the property is valued at the minimum amount required by the borrower. Licensed real estate appraisers conduct appraisals that are hired by the lender.
  4. Association contingency – if there is a homeowners association, there will often be a clause stating the purchase is subject to the successful review of the association documents and financials. Buyers will want to make sure they are comfortable with all of the rules and that the HOA is financially stable.

These contingencies need to be met for a contract to become ratified and binding. While these contingencies are waiting to be performed, the property is considered a contingent house listing. It will be marked in the multiple listing as “contingent” until all the contingencies are satisfied.

When a condition or action is defined, it must be met for the contract to be binding. If these conditions are not met in a purchase contract, one of the parties may decide to terminate the agreement. The meaning of contingent has slight variation differences from state to state, so check with your real estate agent for clarification.

Real Estate Contingencies Explained

Once conditions are met, this makes the contract enforceable, and it is too late to back out without incurring legal consequences. This could involve losing part or all of your earnest money deposit. Many real estate contracts will have earnest money as the relief a seller can get for a buyer not proceeding with a contract.

  • An appraisal contingency protects the purchaser by ensuring the appraisal is at a specific figure for purchase to proceed. The purchase price of the home is usually the threshold that must be met.
  • A financing contingency gives the buyer time to raise funds for the purchase, and if they can’t raise funds, they can be released from the contract without penalty. The mortgage contingency clause will specify how much the buyer is borrowing and when they need to procure their financing.
  • Home sale contingency is put in place when the buyer has not yet sold their own home. Purchasing is contingent on making the sale first. If you are the homeowner awaiting purchase, you may want to put a time limit on this clause when signing the contract. You won’t want it to drag on for months and miss out on other buyers. Home sale contingencies are often frowned upon due to their risky nature.
  • The inspection contingency is contingent on a satisfactory house inspection report. The purchaser will need to be sure that there are no major expenditures required immediately, like a new roof. If a new roof was required, it might cause the buyer to terminate the contract or alternately to ask the seller to pay for it.
  • A homeowners association’s document contingency gives you the right to back out of the sale if you find something in the documentation that is not to your satisfaction. Quite often, it could be finding out that the neighborhood is not doing well from a financial standpoint.

Additional Contingencies in Real Estate Sales

What is a Kick-Out Clause

A buyer or seller can add the kick-out clause to protect against the house sale contingency. If a better offer comes along, a seller can move forward on a purchase agreement with a new buyer after giving the first buyer notice. The buyer with the kick-out clause in place will need to decide on moving forward in a specified amount of time. The time for a decision in a kick-out clause is usually 24-48 hours.

If the buyer does not exercise their right to move forward, the seller can move forward with a contract with buyer #2.

When working with a kick-out clause, it is not a bad idea to consult with a local attorney on crafting appropriate language. A kick-out clause is similar to the right of first refusal found in some real estate contracts.

Why You Should Pay Attention to Contingency Clauses

Real estate purchase and sale agreements are legal contracts. You must understand the details when buying and selling. Not only are huge amounts of money involved, but there is often an emotional investment as well.

Contingency clauses are there to protect you, whether you are buying or selling.

When you buy your house, the contract may say contingent on quite a few things. It is essential to work with an excellent buyer’s agent who will carefully craft appropriate contingencies to be inserted into the contract.

Whether it is a financing clause, home inspection, or some other contingency, it is crucial to stay on top of dates. You will need to make sure you follow all the designated contingency dates, so you stay within your deadlines.

By not providing notice by specified deadlines could leave you open to losing your deposits.

Contingencies Can Benefit Buyers and Sellers

You can make contingencies work for you whether you are selling or buying, as you want your transaction to run as smoothly as possible and complete in time.

So once you sell, there will be contingencies in place in the contract. A contingency is actually a condition that allows everything to move forward to completion. So it is useful when you are purchasing to have some specific contingencies in place to protect you.

Final Thoughts on Real Estate Contingencies

A contingency clearly states expectations and dates. Both buyers and sellers should have a clear understanding of all real estate contingencies meaning. Not understanding a real estate contingency could either cause problems in your transaction or, in a worst-case scenario, a loss of funds.

It is especially important for first-time home buyers to have a firm grasp of common home buying contingency clauses.

Hopefully, you now have a better understanding of common real estate contingencies when buying a home.

Source: realtybiznews.com

How to Buy a Home in a Seller’s Market: 9 Ways to Win

What is a Seller’s Market?

A seller’s market is when there are more homebuyers in a particular area looking to purchase a home than actual houses listed for sale. A seller’s market usually results in rising home prices and stiffer competition among homebuyers. Also, home sellers will have the upper hand when it comes time to negotiate. However, even if the U.S. housing market is indicating a seller’s market and the competition is fierce, rest assured that you can still buy a home.

How has the pandemic affected the market?

The pandemic has affected the housing market in many ways. Because of the shortage of available homes, and the high amount of buyers still looking for a house, the market has been in favor of the sellers. Although eventually there will be more homes listed in 2021 than there were in 2020, the market will likely still favor the home seller and there may still be considerable competition. However, if you are ready to buy a house don’t let a seller’s market deter you. According to Redfin’s Chief Economist Daryl Fairweather, “mortgage rates are as low as they may ever get, so if you are able to buy a home now, you can take advantage of low rates before they rise.” If you are interested in buying a house this year, here are nine of the best tactics to follow when you are ready to make an offer. 

Be Ready to Act Instantly in a Seller’s Market

1) Get Pre-Approved for a Home Loan

If you’re a first-time homebuyer, one of the smartest things you can do to ensure your chances of buying the home you want is to apply for a pre-approval on a mortgage. Applying for a mortgage after making an offer on a house tells home sellers you may not be as motivated to buy as others. An underwritten pre-approval for a mortgage usually takes about 24 hours and is strongly recommended for those looking to buy and want to be competitive in a seller’s market.

Furthermore, you’ll receive a pre-approval letter from your lender indicating how much of a mortgage you’ve been approved for. Sharing this letter with home sellers shows them you won’t be wasting their time and that you’re motivated to buy their home.

2) Get a Great Real Estate Agent

The home buying process can be stressful and sometimes overwhelming. Having a great real estate agent by your side throughout this process can help make everything go more smoothly and aid you in making an offer quickly when the time comes. This is particularly true if you are moving to a new area or a larger housing market and looking at houses in Atlanta or New York. Your buyer’s agent can provide you with keen insights into specific neighborhoods, such as walkability, schools, and other local amenities. They will also help you when it comes time to make an offer, since they know what’s happening in the local markets and will use that knowledge to negotiate effectively on your behalf. 

eco-friendly green house

eco-friendly green house

How to Make Your Best Offer 

Once you have gone through the pre-approval process, connected with a real estate agent, and found the home you want to buy, you’re ready to make an offer. The following are things you can do to make your offer stand out among the competition.

3) Write an Offer Letter Catered to Each Home Seller

Letters to home sellers have become more and more common in a seller’s market and especially true with competitive neighborhoods. So, how do you write a real estate offer letter that will grab the home seller’s attention? First of all, don’t just tell the home sellers you want to buy their house, tell them why you want it. Home sellers are people too and will be appreciative to hear what you love about their home. Additionally, if you notice that you share something in common with the home sellers, mention it in your offer letter. If you both have kids or dogs, referencing this in your letter is a great way to make yourself more relatable, and will also show you wrote it specifically for them.

4) Make an Offer in Cash if You Can in a Seller’s Market

For sellers, an all-cash offer is very appealing and can lead to a higher likelihood of you winning the house. If you don’t have to use a lender, there’s no financing contingency, which shows the sellers that you will most likely not pull out of the deal due to financial issues. If you pay in cash the sale can also happen quickly and, overall, lead to a smoother home sale. Of course, many of us can’t afford an all-cash offer and will need to rely on other tactics.

5) Put More Earnest Money Down

Earnest money is the amount of money you put down to show how serious you are in purchasing a home, also known as good faith money. Earnest money protects the home seller in case a buyer backs out of a home sale after the offer was accepted. Unless a homebuyer backs out due to something coming up in a home inspection or appraisal, the seller will get to keep the earnest money. Earnest money can also be a great tactic to use if you’re shopping in a seller’s market or competitive neighborhood. Home sellers tend to favor buyers who put down a larger installment of earnest money because it shows that you are serious about your offer and giving you a leg up on the competition.

6) Add an Escalation Clause

An escalation clause is inserted into your purchase offer for a home and is intended to make sure you get the chance to be the highest bidder. This clause states that if the seller receives another offer that is higher than your initial bid, you are willing to increase your offer to a higher price, usually a predetermined amount. Want to give yourself the best chance at calling home in a hot neighborhood your own? Then add an escalation clause to your offer.

7) Waive Extra Contingencies

In a seller’s market, you may want to submit an offer without certain contingencies as a way to stand out among competing offers. Waiving contingencies gives the sellers an advantage by taking away protections for the buyer and should only be done with the recommendation and oversight of your agent. Waiving either the inspection contingency, the appraisal contingency, or both can be an effective way to win a bidding war. In a seller’s market, refrain from asking for high-maintenance contingencies such as only buying the house if your current one sells or that you can knock down a wall. Essentially, keep your contingencies to a minimum so the home seller has fewer hurdles to complete in selling their home.

8) Don’t Restrict the Sellers to a Timeline

Limiting the home seller to a timeline can cause them extra stress when they are likely already overwhelmed. Give the home seller the gift of time, allowing them the flexibility to move out whenever it is best for them. A rent-back agreement is a great option for buyers to purchase the home and then rent it back to the seller to give them time to find a new place to live. Something as simple as time might give your competitive offer the edge it needs to win the home.

9) Be willing to make concessions during negotiations

During the negotiation process, you may have a better chance of closing the deal if you are willing to make compromises. There may be some things that you are not willing to budge on such as a home inspection, but maybe you don’t ask the home seller to redo the back deck or paint the house before you move in. This will allow for a smoother closing process and for you to move into your new home more quickly.

Buying a home can be difficult, especially if you are buying in a seller’s market. Use any or all of the recommended tips to stand out from the competition to help you purchase your next home.

Source: redfin.com

How to Make a Competitive Offer Against All-Cash Home Buyers

Buyers who aren’t paying cash for a house aren’t necessarily out of luck. Here’s how you can gain an edge over cash buyers.

Buyers making a cash offer on a house are active in many markets, and they can strike fear in new buyers who are bidding on a home. Cash home buyers can perform and close quickly and provide sellers with a sense of comfort.

But does this mean a solid buyer putting down 20 percent or more shouldn’t attempt to compete with cash home buyers? Absolutely not.

What if you can’t make a cash offer on a house?

The truth is, a buyer getting a mortgage can still compete against cash home buyers and win.

These are the questions that can make the difference:

  • Do you have a 20-percent down payment?
  • Are you well employed?
  • Do you have cash reserves in addition to your down payment?
  • Do you have very little debt?
  • Do you have good credit?

If you answered yes to most or all of these questions, your purchase should be as bulletproof as a cash home buyer’s.

Paying cash for a house doesn’t guarantee a buyer will win over the seller. Well-qualified buyers who put in a little extra effort can seal the deal.

How can you compete against cash home buyers?

  • Be up front about your finances. Make your competitive offer as strong as cash by providing the seller the confidence they need to accept your offer. In addition to a pre-approval letter from your lender, be open to allowing your agent or lender to provide financial information with your offer. Tell them what you make, and how much money you have in the bank. Show bank statements and even a copy of your credit report. Overload the seller to show them that you’re as solid as the cash buyer.
  • Ask your lender to get a head start on the mortgage. See if your mortgage professional can move the process along sooner. Send the lender a copy of the preliminary title report, if available. If you’re buying a condo, find out if a condo questionnaire is available and give it to your lender. If you take any of these steps, let the seller know. Of course, if you have not already, provide the necessary financial documentation to your lender right away.
  • Shorten the loan and appraisal contingencies. Ask your lender how quickly they can send an appraiser to the property, and how long the loan would take to turn around. In some parts of the country, loans are being approved in less than 14 days — sometimes even 10.
  • Pre-order an appraisal. This may not be as easy with a bigger bank. But smaller banks, direct lenders or mortgage brokers can line up the appraisal in advance. At the time your offer is written, tell the seller the appraisal has already been ordered. If you can get the appraiser out within 24-48 hours of coming to terms with the seller, it’s half the battle.
  • Inspect quickly. Along with the quick appraisal and loan contingencies, get your inspector in and out. Shelling out a few hundred dollars and getting the inspections done within days of having your offer accepted shows the seller you mean business. It also gives them comfort that they’ll get over the biggest hurdle quickly.
  • Overpay. Cash buyers nearly always expect a discount from the seller simply because they’re offering cash and are a sure thing. As a result, the cash buyer will often make a lower offer. To increase your chances, top the cash offer, even if means paying a little more than you think the home is worth. If a seller is faced with a few thousand dollars’ difference, the seller probably wouldn’t risk it. But what if your offer is five percent higher than the cash buyer’s? The seller, perhaps wanting the best of both worlds, may ask the cash buyer to raise his or her offer. Some cash buyers will offer more, but not always enough to match. If you plan to live in the house for many years and it’s the home of your dreams, paying a little more to get the deal might only translate into $20 per month over the course of a long-term mortgage.
  • Make yourself known to the seller. Some buyers write “love letters” to sellers, hoping to appeal to their personal side. Does this work? Sometimes! If you’re competing with a cash buyer, particularly an investor who plans to rent the home out, it can’t hurt to get a little personal with your real estate offer letter. The seller almost always wants to know more about the potential buyer. Ask your agent to write a cover letter and an introduction. Let the seller know who you are, why you like the home and what your intentions are.

Do the best you can and be realistic. Make sure your financial “‘house” is in order. Work with a good local real estate agent, and start working with a local mortgage professional well in advance. Structure your offer to show that you’re ready to roll.

For more home-buying tips, check out our Home Buyers Guide.

Related:

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Source: zillow.com

Expert Homebuying Tips for Buying in a Seller’s Market

According to buyer protection laws in most states, sellers are required to report any findings in home inspections to subsequent buyers. In other words, if an inspector finds something wrong with the house, the seller will have to deal with it one way or another— either with you, or the next buyer should you choose to drop out of the deal.
When trying to woo your seller in a competitive market, it helps to make a generous earnest money deposit. An earnest money deposit is a good-faith deposit requested by the seller when you enter into a contract to buy the house and typically run anywhere from 1% to 3% of the sale price of the home.
This might sound crazy, but making a good impression on your new neighbors can actually make a difference when it comes time for a seller to review offers.

Get a Pre-Approval Letter

Larissa Runkle is a contributor to The Penny Hoarder.
Another way to win over your seller (and prevail in any bidding wars) is by keeping your contingencies to a minimum.
“In a really aggressive seller’s market, a home buyer who has to sell a current property should do so before placing an offer on another home,” said Jason Gelios of Community Choice Realty. “Don’t always assume that the seller will take the highest price. Other conveniences can play a factor in gaining the seller’s attention, especially things like faster closing times and less restrictions.”
In order to be competitive in a hot seller’s market, you will need to line up your financing in advance.
Source: thepennyhoarder.com

Be Friendly With Neighbors

Let’s say the listing price on your dream home is 0,000 and you’re able to put down a 6% down payment. That leaves you with a mortgage of roughly 1,000. For a 30-year fixed mortgage at an interest rate of 3%, that translates into ,269 monthly payments. Now let’s say you decide to bid a little higher on the home and offer ,000 over asking price. This would only bump up your monthly payment (assuming you qualify for that low interest rate) by .
Contingencies are the contractual stipulations buyers and sellers must meet before the deal can close. Unsurprisingly, sellers don’t like to have too many of them to deal with. Contingencies can include such things as requesting a seller to make certain repairs, getting a home inspection, or even the fact that you’ll need to sell your old house before being able to buy the new one.
If that sounds fast, it is. But by the time we submitted our offer, the seller already had three others. This is where it helps to have a great real estate agent on your side.

Submit an Offer Quickly

I was in this exact position last fall. Here are seven key takeaways from my experience buying in a seller’s market.
While my partner and I didn’t make the highest offer on our house, we did have the fewest contingencies — mainly, we didn’t ask too much of our seller in the way of repairs, or have another house to sell in order to afford the new one.
After you’ve seen a house, and decided you love it, be prepared to submit an offer quickly— as in, ASAP.
Buying a house is a big decision, but it can feel especially overwhelming to place an offer on a home less than 24 hours after seeing it for the first time. Plus you’re under pressure to outbid several other buyers — or risk losing the house.
“It’s important to understand that the strength of financing is a key consideration a seller takes into account when selecting an offer,” said real estate developer Bill Samuel.

Minimize Your Contingencies (Within Reason)

Work with your real estate agent to determine how many other offers the seller already has (or expects to get) and then be prepared to draft something up that day. In our case, we toured our home for the very first time at 11 a.m. on a Monday — it came on the market the evening before — and made an offer by 4 p.m. that same day.
Work with your real estate agent to find out what matters most to the seller — is it money, closing quickly, something else entirely? Then make sure your offer addresses their needs.
“Having a realtor who can get your offer submitted quickly is crucial,” said Erik Wright, owner of New Horizon Home Buyers. “You want to get your offer in front of the seller first, and make it strong. Purchase price is the obvious factor and in a competitive market, houses often go for over asking price. However, a strong offer has several factors and it depends on what’s most important to the seller.”
Wait. Why would anyone make an offer that’s above asking price? Because the competition did it first, and in a hot seller’s market, offering above asking price is often what it takes to even be considered.
In a hot seller’s market, you’ve got to be ready to move fast. Often this is more of a change in mindset than anything else. When my partner and I first started looking at homes, we considered ourselves casual buyers — that is, until our dream home came on the market late one Sunday night. From there, things moved quickly. We saw the home, made an offer, were under contract by morning, and spent the next month and a half going through the process of closing on the house.
Besides all the usual suspects, like saving up for a down payment and improving your credit score, you’ll also want to get a pre-approval letter from your bank. It states that a bank would approve you for a mortgage of a certain amount, and acts as a guarantee to the seller that you can actually afford to buy their house.

Make a Generous Earnest Money Deposit

This is where it helps to know your budget up front.
When deciding how much of an earnest money deposit to include in your offer, keep in mind that whatever amount you give comes off the price of the home (and is returned to you if the deal falls through). In other words, there’s no reason to be cheap. If you can, go slightly above the seller’s requested deposit amount. Even if it’s just a little more than what they’re asking, that gesture of good faith might just be what gets you the house.

A row of houses on a cul de sac in a suburban neighborhood.
Getty Images

Offer Above Asking Price

Since you’ll likely be visiting the home at least once before making an offer, be prepared to talk to any neighbors you might run into. In close-knit neighborhoods, or ones where people share resources (like an HOA), sellers might care a bit more about the type of person they sell the house to.
If you’re serious about finding your dream home in the next few months, the best thing you can do is know what you want from the outset, and get your ducks in a row to make a compelling offer when you find it. Maybe this means making a list of your must-haves in a house, and working to improve your credit score. It might also mean reaching out to a real estate agent before you need one, and getting that pre-approval letter in place.
No seller wants to risk accepting an offer that might fall through. Aand since pre-approval letters can take some time to get, have one ready before you find your dream house.

Lace Up Your Running Shoes

Upping your offer may not break the bank as much as you’re fearing. “With interest rates so low these days, offering more than what the seller is asking may not make a drastic difference in your overall monthly payments,” real estate agent Pavel Khaykin of Pavel Buys Houses said.
All that said, there are certain contingencies you should never forgo, and a home inspection is one of them. Getting your home inspected is hugely important, since inspectors will often find things even the sellers weren’t aware of. No matter how much you love a house, don’t be afraid of exercising your right to an inspection.
Although inventory is low, new houses come on the market all the time.
If you happen to meet a neighbor when visiting the home, introduce yourself and make a good impression. You never know how much their opinion of you might factor into any final decisions.
While these circumstances might sound extraordinary, they’re not. With housing inventory nationwide at an all time-low — down 22% from last year according to the National Association of Realtors — it’s no wonder buyers are competing for the same few houses.

Buying in a Seller’s Market: 9 Ways to Win

What is a Seller’s Market?

A seller’s market is when there are more homebuyers in a particular area looking to purchase a home than actual houses listed for sale. A seller’s market usually results in rising home prices and stiffer competition among homebuyers. Also, home sellers will have the upper hand when it comes time to negotiate. However, even if the U.S. housing market is indicating a seller’s market and the competition is fierce, rest assured that you can still buy a home.

How has the pandemic affected the market?

The pandemic has affected the housing market in many ways. Because of the shortage of available homes, and the high amount of buyers still looking for a house, the market has been in favor of the sellers. Although eventually there will be more homes listed in 2021 than there were in 2020, the market will likely still favor the home seller and there may still be considerable competition. However, if you are ready to buy a house don’t let a seller’s market deter you. According to Redfin’s Chief Economist Daryl Fairweather, “mortgage rates are as low as they may ever get, so if you are able to buy a home now, you can take advantage of low rates before they rise.” If you are interested in buying a house this year, here are nine of the best tactics to follow when you are ready to make an offer. 

Be Ready to Act Instantly in a Seller’s Market

1) Get Pre-Approved for a Home Loan

If you’re a first-time homebuyer, one of the smartest things you can do to ensure your chances of buying the home you want is to apply for a pre-approval on a mortgage. Applying for a mortgage after making an offer on a house tells home sellers you may not be as motivated to buy as others. An underwritten pre-approval for a mortgage usually takes about 24 hours and is strongly recommended for those looking to buy and want to be competitive in a seller’s market.

Furthermore, you’ll receive a pre-approval letter from your lender indicating how much of a mortgage you’ve been approved for. Sharing this letter with home sellers shows them you won’t be wasting their time and that you’re motivated to buy their home.

2) Get a Great Real Estate Agent

The home buying process can be stressful and sometimes overwhelming. Having a great real estate agent by your side throughout this process can help make everything go more smoothly and aid you in making an offer quickly when the time comes. This is particularly true if you are moving to a new area or a larger housing market and looking at houses in Atlanta or New York. Your buyer’s agent can provide you with keen insights into specific neighborhoods, such as walkability, schools, and other local amenities. They will also help you when it comes time to make an offer, since they know what’s happening in the local markets and will use that knowledge to negotiate effectively on your behalf. 

eco-friendly green house

eco-friendly green house

How to Make Your Best Offer 

Once you have gone through the pre-approval process, connected with a real estate agent, and found the home you want to buy, you’re ready to make an offer. The following are things you can do to make your offer stand out among the competition.

3) Write an Offer Letter Catered to Each Home Seller

Letters to home sellers have become more and more common in a seller’s market and especially true with competitive neighborhoods. So, how do you write a real estate offer letter that will grab the home seller’s attention? First of all, don’t just tell the home sellers you want to buy their house, tell them why you want it. Home sellers are people too and will be appreciative to hear what you love about their home. Additionally, if you notice that you share something in common with the home sellers, mention it in your offer letter. If you both have kids or dogs, referencing this in your letter is a great way to make yourself more relatable, and will also show you wrote it specifically for them.

4) Make an Offer in Cash if You Can in a Seller’s Market

For sellers, an all-cash offer is very appealing and can lead to a higher likelihood of you winning the house. If you don’t have to use a lender, there’s no financing contingency, which shows the sellers that you will most likely not pull out of the deal due to financial issues. If you pay in cash the sale can also happen quickly and, overall, lead to a smoother home sale. Of course, many of us can’t afford an all-cash offer and will need to rely on other tactics.

5) Put More Earnest Money Down

Earnest money is the amount of money you put down to show how serious you are in purchasing a home, also known as good faith money. Earnest money protects the home seller in case a buyer backs out of a home sale after the offer was accepted. Unless a homebuyer backs out due to something coming up in a home inspection or appraisal, the seller will get to keep the earnest money. Earnest money can also be a great tactic to use if you’re shopping in a seller’s market or competitive neighborhood. Home sellers tend to favor buyers who put down a larger installment of earnest money because it shows that you are serious about your offer and giving you a leg up on the competition.

6) Add an Escalation Clause

An escalation clause is inserted into your purchase offer for a home and is intended to make sure you get the chance to be the highest bidder. This clause states that if the seller receives another offer that is higher than your initial bid, you are willing to increase your offer to a higher price, usually a predetermined amount. Want to give yourself the best chance at calling home in a hot neighborhood your own? Then add an escalation clause to your offer.

7) Waive Extra Contingencies

In a seller’s market, you may want to submit an offer without certain contingencies as a way to stand out among competing offers. Waiving contingencies gives the sellers an advantage by taking away protections for the buyer and should only be done with the recommendation and oversight of your agent. Waiving either the inspection contingency, the appraisal contingency, or both can be an effective way to win a bidding war. In a seller’s market, refrain from asking for high-maintenance contingencies such as only buying the house if your current one sells or that you can knock down a wall. Essentially, keep your contingencies to a minimum so the home seller has fewer hurdles to complete in selling their home.

8) Don’t Restrict the Sellers to a Timeline

Limiting the home seller to a timeline can cause them extra stress when they are likely already overwhelmed. Give the home seller the gift of time, allowing them the flexibility to move out whenever it is best for them. A rent-back agreement is a great option for buyers to purchase the home and then rent it back to the seller to give them time to find a new place to live. Something as simple as time might give your competitive offer the edge it needs to win the home.

9) Be willing to make concessions during negotiations

During the negotiation process, you may have a better chance of closing the deal if you are willing to make compromises. There may be some things that you are not willing to budge on such as a home inspection, but maybe you don’t ask the home seller to redo the back deck or paint the house before you move in. This will allow for a smoother closing process and for you to move into your new home more quickly.

Buying a home can be difficult, especially if you are buying in a seller’s market. Use any or all of the recommended tips to stand out from the competition to help you purchase your next home.

Source: redfin.com

How To Make an Offer on a House: A 9 Step Guide

You’ve found your dream home and you’re ready to take the next step toward making it yours. After preparing and saving for your big purchase, it’s time to learn how to make an offer on a house. Offer letters are sales contracts and are legally binding, so it’s important to take this process seriously.

Find out everything you need to know about making an offer on a house with this guide. Below is a quick overview of the offer process. Feel free to click on each one to jump to everything you need to know about that step.

Steps for Making an Offer on a House:

  1. Determine you can afford the house and decide to make an offer.
  2. Talk with your real estate agent about comparable homes before making an offer.
  3. Your real estate agent compiles a written offer.
  4. The written offer is sent to the seller’s agent.
  5. The seller replies and your offer is accepted, countered, or declined.
  6. Learn how to compete with multiple buyers.
  7. The closing process begins when your offer is accepted.
  8. Remember to negotiate before finalizing if contingencies reveal flaws with the house or deal.
  9. Once your offer is accepted, you finalize the contract.

What to Know Before Making an Offer on a House

In addition to researching the process of making an offer, learn these key tips to keep in mind throughout.

things-to-know-before-making-an-offer-on-a-house

  • Try to sell first and buy after. If you aren’t a first-time homebuyer, it’s a good idea to sell your current home before buying a new one. This is important if you’re using the sale of the old home to purchase the new one.
  • Scope out the local market. Your real estate agent will use information on similar houses for sale in the area to put together your offer.
  • Ask about other offers. Your agent does this for you. Sometimes the seller’s agent won’t disclose this, but this information can inform your offer.
  • Learn about the house. If there are problems with the house, you’ll want to find out and keep them in mind when you make an offer.
  • Know what the seller wants. Have your agent find out what appeals to the seller and try to include it in your offer. If the house still has a mortgage, offering an early payment can help tip the balance in your favor.
  • Act fast. For the best chance at your dream home, submit an offer quickly. Don’t wait around because someone else will likely snap it up if you hesitate.

Step 1: Determine Affordability of the House

Finding your dream house is the easy part. Figuring out if you can afford it takes a hard look at the numbers. Set a home budget beforehand and be strict about sticking to it when looking at houses. To gauge what your budget should be, a majority of lenders advise that you shouldn’t spend more than 28 percent of your monthly pre-tax income. Be sure to include your estimated monthly payment plus other costs like the down payment, HOA fees, home insurance, and property taxes in your budget.

When you go through the lending process, lenders can help you determine what is affordable. If you’re not there yet, use this home affordability calculator to see if your dream house is in your budget.

Step 2: Talk with Your Real Estate Agent

Making an informed offer is the key to giving you the best chance of getting the house you want. Speak with your real estate agent about what comparable homes in the area are going for and use this information to guide your offer.

Step 3. Compile an Offer Letter

After comparing similar houses for sale, you’ll work with your agent on your offer. There are many components to an offer letter. We discuss everything that is included, how to navigate your offer price and contingencies, and tips for making an offer they can’t refuse.

What’s Inside an Offer Letter

Offer letters are legally binding sales contracts, and it’s important to be thorough about what you include.

Typical Components of an Offer Letter:

  • Offer price: This is the amount of money you are willing to pay for the house.
  • Contingencies: Conditions that the seller must abide by if and when they accept your offer. Standard contingencies include a home inspection and appraisal. Jump down to learn more about contingencies.
  • Down payment: The amount paid for the home upfront. This can be anywhere between 3 to 20 percent when paired with a conventional loan.
  • Earnest money: This is a deposit made by the buyer to demonstrate good faith on a contract to buy a home. It’s generally a small percentage of the price and is held in escrow until the offer is closed. It’s usually applied to the down payment or closing costs once the offer is accepted.
  • Closing costs: These include all costs associated with purchasing a home. Read more on some of the common closing costs like inspection and loan origination fees.
  • Timeline: You’ll include your preferred closing date, as well as the closing date of your current home if you aren’t a first-time buyer.

How Much Should You Offer?

Figuring out how much you should offer depends on what you can afford and what kind of market you’re dealing with at the time of the purchase. Your real estate agent should guide you through making an offer, but ultimately, you are the one who decides what you’re willing to pay. A good rule of thumb is that your first offer should leave some room for negotiation, so don’t give away what you’re willing to pay right away.

buyer-vs-sellers-market

Making an Offer in a Buyer’s Market

In a buyer’s market, you have more power to negotiate because there is more supply than demand. With the bargaining advantage on your side, you can feel more comfortable making an offer below the asking price. If you do offer below asking price, negotiation is a typical response.

When offering less, it’s also important to be respectful of the seller. Offending them with an outrageously low offer could result in them rejecting and you losing your dream house.

Making an Offer in a Seller’s Market

A seller’s market is when the housing demand exceeds the supply. In this situation, you will not have the bargaining advantage, and you will be competing with others for attractive properties. If you can afford it, exceeding the seller’s asking price can help you stand out among other offers. Remember to keep your budget in mind when negotiating and don’t offer an amount you can’t afford.

Contingencies

Contingencies are conditions of the purchase that get outlined in your offer and must be met for the sale to go through. If they aren’t met, based on the contingency, either the buyer or seller can cancel the sale. About 74 percent of buyers include contingencies in their offers, so let’s discuss the standard ones below.

Home Inspection Contingency
A home inspection contingency exercises your right to have the property inspected before closing the sale. If the inspection reveals problems with the house like faulty plumbing or a compromised structure, there is room to remedy any issues before you close. You can negotiate for a lower price, ask the seller to make repairs, or even back out of the offer.

It’s not advisable to forego a home inspection contingency to make your offer more attractive. This could cause you to pay more for a damaged property and could cause financial problems down the line if you find out there are major issues with the house that are costly to fix. Home inspections prior to closing are always recommended.

Home Appraisal Contingency
A home appraisal contingency verifies that the price you are paying is fair compared to the home’s market value. In the event that the house you are buying is appraised as lower than the selling price, you are able to negotiate with the seller or cancel the contract. This is recommended to prevent you from paying more than you should for a house.

Home Sale Contingency
In case you need to sell your current home in order to finance a new one, you can make a home sale contingency. This contingency stipulates that the current house must be sold before the new purchase can close.

Home sale contingencies aren’t attractive for sellers, as they cause delays and discourage other offers. A clause can be attached to this contingency by sellers to include a sell-by date. If your house hasn’t sold by the date in the clause, the seller is legally able to move on with other offers.

Financing/Mortgage Contingency
A financing or mortgage contingency allows the buyer time to secure financing from a lender. For buyers, this provides insurance that they can cancel the sale and recover their earnest money in case their financing options fall through.

This contingency is usually given a specific timeline, and the buyer can end the contract before time expires. If the buyer has not secured a mortgage and fails to cancel the contract before the allotted time is up, they will still be obligated to purchase the property.

Tips For Making an Offer They Can’t Refuse

When making an offer on a house, remember to appeal to the seller by using these tips to make an offer they can’t refuse.

  • Make an offer in cash. If you have the savings and can afford to make an offer in cash, you can forego the financing contingency. This means less delay in the sale, and it can also help you compete with higher offers with more contingencies.
  • Propose a short closing period. If you’re willing to move quickly, offering a short closing period can appeal to a seller who needs to sell fast.
  • Pay some of their closing costs. All sellers will have closing costs when the sale goes through. Paying off some of those costs can help sweeten the deal for them.
  • Offer up more earnest money. More earnest money shows you’re serious about the home. It’s also more money in the seller’s pocket upfront.
  • Write a personal letter. Homes are very personal and sellers may be emotionally attached to them. Make an emotional appeal by writing a personal letter to tell them the home will be in good hands.

write-personal-letter

Step 4. Submit Your Offer

Once you have decided on an offer, your real estate agent will write up a purchase and sale agreement. You will sign this agreement and then they will submit it to the seller’s agent. This agreement is legally binding if the seller agrees.

Step 5. Review Seller’s Reply

A seller can reply in a couple of ways. They can accept, counter or decline. Let’s walk through what to do with any of these three responses and what to do when there’s another buyer.

What to Do When They Accept

Congratulations — they’ve accepted your offer! You can now move on to Step 7 of the offer process. As long as all contingencies are met, you are buying a house.

What to Do When They Counter

The seller might not have liked your offer exactly how it was written and they can counter. It’s then up to you to accept that offer or to start negotiating by countering again. You are also free to back out of the offer if you aren’t happy with the seller’s counteroffer.

If you do end up negotiating, it’s normal for there to be a back and forth of counteroffers. You are both working to come to an agreement on price, timeline, and contingencies, and this takes time.

What to Do When They Decline

Unfortunately, if the seller declines, you won’t be buying that particular house for what you offered. If there is room in your budget, you could attempt to make a more attractive offer. About 45 percent of buyers end up making multiple offers during the buying process. However, not every budget allows for a better offer.

A declined offer is a disappointing outcome, but it’s important to be respectful of the seller’s decision. Take the time to talk to your real estate agent and learn about what can be done differently when the next opportunity comes around.

Step 6: How to Compete With Multiple Buyers

In a competitive housing market, desirable properties will attract many buyers. Here are a few potential scenarios that can play out if a seller receives multiple offers.

Multiple Buyer Scenarios:

  1. If your offer didn’t compare with the others, they may decline you and pursue other offers.
  2. If your offer was one of the better offers, they may ask each buyer to return with their best offer and make a decision among those final offers.
  3. They may allow a bidding war to see who will come up with the best offer.

Strategies for Competing With Multiple Offers:

  1. Be flexible with your contingencies. Keep important ones like the home inspection and appraisal, but figure out which ones aren’t necessary for you.
  2. If there is room in your budget, add an escalation clause. This notifies the seller that you will outbid the highest offer up to a maximum amount. This shows you are serious and keeps you competitive price-wise.
  3. Mention preapproval for a mortgage if you have it. The more likely you are to obtain financing, the more attractive you are as a candidate.
  4. If you can afford it, increase your down payment or earnest money deposit.

To keep everything professional, remember that your real estate agent should facilitate negotiations directly with the seller’s agent.

Step 7: Start the Closing Process

The closing process begins when a buyer accepts your offer. This process includes all necessary actions that must be done to move the transaction forward like reviewing what you owe, authorizing documents, and transferring the title. For an in depth walkthrough of this process, check out this guide for closing on a house.

Step 8. Negotiating After Your Offer is Accepted

When a seller accepts your offer, you will first move forward with any contingencies. If anything is wrong with the house or deal, you have the ability to negotiate or even walk away. Here are some examples of negotiations based on contingencies:

  • If a home inspection reveals flaws with the house, you can ask for repairs to be made by the seller before the deal is closed so that the financial burden doesn’t fall to you.
  • If the home is appraised to be lower in value than the accepted offer price, negotiate for a lower, more appropriate sale price.

Step 9: Finalize Your Contract

When negotiations have ended and you are satisfied with your contract, you will sign to finalize your purchase. Once you sign, the contract is legally binding.

After you make it through the final step, it’s time to celebrate! Revel in the excitement of purchasing your dream home, and know that you just took a big step toward a new life. Keep up good saving and budgeting habits so you can continue to hit your financial goals in the future.

Sources: Investopedia

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