Putting together a great offer is the single most important step you'll take toward buying a home. It's what decides whether you'll be becoming a homeowner or going back to the drawing board and trying again.
With stakes like those, it's important to avoid making any mistakes that could inadvertently end up costing you the house. With that in mind, we've laid out a few common offer mistakes so that you can learn from them. Read them over so that you don't fall into the same traps.
Offering an insultingly low sale price
We all want to get a good deal on our home, but there are low offers that act as a starting point for negotiation and then there are low offers that stop all communication in its tracks. Sometimes buyers can get caught up in offering how much they'd like to pay for a home, rather than stopping to consider what the home is actually worth. This can lead to submitting overly-low offers that insult the seller and never end up getting off the ground.
If you want a decent chance at getting the house, the better thing to do is to base your offer off of the home's fair market value. To do this, have your agent pull up comparables or similar properties that have sold in the area recently. Use those to come up with a range of acceptable prices for the home. Then factor in its condition and amenities to determine where it falls within that range.
You also need to consider the type of market you're in to get a sense of how much wiggle room you have on the sale price. In a buyer's market, where homes tend to sit longer, you'll probably have more room for negotiation. However, if you're in a seller's market, where it's not uncommon for multiple buyers to compete for the same property, you may not have much of a chance to negotiate at all.
Focusing too much on the sale price
As the buyer, it makes sense to be focused on the sale price. After all, by submitting the offer, you're committing to the possibility of paying it off for the foreseeable future. However, that's only one piece of the puzzle. If you get too focused on the sale price, you may end up losing out on the right home for you.
Look at it this way: from the seller's perspective, getting the highest possible sale price is crucial. They get one payout from what's likely their biggest asset. They need that payout to be worth the effort. However, as the buyer, you're a bit more protected. Since the sale price will likely be rolled into a mortgage, you have the advantage of paying it off over a series of smaller payments. Over the life of the loan, a slightly higher sale price is the difference of a few dollars each month. To you, it's likely negligible.
With that in mind, if you have your heart set on the home, it may be worth it to be more flexible when it comes to the sale price. If you're truly worried about the cost, have your lender work up what your monthly payments will be at a few different price points. Then, you can see whether or not it's really worth it to up your offer and put yourself in a stronger bargaining position.
Including unnecessary contingencies
The term "contingency" refers to anything that needs to happen in order for the transaction to continue moving forward. Typically, it refers to things like conducting inspections or getting the approval for a mortgage. Contingencies are there to give both parties a fair way out of the transaction if buying the home is no longer feasible.
For the most part, buyers love contingencies because they give you the opportunity to exit the transaction with your security deposit in hand if need be. On the other hand, sellers don't appreciate them because each one is seen as an opportunity for the deal to fall apart. As such, an offer with lots of contingencies isn't seen as strong as a similar one without.
In light of that, as you put your offer together, resist the temptation to protect yourself by electing as many contingencies as possible. Instead, focus only on including the ones that you truly need for the offer to make sense for you.
Forgetting to address the seller's needs
Too often, buyers go into writing an offer thinking that it should be tailored solely to meet their needs. In reality, the strongest offers are set up so that they are a give-and-take that addresses the needs of both the buyer and the seller. More than likely, the seller will notice the effort and that will help to set your offer apart from the crowd.
To that end, go into writing the offer by thinking of the best way to strike a compromise. If you can, have your agent find out the seller's motivation for the move and use that as your bargaining tool. Alternatively, consider what's most important to you, then compromise on the rest. For example, if you need to include a home sale contingency, think about offering a slightly higher sale price to sweeten the deal for the seller.
Not submitting it promptly
We get it. Writing up an offer is one thing. Signing and submitting it is another entirely. It can be nerve-wracking to take that final leap. However, it's bad form to keep a seller waiting too long for an offer. Doing so may make them think that you're not seriously interested in buying the home.
If at all possible, it's best to have any discussions about whether or not you truly want to buy the home before you write up the offer. In the event that you're having second thoughts, make sure your agent knows not to tell the listing agent that an offer is on its way. That will give you the time you need to think without having an expectant party on the other end.
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Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917