Making a Home Offer

Buying & Selling a Home

Making a Home Offer

Once you've found a home you want, it's time to negotiate the price. Here's what you should consider when preparing to make an offer.

You've been preapproved for a mortgage loan and know exactly how much you can afford. Now, it's time to decide what you're willing to pay for the place you want. Here are some tips on how to choose a home that meets your needs and your budget:

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Get an analysis of comparable properties from your agent. There should be several on the list. No two will be exactly alike, but they should be similar enough to serve as a useful tool in setting an offering price.

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Comparables should include closed sales (preferably from within the past few months, but not more than six), current listings (homes that haven't yet sold) and pending sales (contracts that haven't yet closed). This will show you how much of a discount, if any, from the asking price you can reasonably expect to get. If homes currently sell at a discount of 5% from the list price, the offering 10% less probably won't fly.

Note locations. A similar home in a different neighborhood may not be comparable at all. Compare the features of each property. Comparables should be roughly the same age and condition. Scrutinize terms and conditions. Properties sold with seller financing, for example, can't be readily compared with those sold using conventional 30-year mortgages.


Also ask your agent to provide the listing history for the home in question. That can be revealing. The longer a property has been for sale and the more price reductions, the more motivated -- or more desperate -- the seller.

Whether you should go ahead and make your highest bid right away or send up a trial balloon in the form of a lower offer depends on how fair the asking price is, the motivation of the sellers, how many buyers you may be competing with and what other enticements desired by the seller you can offer (like a quick closing).

See Also: Home Buyer's Survival Kit

Be careful if you bid low, however. The seller may not bother to counteroffer or come down only incrementally, leading to round after round of negotiation. Another buyer might come along and snatch the property away for a few thousand dollars more -- a price you might have been willing to pay anyway.

Buyer and seller usually reach agreement after a couple of go-arounds.


Put It in Writing

Do your negotiating in writing. Don't reveal your strategy, and don't make oral offers. You want to buy the house, but you don't want to hand over your money until you're sure the seller is legally capable of conveying a good title and meeting other conditions. The seller, in turn, doesn't want to deliver the deed until you've paid for the property.

Now what? You (or your representative) present the seller with a written contract setting out the commitments and promises that you and the seller need to agree on and fulfill in order to make the sale.