Once you have found your perfect future home, it is time to go ahead and actually make an offer to buy. There are many things to consider before you make your final move. Making a realistic offer that suits your budget and also keeps in view the market conditions is very important if you want it to be accepted. Your real estate agent will be of great assistance in preparing the right offer according to market conditions, comparable sales, location, and price per square foot.
What to Consider When Making an Offer on Real Estate
Before making a formal offer in writing, it is best to figure out why the seller is selling and if possible, how much did the seller pay. Even though a house bought years ago will not give a true picture of the current market, it can give a rough idea by looking at the historical median house prices in that area. Other important factors to consider when making on offer on real estate may include:
Price Per Square Foot
Smaller homes normally have a higher per square foot cost as compared to larger homes. You can compare the averages of similar sized homes and make an offer accordingly.
Days on Market (DOM)
Homes that sell within 2 weeks of listing are most likely in a seller’s market. On the other hand, homes that stay for at least 60 days are probably in a buyer’s market. The greater the DOM number is, the lower you can go on your offer price.
If you are in a buyer’s market, you will probably face less competition from other buyers and the seller would be more likely to accept a significantly lesser value than his initial asking price. In a seller’s market, the tables turn and you would need to make a strong offer in order to stand a chance due to increased competition from other prospective buyers.
A look at comparable sales of homes with similar square footage, the age of construction, location and configuration can help a great deal in making the right offer. If similar homes are selling for under the list price for past six months, it might be likely that the seller will accept a lower offer than the listed price.
What to Include When Making an Offer
Apart from price, other things to include in your purchase offer are:
- Address of the property
- Terms of payment (all-cash or mortgaged)
- Promise to provide clear title
- Target date for closing
- Amount of money that will be paid to confirm the contract
- Provisions to pay utilities and real estate taxes
- Provisions about who will pay closing costs including escrow fees
- Type of deed demanded upon closing
- Time till the offer is valid
Contingencies may include the buyer’s financing for the purchase and a satisfactory home inspection report from a qualified inspector. Demand a walk-through on the closing day that allows you to legally delay or cancel your offer. If the seller submits a counter-offer, be prepared to work with your real estate agent or attorney and take your time to proceed.