Making a good offer
After months of searching on the Internet, attending open houses, and motoring around town with your Texas REALTOR®, you finally found a house that suits your needs. Now you’re ready to make the purchase – so the next logical step is preparing an offer. Let’s look at a few things to help get you started.
Start with a number
Obviously, the price you initially write into the contract has much to do with whether the seller looks favorably upon your offer. But, how do you come up with that figure? There are several factors to consider.
Determine how the home stacks up to similar properties in the immediate area. The most reliable way to make this evaluation is to look at recently sold homes in the same neighborhood – real estate professionals call these “comps.” Comps are an important part of determining price because they reflect local, i.e. neighborhood, conditions. Real estate markets are very localized, so the sales price of a home across town may have very little to do with what a home in another area of town is worth.
The size of a home is a major factor in determining an offer; you would generally expect to pay less for a home that’s smaller than the neighborhood average. As with most things in real estate, though, there may be other variables to take into account. A smaller property with desirable upgrades, for instance, can be worth substantially more than a larger house that needs serious work.
The type of market you’re in also plays a part. If you’ve lost out on three bidding wars because you’re doing business in a seller’s market, you might be more likely to make an offer that approaches the asking price. A buyer’s market may give you more leeway. Keep in mind, though, that it only takes one other offer to knock you out of contention.
It’s not all about money
Hitting a seller’s magic number does not necessarily guarantee he will accept your offer. Several other aspects of your offer can improve or sink your chances.
For starters, the homeowner will look at the amount of earnest money in the proposed contract. A higher number shows a higher level of sincerity about the purchase and may place your offer above other similar offers.
Some sellers may have a strong preference for when they close on the sale. If you can meet their timeline, your offer gains strength.
When you can help it, stay away from contingencies. When you can’t help it, make those contingencies as moderate as you can. Why? Put yourself in the seller’s shoes. A slightly lower offer may be more attractive than a higher offer that’s contingent on the buyer needing to sell his own home.
The more you ask for from the seller, the weaker your offer. That’s not to say that you shouldn’t make a purchase contingent on selling your home first, or that you shouldn’t ask for the patio furniture to convey if that’s important to you. Just know that each request may take a bit of luster off your offer.
Give yourself options
There’s a provision in the standard residential contract whereby you can purchase a termination option. This non-refundable fee buys you an option period – time to back out of the transaction for any reason. You’d use this timeframe to have the home inspected and otherwise evaluate whether you want to proceed with the transaction. The amount of the fee and the length of the option period are negotiable.
While you don’t want to propose an option period that’s so long the seller will reject your offer, be sure to give yourself enough time to schedule inspections and weigh your decision before proceeding.
Many things combine to make an attractive offer. Your Texas REALTOR® can help you determine how to put together an offer that gives you the best chance of getting the home you want at terms that are favorable to you.
For more great tips about real estate, visit TexasRealEstate.com, the consumer site of the Texas Association of REALTORS®.
For more information on buying or selling property in Texas, please call Waymond Lightfoot at (210) 386-5201.