This Discussion Will Cover
How to Make an Offer On a House
Whether you are submitting an offer on your first home or this is the second or third home that you’re buying, the offer submission process can be intimidating. Our goal is to make sure you know how to make an offer on a house in a manner that’s as stress free as possible.
We have developed the following resource to help you fully understand the offer writing process from start to finish.
General Timelines and Expectations
One point to emphasize as it relates to the timeline is that we are not in a hurry to find you a house. But once you identify what house you want to put an offer in on we are all going to be in a hurry to get that home for you!
From the home buying process up to the point of submitting an offer, the overall speed of the process was dictated by you; That changes once you identify a home. With that said, we will have to move at the speed necessary to get all the documents we need completed.
One of the primary goals of The Kree Team Offer Writing Knowledge Center is to cut down the stress that many buyers experience when submitting their first offer. Understanding how to make an offer on a house and what you’re getting into makes the process much easier to swallow.
Below we give an overview of the steps that go into how to make an offer on a house and then dive into a deeper explanation below.
Our Team will reach out to the listing agent to get the following information:
- Verify that the home is fully available.
- When they will review offers; There are really two possible outcomes for that; one they review offers as they come in or they set a deadline.*
- Ask them if there is anything particular the seller is looking for in regards to timelines, price, and contingencies.
*Based on how they are reviewing offers will decide how fast we need to move. For example, if offers are reviewed as they come in it generally benefits to you to get your offer in as soon as possible as long as it is a strong offer (at or above the list price). If they set a deadline unless you offer them something very strong the odds of them accepting are much lower. They will typically wait until the deadline to review the offers. With that said, we can then move at a more comfortable pace.
a. Lender Estimates
b. Seller Need Identification
c. Offer Deadlines
d. Request Seller Disclosures
Our Team will reach out to your lender to get estimates on the home and a pre-approval letter.
Our Team will research comparable property sales and send them over for you to review. The goal is to gauge what the home might sell for based on other sales in the area.
Our Team can schedule a pre-inspection based on how competitive the home is expected to be.*
*The purpose for a pre-inspection with a licensed inspector is so you can waive the inspection contingency. For many homes in the current market, this is the expectation. The cost of a pre-inspection is about 300-600 dollars based on the size of the home.
Our Team will pull together the offer documents and send them for you to read over.
We will schedule an offer strategy session after you review the offer documents. Please, plan for about 1 hour.
We will upload the Offer Documents and send them to you via DocuSign.
Our Team will prepare the offer packet and submit it to the listing agent. In general, we expect to hear back within 24 hours.
The seller will make a decision on what they would like to do which will result in either a counter offer, acceptance or sometimes even no response.
The two possible outcomes when submitting an offer Ratification when the seller agrees to your terms and conditions or when the seller turns down your offer.
Now that you have a better idea of what to expect, lets go through how to prepare and gather information.
Preparation and Information Gathering
Once you identify a property you’re interested in putting an offer in on, our team will begin to gather and collect key information that you need in order to put in the the best possible offer.
Rely on multiple sources:
- The listing agent,
- The multiple listing service (MLS)
- The lender
- Public records
By relying on multiple sources, you’ll be able to better identify all of the information needed.
Comparable Property Sales
Comparable property sales often referred to as comps are a great way to gauge where the property might end up from a pricing perspective. Our team uses our methodology when Researching comparable properties. With an emphasis on the following factors:
- Recency of the comparable sale
- Distance from subject property
- Similarities in size, finishes and aesthetics
In general the best comparable property sales are condos that have identical units within the building since those are essentially an exact match.
Whereas with fee simple homes there’s a much greater range of finish quality size and possible renovation outcomes so we need to take a greater look into the details.
Within the comps that we’ll provide, we start by trying to set a pricing floor and pricing ceiling for the property where it might go in terms of pricing. We do this by finding a property that we feel is a step down from the subject property and then finding a property where it is an obvious step up from the subject property.
For example it has a larger kitchen, a larger lot, south rooms to name a few areas that show a value difference.
From there, we will fill in the rest of the year market analysis with properties that are similar ideally a total of 3 to 6 properties.
Seller Disclosures and Inclusions
Seller disclosure requirements are dependent on the jurisdiction in which you reside. In Washington, D.C., sellers are required to complete disclosures while just across the river in Virginia it is a buyer beware jurisdiction and seller disclosures are not required.
Seller disclosures are a great resource but cannot solely be depended on because they are completed to the best of the seller’s knowledge.
It is best to use the seller disclosures to gauge or focus the home inspection on specific areas of note. If the seller mentioned something that needs to be addressed i.e. water in the basement, issues with a key system in the house are two examples.
The reason you shouldn’t solely depend on seller disclosures is people just don’t know everything that is happening in their homes.
Once a person moves into a home many people go about living their life. They forget how old systems are and don’t keep great records; so it’s going to be on our side to ensure that we are doing our proper due diligence so that you can make the informed decision.
The second element of the seller disclosure statements is the inclusions and exclusions section that is very black and white. It lays out what is included and what is not included with a home.
Lender Estimates
Lender estimates, as the name would imply, are estimates that the lender provides for you that break down all the costs that you will be expected to pay during the purchase of the particular property; Excluding some small third-party costs like home inspections and contractor estimates if you require them.
It’s important to project and run multiple scenarios with lender estimates to ensure that you understand exactly the amount of money that it will require to complete the purchase based off of your offer price and this will be very important as we review and develop the offer package on your behalf.
If you’d like to go a bit deeper, check out our blog post that breaks down real life examples and how to analyze the data.
Developing Your Offer With Data
Once you’ve determined a property that you like, it’s time to determine how much to actually offer for that property. The best method to get this accomplished is developing your offer based on comparable property sales.
First seek to understand, then seek to be understood.
The list price of the home generally falls into one of three categories:
- Over market value
- Under market value
- At comparable market value
Comparable property sales, often referred to as comps, are a great way to gauge where the property might end up from a pricing perspective. Our team uses our methodology when Researching comparable properties. With an emphasis on the following factors:
- Recency of the comparable sale
- Distance from subject property
- Similarities in size, finishes and aesthetics
Ideally, the best comparable property would be an identical property next door to the subject property that sold within the last 30-90 days. Unfortunately, that dream scenario doesn’t happen often so we have to improvise and try to weigh the properties against each other.
The Primary Contingencies to Consider
By definition; A contingency is a provision for an unforeseen event or circumstance. The contingencies are typically meant to protect the buyer during the home buying process.
Different markets determine how strictly you should approach contingencies. For example, in a market where demand exceeds supply, you’ll want to keep contingencies to a minimum. On the contrary, when supply exceeds demand, you have more flexibility with the amount of contingencies you can consider.
Here are two of the primary contingencies to consider.
A home inspection is a limited, non-invasive examination of the condition of a home, completed during the home sale process. Home inspections are usually conducted by a home inspector who has the training and certifications to perform such inspections. Some of the inspection contingencies include:
- Full inspections
- Walk and talk inspections
- Component specific inspections
To start an appraisal is defined as an unbiased, professional opinion of the value of a home and is used whenever a mortgage is involved in the buying, refinancing, or selling of that property.
In a purchase-and-sale transaction, an appraisal is used to determine whether the home’s contract price is appropriate given the home’s condition, location, and features.
In a refinance transaction, an appraisal assures the lender that it isn’t handing the borrower more money than the home is worth.
There is a lot more that goes into these contingencies and whether or not you’re getting the most out of them as a buyer, so be sure to check out our primary contingency guide to learn more.
The Overall Mindset of a Winning Offer
Most buyers think that writing an offer or having your offer accepted only comes down to one thing: who offers the most money.
Unfortunately from a simplistic standpoint this is not the case.
The reason, writing an offer is not as simple as who is offering the most comes down to the human element of the process with seller and the listing agent included.
The sellers for most homes are not large corporations, typically it’s first time sellers! For them there is a different level of stress included in the process.
Pro tip: winning offers alleviate these stress points, our team focuses on finding out what these are from the listing agent.
Each home seller has different needs and wants with different levels of risk tolerance.
Some sellers only care about one thing; how much money they’re getting for their home. While others care more about the terms of the offer and ensuring that they will successfully make it to settlement.
There are other buyers that are more focused on the simplicity of the transaction over the price so not having to worry about making repairs or changes to the house.
Taking these factors into account will have a huge impact on whether your offer is accepted or declined.
The other variable that comes into play that can cause a huge shift in how offers are handled is who the listing agent is. A great real estate agent can coach and advise sellers in a way that makes the process more transparent and fair, while an inexperienced listing agent can cause more harm than good in the process.
Collaborating and fostering strong relationships with listing agents is something that our team takes pride in and clients reap the benefits of.
No matter what the sellers priorities are or who the listing agent is, the priority is to ensure that you are comfortable with the offer terms you are submitting.
Be sure to book a consultation to discuss how to make an offer on a house and achieve your real estate goals.
