Although there is plenty of uncertainty looming, you want to take advantage of the opportunity to buy the home of your dreams. Here are a few tips on making an offer on a house.
Offers In A Seller’s Market
Although the current real estate market conditions are moving away from being a seller’s market, this doesn’t mean it has gone directly into a buyer’s market. The effects of inflation are still reverberating across the nation in many markets.
Additionally, the lack of inventory in certain areas still gives sellers some leverage in the current market. Although previously hot markets such as Seattle and Sacramento are cooling off, you may still find that these markets favor sellers. Some other cities, such as Reno, Nevada, are still growing strong as seller’s markets.
If you want a home in a seller’s market, make an offer that puts you in a favorable position for the seller to take you seriously. Remember that going in with lower bids may be a surefire way to price yourself right out of consideration. So instead of lowballing sellers, looking for homes with an affordable purchase price that you can offer higher bids on is ideal.
Typically 1 to 3 percent over offering is a great place to start. However, keep in mind that there may be multiple offers, including buyers who can offer upwards of 10 percent. There may also be plenty of cash offers that, in some instances, may supersede mortgage-backed proposals.
Offers in a Buyer’s Market
It may be a while before the entire real estate market moves favorably into a buyer’s market. Until then, there will be some regions that will become buyer’s markets much faster than others. If you find yourself in a buyer’s market, you may have more leeway with lowball offers. However, it isn’t a good idea to put in offers so low that sellers won’t take you seriously.
Ideally, you should put in an offer at 10 percent below asking. But some buyers may go as low as 20 percent below asking. Ultimately, the decision is up to you. But know that the seller has every right to reject an offer that doesn’t fit their goal.
Your real estate agent will be a valuable resource when making offers as they will have the best insight on what amount to offer and how to ensure you have a competitive offer.
Backing Out of Contracts
Once you make an offer on a home and a seller accepts, the deal should go through the closing process successfully unless problems arise in financing. Real estate contracts, or purchase agreements, are legally binding, so you won’t have to worry about a seller backing out of a real estate contract as long as the contract communicates such details. However, there are times when a seller may back out of the purchase of the property
In addition to determining how much to offer, home buyers should weigh the pros and cons of making offers with or without contingencies. Contingencies are a regular part of a real estate transaction and are stipulations that are added to home purchase contracts that provide protection for either party in the event something unexpected happens during the home buying process.
Examples of contingencies include appraisal, financing, home inspection, title review, and septic/well tests. Buyers should consider the potential risks associated with not adding these contingencies when making an offer on a home since they may be vulnerable if any issues arise after the expiration date of a contingency period.
An experienced mortgage lender can advise on contingency periods, and when to lift them or waive them when making offers. Once contingencies expire it is generally harder to back out of an agreement, but in some cases this can be negotiated.
Finally, another critical reason sellers may back out of a home sale, is that some unscrupulous behavior was involved in the deal. But ultimately, if you’re ready to get a house this year and are willing to play by the rules of your given market, whether a buyer or seller’s market, you shouldn’t have trouble closing on your dream home.
Final Thoughts
Buying a home can be a complicated process and requires careful consideration of the current market conditions, home prices, the amount to offer, and the use of contingencies.
When buying in a seller’s market, it is recommended to make an offer that is competitive and shows the seller that you are serious about purchasing their home. On the other hand, in a buyer’s market, you may have more bargaining power and can consider offering below asking price. However, it is important to consider the seller’s goal and not make an offer that is so low that they won’t take you seriously.
In addition, it is important to understand the importance of adding contingencies in the purchase agreement to protect your interests and ensure a successful closing. Ultimately, with careful consideration and understanding of the market conditions, you can make an informed decision and successfully purchase the home of your dreams.
