The Biggest Misconception First-Time Buyers Have About Making an Offer on a Home
Making an offer on a home isn’t like sliding a sticky note across the table. Your offer as a buyer is so much more than just a dollar amount.
There’s no question that sale price is crucial, but it’s far from being the only important factor when making an offer on a home. There are actually seven distinct facets to consider and — good news for folks in hyper-competitive markets — most sellers will weigh the attractiveness of the total package over the sale price alone.
While your agent will work with you to put all of these details together in your offer, consider this an overview of what you can expect. Use the information below as a guide to help you wrap your mind around the anatomy of an offer. The components are as follows:
1. Sale Price
Obviously, the sale price is how much you’re willing to spend on the home. When thinking of how much you’d like to offer, consider how much comparable properties have sold for recently, the overall condition of the property, and whether current market conditions have been in favor of buyers or sellers.
2. Earnest Money Deposit
The earnest money deposit will be collected from you early on in the transaction and kept in escrow account to be put towards your down payment at settlement. Think of this as your “ouch money”. It’s how much you could lose, if you decide break the contract and walk away from the property. Sellers usually prefer larger amounts because that means you’ll be more invested in seeing the deal through the end.
3. Down Payment and Financing Details
This section accounts for whether you’ll be buying the property in cash or you’ll need to apply for a mortgage. If you’re going the mortgage route, it also details what percentage of the property you can pay for upfront versus how much you’ll be financing. Most of the time, paying in cash is preferable, since there is much less red tape in these transactions. However, when a mortgage is necessary, a sizable down payment can help assure the seller that your financeable.
4. Details of the Deal
This is where you’ll put any contingencies, or events that need to occur in order for the transaction to continue moving forward. While exactly which contingencies are needed will be determined on a case-by-case basis, they usually include factors like inspections, the receipt of deposit monies, or a mortgage commitment.
5. Length of Time the Offer is Valid
Once you have all your contingencies in mind, you’ll want to consider how long it will take for all of them occur. Depending on how much legwork is needed, real estate transactions usually occur in either a 30, 60, or 90-day timeframe.
6. Closing Date
This is the day you’ll be going to settlement. Typically, it will fall within one of the above timeframes and be either 30, 60, or 90 days out from the day that both you and the seller have signed off on your negotiated offer.
7. Move-In Date
Usually, your move-in date will be the same as your closing date, but if there are mitigating circumstances like a delay on a new build, it can be renegotiated.