You've set your budget, you've looked at homes to buy and you've found one you love. So how do you know how much to offer? Staying inside your budget is important, but there's more to getting the house you want than just picking a number. Here are some things to consider when deciding how much to offer:
Are there comparable homes for sale in the same area? Noting how long they've been on the market can give you an indication of how much competition you're facing. The more competition you have, the stronger your offer should be.
How long has the house been on the market? If it's been a long time (more than two or three months) or has been listed multiple times, the seller may be more willing to accept an offer below asking price.
Do you expect to have to compete against other buyers? If the house is in a highly desirable area, there's a chance you could enter a bidding war. You'll need to decide how high you're willing to go before you make your initial offer. If you expect the home to have other bids, it might make sense to come with your strongest offer upfront.
Does the house require repairs or renovations? To help you stay on budget, keep these future costs in mind.
Your approval letter will state the amount that you're approved to borrow from the lender. You can offer a greater amount, but you'll likely need a larger down payment to make up the difference. Check with your Sunlite Mortgage broker first to make sure you can get approved for a higher amount should your offer get accepted.
When you're ready to make an offer, your real estate agent can help you get in touch with the seller and submit the offer in writing. Chances are your real estate agent will write the actual offer letter, but here are some details it will include:
The address of the home
Your name and the names of anyone buying the house with you, like your spouse
The amount of your offer
Any contingencies you're requesting (i.e., conditions that must be met before the sale is a done deal), such as a successful home inspection
Any seller concessions you'd like (i.e., things you're requesting from the seller), fixtures, roof replacement etc.
Items you want to include in the sale, like appliances and window treatments
The amount of your earnest money deposit
Your approval letter, so the seller will know that you won't run into any financing problems
The date you expect to close
The date you want to move into the house
The deadline to respond to your offer
Yes – it's common for buyers to ask the seller to complete repairs as a contingency for you buying the house. You can also request that they make upgrades, like installing new carpet, but keep in mind that this could drive your purchase price up.
If the seller accepts your initial offer, then great – you just bought a house! Contact your mortgage agent as soon as possible and send in the property listing and the agreement of purchase and sale. He or she will contact the lender to get a mortgage commitment letter which outlines all the additional condition to be satisfied to close the mortgage.
If the seller counters your first offer or even just rejects it, how to proceed is up to you. Your agent can get in touch with the sellers to see how willing they are to negotiate, and you may trade counteroffers that negotiate not just the purchase price, but the other parts of your offer like the move-in date.
Negotiating can be stressful, so it's important to keep your goals in mind. Don't forget that it's OK to walk away if you and the seller can't agree. There will always be another house. This is a long-term purchase, so you should take a long-term view.
The first steps in buying a house are ensuring you can afford to pay at least 5% of the purchase price of the home as a down payment and determining your budget. This calculator steps you through the process of finding out how much you can borrow. Fill in the entry fields and click on the payment schedule button to see a complete amortization schedule of your mortgage payments.
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