Making an Offer on a House: A Brief Guide

Once you’ve found a home that you love, it’s time to make a move—literally. Writing an offer on a house is the most critical step in the home-buying process. Understanding the terms involved can make all the difference. In this post, we’ll explore the essential terms and strategies you need to know when making an offer on a house, particularly in the Arizona real estate market.

Purchase Price: The Heart of Making an Offer

The purchase price is the most significant term in your offer. It’s the amount you’re willing to pay the seller for the home, but it’s not always the total cost you’ll incur, as closing costs and other fees may apply. It’s crucial to ensure that your offer price aligns with your mortgage pre-approval and reflects the market value of the home.

Tip: Homes can be overpriced or underpriced. Just because a property is listed at a certain price doesn’t mean you should offer that amount. Work with your Realtor to research comparable sales in the area before deciding on your offer price.

Down Payment: Showing You’re Serious

Your down payment is another key factor in your offer. It signals to the seller that you are financially stable and serious about purchasing the home. In a competitive market, offering a higher down payment can make your offer stand out.

Tip: Increasing your down payment can be particularly advantageous when competing with other buyers.

Loan Type: Put Your Best Foot Forward

The type of loan you use can influence how sellers view your offer. Conventional loans are often seen as the most reliable, giving sellers confidence that the transaction will close smoothly. However, in a balanced market, the type of loan may be less of a concern.

Tip: If possible, qualify for a conventional loan to increase the appeal of your offer. If terms are better for you to use an FHA product, ask your lender to contact the listing agent when the offer is submitted. Hearing from the lender that you are a qualified borrower gives the seller peace of mind.

Earnest Money: Putting Skin in the Game

Earnest money is your financial commitment to the purchase. It’s deposited with a title company and held in escrow until closing. A higher earnest money deposit shows the seller that you’re serious about buying the home. Earnest money provides the seller some security if the deal falls through.

Tip: Offer a substantial earnest money deposit to make your offer more attractive, especially in a competitive market.

Seller Concessions: Negotiating Financial Incentives

Seller concessions are financial incentives that the seller may offer to make the deal more appealing. These can include contributions toward closing costs, or depending on your loan type, can even include paying off certain debts. However, the lender must approve any concessions, so check with your Realtor and your lender before asking for concessions.

Tip: Use seller concessions strategically to reduce your out-of-pocket expenses at closing.

Closing Date: Timing Is Everything

The closing date is when the ownership of the property officially transfers from the seller to you. It’s a crucial date for both parties, as it dictates when funds will be exchanged. Additionally, possession of the home may not always coincide with the closing date, so this term must also be clearly defined.

Tip: Be flexible with your closing date to accommodate the seller’s needs, but ensure it aligns with your financing and moving plans.

Personal Property: What Stays and What Goes

In real estate, personal property (like furniture or appliances) is typically not included in the sale. However, if there’s an item you want to keep with the house, make sure it’s included in your offer.

Tip: Prioritize the essential items you want to keep with the property and be prepared to negotiate for them.

Home Warranty: Peace of Mind for the Future

A home warranty can help protect you from unexpected repairs after you purchase the home. Deciding who pays for the home warranty—whether it’s the buyer, seller, or both—can be negotiated in your offer.

Tip: Request a home warranty as part of your offer, especially if this is your first home or if the home is older and has outdated systems.

Inspection Timeframes: Protecting Your Interests

The inspection period is your time to thoroughly assess the home and negotiate repairs or walk away if significant issues arise. The standard inspection period is 10 days. But in a competitive market, you might consider shortening this timeframe to make your offer more attractive.

Tip: Be cautious when reducing the inspection period, as it limits your time to uncover potential problems and get second opinions.

Appraisal Waiver: Navigating Competitive Markets

In a hot market, you may encounter situations where your offer exceeds the home’s appraised value. An appraisal waiver or shortfall agreement means you’re willing to cover the difference with additional cash, which can make your offer more competitive.

Tip: Know your financial limits before agreeing to an appraisal waiver to avoid overextending yourself.

Offer Expiration: Creating Urgency

Setting an expiration date on your offer encourages the seller to act quickly, reducing the risk of other offers coming in and competing with yours.

Tip: Set a reasonable but firm expiration date to prompt a timely response from the seller.

Conclusion: Crafting the Perfect Offer

Making an offer on a house is about more than just naming a price. Tell a story to the seller about your seriousness, financial stability, and flexibility through the terms you put forward. Working with a knowledgeable Realtor who can strategically present your offer can make or break securing the home you want.

Remember, buying a home is an emotional process for both you and the seller. By understanding the key terms and thinking strategically, you can craft an offer that stands out and increases your chances of success.

If you’re considering making an offer on a home, contact John Harding today at 480-639-9640?Let’s work together to secure your dream property!