How To Make A Good Offer On A House
November 10, 2021
It’s always disappointing to see your offer on a home was rejected by the seller. However, home offer rejections are actually common, especially for first time home buyers.
Constructing an attractive offer that has a better chance of being accepted requires two things: an understanding of the seller’s needs and the essential components of a good offer. In this blog post, we go through the 7 essential components that make an offer on a home strong.
The 7 Essential Components That Make An Offer Strong
1. Purchase Price
All homeowners who are selling their property have one thing in common – they want to make the most amount of money from the sale. This means that the amount of money put into the offer is one of the biggest factors in its viability.
As someone who is buying a house, you need to offer a price after thoroughly assessing the comparable report of the neighborhood. A comparable report reveals the selling price for similar homes in the area over the last 12 months. Sellers use the report to make sure their house sale price isn’t too low or too high.
Therefore, one of the first things you need to do when you plan to make an offer for a home is assess the comparable reports. You can easily access this information online in the public property records.
Whether you are planning to buy a house in cash or plan to take loans out for it, having a strong financial background can help your case. Providing the seller with proof of your financial background can make your offer stand out amongst the others.
If you are taking a loan out for the house, submitting proof of the loan along with the offer may also strengthen your case. After all, it’s riskier to accept an offer from someone who hasn’t shared how they plan to cover the cost of the house.
3. Adding an escalation clause
Sometimes an offer can be rejected while having all of the essential components for one reason, someone outbid you. This is why escalation clauses were created.
Escalation clauses are provisions that state that you will increase your offer on the house if someone offers a higher amount. For example, you can offer $400,000 for a home with an escalation clause that states you will outbid higher bona fide offers by $10,000 until the price reaches $500,000.
It’s important to include the term bona fide because it ensures that the competing offer is a legitimate offer. The seller will have to provide proof that the other buyer’s offer is authentic. A real estate agent can help you create the escalation clause along with the language to ensure that the seller can’t make up an offer to increase yours. They can also help verify that the competing offer is legitimate.
4. Earnest Money Deposit (EMD)
Earnest Money Deposit is a small deposit made to the seller to show good faith to the buyer about buying the house.
One of the the most recommended methods of showing that you are serious about buying a house is to put down an amount in earnest money deposit. That way, the buyer knows you are willing to put money down in goodwill and also have the financial strength to support your offer.
Offering earnest money is especially helpful when sellers are looking to sell their house quickly. Rather than waiting for other offers, with no assurance or financial backup, they may accept your offer gleefully.
5. Settlement Date
Choosing a settlement date is an important part of the home offer. This is the date you become the legal owner of the home. Real estate agents can be a vital partner in this process by confirming the seller’s urgency or lack thereof, and choosing a date that is best for both the buyer and seller.
6. A Personal Letter
Including a personal letter with your offer adds an extra emotional and sentimental value to your offer. It’s common for sellers to accept offers that are less than competing bids simply because they felt an emotional connection to the prospective buyers.
So, use your creativity, convey your personality, and find a way to emotionally connect to the sellers through a personal letter. You can try to get a better sense of who the sellers are and why they are selling their house by researching their social media. Ultimately, the goal is to connect with these sellers through written words, and sometimes it’s helpful to think about what would connect to you.
7. Closing Costs
The last important element that could make your offer strong are the closing costs. These are the costs involved in the final transaction besides the house down payment. Here is a list of some of the expected closing costs for anyone selling a house:
- Recording Fees: a fee charged by a government agency for registering the purchase of real estate.
- Real Estate Commission: fee paid by the seller to the listing agent, seller’s agent, and typically the buyer’s agent as well.
- Appraisal fees: fees paid to professionals for evaluating the worth of your house.
- Lawyer fees: fees paid to the lawyers who are involved in closing the deal, if required.
- Property transfer taxes: fees paid to the government for transferring the ownership of the property.
To make your offer stronger and unique, you can offer to pay an equal sharing of their closing costs. For sellers, it would be difficult not to consider an offer where the buyer is willing to split the costs. However, buyers have their own closing costs to worry about which can add up to a hefty fee.
Even though offering to help the seller with their closing costs can be a great way to strengthen your offer, you need to make sure that you can afford such a task.
The Bottom Line
When it comes to making an offer on a home, the situation varies from one seller to the other. Some sellers may value the price in the offer more while others may value the urgency of the settlement date. It’s difficult to assess what a seller’s needs are but that is why a real estate agent can be of great help.
For instance, someone like a Negotiator Recognized Partner can bring their expertise to create an undeniably strong offer, which has a better chance of being accepted.
All the best.