Home Buying 101 Series: Offer Writing and Negotiating

December 18, 2018

We’re back with the third installment of our Home Buying 101 Series, and this time, we’re tackling the topics of offer writing and negotiating! If you missed out on Part 1 and Part 2 – you can catch up first before reading on!

So, you’ve found a home you love and you’re ready to write an offer. Where do you begin?

First, look at market conditions with your agent. You’ll what to gauge whether you’re in a buyer’s market or a seller’s market so you can structure your offer accordingly. In the simplest of terms, this is determined by the amount of housing that’s currently for sale. For a balanced market, there needs to be six months of inventory. If the amount of homes for sale is higher, then it’s a buyer’s market and if it’s lower, it’ a seller’s market.

This is also the time to determine how close the home’s asking price is to its actual market value. Your agent should sit down with you to look at similar homes in the neighborhood that have recently sold to make sure you’re not overpaying. It’s also important to learn about the seller’s needs. Do they require time in their home after escrow closes? Or perhaps they need a shorter escrow period? These are all crucial questions that your agent should ask.

Next, make sure you’re presenting a “clean” offer by dotting all of your I’s and crossing all of your T’s. It should be basic in its requests without asking for a bunch of things that may cause the seller to reject your offer. Additionally, the offer may need to be aggressive in regards to price (depending on what the market value is and whether closing costs are needed by the buyer.) Listen to your agent here! I know most buyers want a good “deal”, but sometimes the good deal is just getting the house.

One way to ensure that your offer stands out is to write a personal letter to the seller. I encourage my buyers to tell the sellers why they love their home and what makes it a perfect fit for them. I also include a photograph of the buyer and/or their family. Heartfelt letters like these can speak to a seller’s emotions – I cannot tell you how many times my buyers “won” the purchase of a home because of their letter.

Congratulations – now you’re ready! You’ve looked at comparable sales, determined the estimated market value and gained insight from the listing agent as to the seller’s “hot buttons”. You’ve structured your offer and your earnest deposit is at least one percent of the sales price. It’s time to negotiate.

Remember – one of the most important things is to make the seller feel comfortable with you as the buyer of their home. Not only do sellers feel emotionally attached to their home, but it’s likely that they also have requirements that need to be fulfilled so that they can move into their new home. A buyer can make great strides in establishing a sense of security with the seller by providing:

  • Documentation that shows proof of down payment (submitted with the offer)
  • A letter from your lender showing that you are fully approved
  • Cross-qualification paperwork for the listing agent’s preferred lender (if required)

These three easy steps will show the seller and their listing agent that they’re working with a team player. Negotiations shouldn’t be viewed as “us” versus “them”. Instead, they should be carefully structured conversations in which each participant feels that they’re getting their most important needs met. In my experience, price is where negotiating is most likely to fall apart. I’ve seen transactions fail over amounts as little as $5,000. For buyers, that’s a mere $24 per month over a 30-year period at 4 percent. For sellers, that’s extending the amount of time in paying carrying costs like the mortgage, taxes, insurance and more.

As you can imagine, staying level-headed can make a HUGE difference throughout the transaction. By putting your feet in the other person’s shoes and considering their perspective, you’ll be able to better focus on the big picture and bring success to both parties.

If you’re considering buying a home in 2019, it’s not too early to seek the advice of a real estate professional and lender. We’re here to help you determine if it’s a good time to purchase a home and achieve your homeownership dreams. Please don’t hesitate to contact me directly at 619.405.7673 or homes@livininsd.com.

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