Making an offer on a house isn’t incredibly complicated, but it takes some skill. Whether you are a real-estate agent or investor, I’m going to teach you how to make an offer and how to lessen the likelihood that you end up over paying for a house.
- You need to research what has sold in the past 6 month
Dig up properties thru Zillow, MLS, and/or the tax record and see:
- What did the property sell for?
- How long did it take to sell?
- What amenities did it have?
- What were the terms? Cash, conventional, seller financing
- How long was it under contract for?
- Did it come back on the market?
The biggest mistake I see people make is not properly comparing properties. Many times people want compare a junker to a nicely remodeled home (vice versa)
2. With what you have researched, come up with the price and terms you plan on offering.
Formulating an offer is an art and takes practice, but it boils down to these two things:
- How much demand is there for the property?
- What market are you in?
- What are the circumstances for the sale?
An offer in a totally raging hot market, beautiful kitchen, under priced:
- Offer over list
- Don’t ask for buyer expenses
- Don’t ask for a warranty
- Don’t try to negotiate any personal items
An offer in a bad market, with a house that needs work, and is over priced:
- Offer below ask
- Ask for expenses paid
- Ask for a home warranty
- Negotiate on inspection
3. Make the offer via email, verbally, or fax it (Preferably email)
Many people over complicate this part, but just submit the offer and don’t say anything.
4. Negotiate (if they counter)
This is when you typically get into more in-depth negotiations:
- Work to understand the other party
- Set a limit that you will not go over
- Sometimes property will go into a multiple offer situation, in which case just make the highest and best offer you plan on making
- Don’t stain relationships by being offensive or negative
- Provide documents that justify your price.
- Set a limit on the offer and DON’T let people shop you (wait out for other offers)
5. Second Round Negotiations & Repairs
So in real-estate you typically have second rounds of negotiations where you negotiate what the inspector finds:
- If there are very small issues such as a leak under the sink, usually it’s very difficult to get seller to repair
- If there are CATASTROPHIC issues found such a mold, foundation issues, electrical issues, etc expect concessions
6. Once all negotiations are done and everybody signs, YOU HAVE AN OFFICIAL CONTRACT.
Low ball offer Tips:
- You can’t low ball people that have multiple offers on the property.
- If you low ball you should offer “as-is” condition and not try to negotiate down the home price
- Make the contract quick and painless. Don’t ask for anything else.
In general negotiations:
- Don’t be agressive and realize that a real-estate negotiation is a long process.
- Set limits on what you will pay and don’t go over
- Be realistic