“Love at first sight.” At some point in life, you’ve likely experienced the phenomenon — with a soulmate, a child, or maybe even a pet. I’m willing to bet you’ll feel similar butterflies while seeing the house of your dreams. When the tour ends, there’s one question you can’t ask the real estate agent fast enough: What do I need to do to make this house my home?
Perhaps you already know the answer: The offer stage looms. Here’s what you need to know before making an offer on a house.
Unless it’s a tire-kicking exercise, you likely haven’t been visiting properties outside of your price range. So now comes the time to roll up your sleeves and figure out what price the seller will accept to have you enjoying backyard barbecues or balcony sunsets. Before making an offer on a house, be sure to give careful consideration to a few factors that might make or break the deal.
Putting together the right price means knowing as much as possible about where you’re buying. A real estate agent will certainly help but educating yourself about the market never hurts. Peoria, Illinois is an entirely different market than San Diego, California. But regardless of where you plan to enjoy a big chunk of your future, realize that crafting the offer according to market forces is crucial.
The list price of a home merely marks a starting point. Some observers see a plateau in the steaming housing market. According to Aaron Terrazas, a senior economist at Zillow, “The frenetic pace of the housing market over the past few years is starting to return toward a more normal trend.” In regions with adequate supply and lackluster demand, making an offer below market is a wise strategy. The house may have been sitting on the block for a few months, and a motivated seller might simply want to cash in and move on.
On the other hand, in competitive areas where homes sell in a day or two, nailing down your corner of the world requires fast decisions and a bid at or above the asking price. In many U.S. markets, buying activity continues at a frenzied pace. “The strong job market continues to bolster demand for homes,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association. Not a problem if you’ve projected a careful budget, and the folks at Finance of America Mortgage can help calculate just how much home you can afford.
You’ve decided to make an offer on that dream home. Your real estate agent will assist you by filling out a sheet that details how much you plan to spend, and when you expect to sew up the transaction. A good faith or earnest money deposit, eventually applied toward closing costs, goes a long way. Those dollars — about $500 to $1,000 on average — will let the seller know that serious interest exists.
As you hold your breath, three outcomes are possible. The seller can reject the bid, make a counteroffer, or accept.
Through the offer stage, you’ve felt anxiety and exhilaration. It’s water under the bridge. Now the real excitement begins — planning the parties and imagining the peace you’d envisioned when first casting eyes on the place. A few more steps need attention before the moving vans roll up, though.
- Schedule an inspection. The house may look great on the surface but you’ll want to make certain that expensive repairs don’t lie beneath.
- Secure financing. You may have gone through a pre-approval phase but now’s the time to finalize the terms of a mortgage.
A mortgage advisor at Finance of America Mortgage can help you move further down the path to home ownership. Contact us today.
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