Once you’ve found the home of your dreams, your next step is to place an offer. A formal offer on a home states how much you’re willing to pay and the conditions that you agree to follow.
A strong offer can make a difference as to whether the property becomes your next home. If you’re wondering how to make a competitive house offer, here are a few tips to follow.
1. Know the Market
Before drafting your offer, talk with your real estate agent so that you know what kind of market you’re dealing with. Is it a seller’s market, with homes frequently going for at or above their asking prices? Or, are you in a buyer’s market rife with hidden deals and room for negotiation?
The specifics of your local home market will influence your offer. When making an offer in a seller’s market, your first offer should reflect what you’re willing to pay for the home; there may not be a second chance to negotiate the price, especially if the seller is fielding multiple offers. It’s also wise to eliminate as many contingencies as possible so that your offer doesn’t appear overly complicated.
However, with a buyer’s market, you likely have more wiggle room when it comes to the price and potential seller concessions.
2. Put Up a Strong Financial Front
Make your offer stand out by proving to the home seller that you’re financially secure. Include a pre-approval letter so that the seller knows you’re able to obtain a home mortgage for the price of their home.
When you submit your offer, you’ll include a deposit known as earnest money to prove you’re serious about purchasing the home. Discuss with your realtor as to what amount is appropriate, but typically, your earnest money should equal one to three percent of the amount you’re offering for the home (with higher percentages being more common during a seller’s market).
If you buy the home, the earnest money will go towards your down payment and closing costs. However, if you violate the terms of your offer and don’t purchase the home, the seller will get to keep your earnest money.
3. Include an Escalation Clause
As you learn how to make a competitive house offer, one technique that you’ll encounter is using an escalation clause. An escalation clause states that if a higher offer comes in, you’re willing to match this offer (up to a specified dollar amount). It serves as an automatic counter offer so that you don’t lose the home to a slightly higher offer.
Want more advice on how to make a competitive house offer? Contact us today for assistance!