Let’s say you’ve taken the time and found a desirable property. It has a great location, excellent build, and would make a perfect addition to your portfolio. As far as real estate opportunities go, you wouldn’t want to pass it up. The question now is: how do you seal the deal? You aren’t the only one looking at this property, so what can you do to show up the competition?
Knowing how to make an offer on a house can mean the difference between losing a valuable property and adding new real estate to your repertoire. Real estate purchases come burdened with all manner of components, contingencies, and amendments to take into account. However, even after you gain a thorough understanding of the process, there’s still more to learn. Our aim is to help improve your real estate investment skills by offering a few choice tips to further hone your knowledge base.
The end goal of any investment is in the payoff.
No matter how much research you do, it means nothing if you can’t close the deal. With a little help, patience, and study, you’ll learn a bit more on how to make an offer on a house.
How to Make an Offer on a House
The advice we’re providing is more or less a drop in the bucket of overall information regarding how to make an offer on a house. There’s always more to integrate into your skill set. The first step, before consuming any tricks of the trade, is to have a solid grasp on the intricacies of what goes into formulating a house purchase. You should have a better handle on where to proceed from there.
1. Present a Written Offer
When you’re wanting to provide a professional appearance and be taken seriously as an investor, get it on paper.
While offers can be easily made through verbal communication, they won’t be taken as genuinely. Maintaining a written formality helps not only organize your offer, but creates an easily referable paper trail.
Think of a written offer like a cover page and a resume. You’re pitching yourself as a strong potential buyer for this real estate property. You want to include things that highlight your commitment to the property, reassuring them you aren’t going to flake. You can provide compelling assurance for your contention, financial capability, mortgage endorsement, and more.
2. Research Other Offers on the Property
You need to know your competition. Chances are you won’t be the sole bidder on any property, turning opportunities into a dogfight. While you may not have the opportunity with every house purchase to dig into competing offers, the right real estate agents can often provide much needed intel. Where your own investigative efforts may fall short, others may excel.
You are not guaranteed to gain any insightful knowledge into what other offers are available. However, if you know that there are competing offers, then that’ll change the offer you should make to stand out. The more serious interest is coming from competing bidders, the more buyer-friendly you should design your own offer.
The goal is to make yourself the best candidate. Once you have the buyer’s attention, you can negotiate from there.
3. Make your Price Competitive
Whether or not you know there are other offers on the house shouldn’t stop you from making a good starting offer. When you make an offer on a house, the process is usually starts with you making an offer and then the seller accepts, counter offers, or declines. Ideally, you’re shooting for either of the first two options. You aren’t out of the running if you receive a decline. You’ll simply have to make a better offer. An acceptance is ideal, but there’s a chance that an immediate accept means you overbid and spent more money than you needed to.
The counter offer means that while your first asking price wasn’t quite what they were looking for, they’re still interested in you as a potential buyer.
Depending on your initial offer, you may receive mixed responses. An offer that’s too low may eliminate you from the pool of potential buyers entirely. If they can’t easily find a medium between your offer and their counteroffer, it can gum up the process entirely.
Your goal is to provide an offer that fits in with the housing market of that area. Examine recent past purchases and draw your own reasonable conclusions based on those selling prices.
4. Maintain Communication
Communication is the variable that defines most adult functions. So long as you’re staying in consistent contact with the seller, you’re establishing a rapport.
Being able to ask pressing questions about the house supplies you with the information you need to make an educated offer. When it comes to knowing how to make an offer on a house, information is one of the most valuable resources you can have.
The more you discuss with your buyer, the more confident you’ll feel when presenting an asking price. You’ll be able to leave an impression and show that you’re concerned and knowledgeable about housing condition, pricing, and upkeep.
5. Start with a High Down Payment
Let’s take a look at two different offers. The first offer is for $255,000 with a down payment of 15% upfront. It’s not a terrible offer, and may draw attention. However, there’s a second offer being put forward at around the same time.
This second offer is for the same price of $255,000, except the down payment is for 20%. If both potential buyers are of equal standing, the latter offer is the more attractive.
Showing that you have the financial security to drop a high down payment makes you an attractive buyer. The higher a down payment, the stronger your offer and less of a risk you’ll pose. Showing that you’re confident and ready to commit is indicative of your reliability as a buyer.
6. Limit Contingencies
Contingencies are in place to help the buyer complete steps to ensure the quality of the home they’re purchasing. There are several standard contingencies automatically included in the home buying process, and special ones can be added. When you’re learning how to make an offer on a house, however, knowing what contingencies are unnecessary is just as important.
If you believe you need to make a final step forward to close the deal, then you may look into removing some contingencies. This will make the process easier for the seller to help close the deal. It will also help your offer stand out among competition if there are multiple offers made on the house.
A seller will be more interested in offers with limited contingencies compared to those that maintain a list of final checks. It’s important to pay attention to what contingencies you think are safe to remove from the agreement. A heated competition for the purchase of a property may definitely call for a sweetened deal. However, homes that have been on the market for a while can be more patiently approached. If there’s no need to limit contingencies to finalize a deal, it’s safer to keep those in place.
7. Obtain Mortgage Pre-Approval
Having proof of mortgage pre-approval can be what decides an offer that keeps you in the running or not. The financial stability and security promised by that ensure a place in a competitive scene. For example, if you’re making an offer on a house against several other potential buyers, you won’t get far if you don’t have a mortgage pre-approved.
Sellers are interested in buyers that are vetted. Having the credentials to prove you’re serious ensures satisfactory assurance that you can handle the expenses the home will incur.
Keep Up the Morale
There’s a chance that, even with a strong initial offer made on a house, that you’ll still lose it to a competing buyer. Knowing how to make an offer on a house will not guarantee that you’ll succeed on the final purchase. As discouraging as that may be, maintaining a positive outlook can help you net the next property that comes along. The housing market is always changing. You may miss out on one house, but that may simply provide an opportunity for the better offer coming along.