Step 7 to Buying a Home: I Want to Make An Offer On A Home I Love
You’ve found the perfect home and want to put in an offer. In today’s market, we need to put your offer in ASAP; ideally within a few hours. Before we can put an offer in on a home, there are a few things we need you to email to us:
- Full Legal Name: I will need the full legal name of anyone who will be on the contract as well as their phone number and email address.
- Offer Price: What price do you want to offer for the home? We’ll certainly discuss this in detail, if we’ve already seen several homes in the neighborhood, it might be a short discussion as we’ll likely have a good idea of the price based on today’s market.
- Your Walk Away Price: Don’t expect to pay your initial offer price as it’s rare for a seller to accept your initial offer without some negotiating back and forth. That’s why it’s called an initial offer. In addition to deciding what offer you want to put in to start, we need you to decide now how much you’re willing to pay for this property and what your walk away price is before thing get heated and emotional.
- Closing Date: Typically, the closing takes place 45-60 days from contract acceptance. Sometimes you can ask for a longer closing date depending on the seller’s needs, but we shouldn’t expect it. Therefore, if you want to move around July 1, plan on putting in offers at the beginning of May. If you’re paying 100% cash you can often close faster than 30 days (around 21 days), but 45 days is usually the required minimum if you’re using a mortgage to buy the property.
- Earnest Money: How much earnest money are you comfortable putting down on this property? Typically, in California we ask for 3% of the purchase price as earnest money, since this is the amount set by state law for Liquidated Damages. Making a larger earnest money deposit is a good way of showing a seller that you are serious (keep in mind that state law still sets 3% as the maximum a seller can hold in a breach of contract). The earnest money is part of your down payment. Therefore, if you’re planning to put $40,000 down for a down payment and you’re paying $15,000 in earnest money then at closing you would owe an additional $25,000 for the remainder of the down payment.
- Down Payment: For the contract, we need to know how much you’re going to put down for your down payment. Typically, this will be the purchase price minus the loan amount.
- Closing Cost Credits: Do you want to ask for any credits for closing costs which would go towards the amount of closing cost fees you must pay for on top of your down payment?
- Home Warranty: Do you want to ask the seller to provide a home warranty on the property?
- Contingencies: Any other contingencies we need to be aware of? Do you need to sell your current home before we can buy this home?
Lastly, buyers sometimes want to know what happens if the offer is accepted and they have a change of heart or the inspection reveals a huge problem. We will cover these issues in detail in the next few sections. Just know that the purchase agreement gives you many protections. Never hesitate to ask me questions.
Want to review the purchase agreement in advance?
Once we’ve talked through the above and you’ve emailed us your answers, I’ll write the offer and have you sign it digitally. This gives you the opportunity to take your time reading through what you’re signing and allows you to put together any questions you might have for me. Once I have the signed offer, along with your lender’s pre approval and proof of funds, I’ll talk with the seller’s agent to determine emphasize your strengths and the best way to submit the offer as expeditiously as possible.
While negotiations sometimes go quickly, be prepared that it could take 24 – 72 hours to even get the offer in front of the seller, they might be out of town, want to on it, they’re dealing with a bank, etc. Every seller is different and some people can make decisions quickly whereas others need time to think things through. Patience is now the name of the game once an offer has been submitted!
Go back to Step 6 to Buying a Home: Time for Showings!, go forward to Step 8 to Buying a Home: I Have an Accepted Offer, Now What?