Top 5 Considerations for Writing an Offer on a House

Real Estate

Mar 6

You have your finances in order, you know what neighborhood you want to live in, and now the perfect house just popped up on the market. You want to write an offer ASAP. While you may think that the offer price is the only thing to think about, there are many other terms that we have to discuss before sending over your offer.

Let’s review five terms we have to consider when writing an offer.

1) Offer Price

We determine this price based on the listing price, comparable properties that recently sold, the current market, and what you can afford to pay. It can be tough to determine a price when it is a home with multiple offers and an offer deadline. The advice I give is this: If I call to tell you that you didn’t get the house, which number can you look in the mirror at yourself and say, “That was all I was willing to pay. That was my best and final. I am bummed I didn’t get it but at least I didn’t pay more than I was comfortable”. This is because if you lose the house by $5,000, you don’t want to beat yourself up and question why you didn’t offer just a little more.

Tip: Estimate about $20 per $5,000 increase in the purchase price. It makes an additional $5,000 much easier to consider.

On the contrary, if you did get the house, the last thing you want is buyer’s remorse. You should be ecstatic and comfortable with the situation. It is all too often now that the highest bidder backs out of a contract within the first 48 hours, which isn’t fair to the sellers or the other buyer who had the second-best offer and received the call that they didn’t get the property. I want you to be confident and comfortable in both situations.

2) Earnest Money Deposit

When you submit an offer, you put down an earnest money deposit on the property. This ranges from 2% to 3% of the purchase price. The deposit will be credited toward the total purchase price and/or closing costs at settlement. It is used to demonstrate your commitment to purchasing the property. If you and another offer have the same terms but one offers a better deposit, that is usually viewed as the better offer. It acts as a safety net to prevent buyers from suddenly pulling out of a deal. However, if we have to terminate the agreement for inspection reports, for example, you get your deposit money back.

3) Inspection Contingencies

A home inspection is a thorough examination of a property's condition conducted by a qualified inspector before a real estate transaction. The purpose is to assess the overall state of the home and identify any potential issues or necessary repairs. Once the inspection is complete, you must accept the property 'as-is', terminate the agreement, or present a written corrective proposal that lists corrections and/or credits. Below are the common inspection options that buyers select:

General Home Inspection
Wood Infestation (termites)
Deeds, Restrictions and Zoning
Water Service
Radon
On-Lot Sewage (if applicable)
Stucco (if applicable)

In a hot market, many buyers wave inspections. They do this because it gives the deal one less contingency to overcome. While I will never recommend waving inspections, my experience as an investor and renovator allows me to give a good overview of whether I think a house is generally solid or needs too much work. Ultimately, which inspections to elect or wave lies with the buyer.

4) Financing Contingencies

A mortgage financing contingency is the most common type of financing contingency. It allows the buyer a specified period (usually 30-60 days) to secure a mortgage loan to purchase the property. If the buyer fails to obtain financing within the agreed-upon timeframe, they can withdraw from the contract without losing their earnest money deposit. When you have your initial conversation with your lender and receive your pre-approval letter, you determine many of the financing contingencies - it is then my job to include them in the agreement of sale.

5) Settlement Date

This date is usually 30-60 days from the execution date of the contract. However, in a hot seller’s market, it is advantageous to ask the seller if they have a preferable move-out date.

Considering all the terms of an agreement of sale can feel overwhelming, which is why it is important to have an experienced REALTOR® guide you through the process. Reach out to me today to get started on your home-buying journey!