Making an Offer on a House
How to make the offer that wins, including setting the price, adding contingencies, and developing your strategy for competitive housing markets.
Once you've found a house you like, you must make a written offer to buy it. The seller will either accept your offer without changing it, make a counteroffer with one or more changes, or reject it outright.
Deciding How Much to Offer
Offer too little, and other bidders will beat you, or the owners will wait to receive higher offers. Offer too much, and you might be wasting your money. Consider the following factors when deciding how much to offer:
The advertised price of the house. Treat the asking price as only a rough estimate of what the seller would like to receive, and recognize that different sellers price houses differently. Some sellers deliberately overprice, others ask for pretty close to what they hope to get, and a few underprice their houses in the hope of attracting a flood of potential buyers who will compete and overbid. The seller has no obligation to sell to you or anyone at the advertised price.
What you can afford. What you can pay for a house will probably depend on how much you already have in cash and how much you can reasonably borrow in a mortgage. When figuring out the cost of the house, be sure to factor in your share of the closing costs, which will be about 2%-5% of the purchase price.
Prices for comparable houses. Before making an offer to purchase, you should know the selling prices of nearby houses similar to the one you're interested in buying. For reliable comparable prices (called "comps" in the real estate trade), keep the following guidelines in mind:
A comparable sale should have occurred within the last three to six months (the more recent, however, the better). In a market where prices fluctuate fairly fast, comps should be houses that sold in the last month or so.
A comparable sale should be for a house quite similar to the one you're interested in -- in terms of age, size, and type and number of rooms.
A comparable sale should be within six to ten blocks of the house you want to buy -- or less, if a freeway or other dividing line splits the neighborhood.
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Copyright 2007 Nolo
