Understanding Mortgages: Making an Offer

In the midst of one of the most uncertain real estate markets in history, it’s more important than ever to be informed. In a continuing series, we take a look at some of the most pressing questions about mortgages, refinancing, home equity, and other real estate options available to you.

(9/27/2012) You’ve found the home you’ve been searching for. Whether it’s a condo or a single-family home, the next step is to make an offer to purchase the property.

For people new to home purchasing, and to those who have been around the process multiple times, making an offer can be a bit intimidating. Potential buyers must balance competing factors — offer too much, and there could be difficulty in obtaining an appropriate appraisal and loan, and offer too little, and the seller may reject it.

The key to making the best offer then is following a smart process from beginning to end.

Before making an offer, and before even looking at properties, buyers should know exactly what they can afford and what they can’t. The tricky part here is that many buyers may pre-qualify for a loan that’s bigger than their budget, which can encourage some to offer more than they can afford. By understanding firm numbers that are reasonable on a monthly basis, and gearing offers towards that, buyers can avoid getting in over their heads.

Another smart move is enlisting a real estate agent as a resource and guide. Particularly for those new to the home buying process, an agent can provide data about comparable properties and their selling prices, which can help buyers hone in on an appropriate offer. They can also provide a strategy of offers and counteroffers that can get you a good deal.

With budget and comparable data in hand, and with the guidance of a real estate agent, buyers can then provide an offer for a home. Typically, you will need to present “earnest money” along with the offer — a certain sum that demonstrates your seriousness as a potential buyer.

In most cases, the offer you present will be less than the asking price — sellers will often ask for more than they expect to sell for, and even more than market value. The offer will occur in the form of a written proposal, which is often provided by your real estate agent to the seller, the seller’s agent, or the seller’s attorney. For some properties, like those in bigger condo developments, there may be a form that offers must follow.

After making the initial offer, sellers will either accept it, reject it, or provide a counter-offer. The last option is very common — usually the offer is the starting point of a negotiation. Since sellers often inflate home prices, it’s expected that there be a series of offers and counteroffers before agreeing on a price. Each time either side presents a counteroffer, the other party is free to accept, reject, or provide an additional counteroffer. During the negotiation, buyers and sellers may discuss the price of the property as well as any concessions or special agreements, including:

    • Price
    • Terms (whether the purchase will be cash or subject to mortgage approval)
    • Target date for closing
    Closing costs, and any funds provided by seller towards these costs
    • Repairs needed and who is responsible
    • Amount of earnest money deposit, and the process for refunds if the offer does not go through
    • Details around real estate taxes, rents, fuel, water bills and utilities, including who will pay and until when
    • Provisions about who will pay for title insurance, inspections, and more

All of the back and forth should be captured in written form, which your real estate agent will ensure.

Important to remember throughout the entire process is to remain logical and keep emotion out as much as possible. Becoming overly emotionally attached to a property before purchase can cloud a buyer’s judgment, resulting in a missed opportunity or a deal that could have been better.

For Additional Reading:

The Art of the Aggressive Offer

How Low Can You Possibly Go on a Real Estate Bid?

Why Some Low-Ball Real Estate Offers Work — And Others Don’t: http://moneyland.time.com/2011/08/31/why-some-lowball-real-estate-offers-work-—-and-others-don’t/




Other related articles:

Understanding Mortgages: Buy or Rent?

Home buyers replace investors, easier mortgages replace all-cash deals

Understanding Mortgages: What is Market Value?

Understanding Mortgages: Buying an Investment Property

Understanding Mortgages: Buying a Condo

Understanding Mortgages: Buying a Foreclosed Property

Understanding Mortgages: What is Pre-Approval?

Disconnect between what buyers, sellers want




Fannie Mae & Jumbo Mortgage Rates

Just One Click! = Current Rate Chart

Pennsylvania Mortgage Rates Current Mortgage Rates - Hawaii Current Mortgage Rates - Alaska West Virginia Mortgage Rates Virginia Mortgage Rates District of Columbia Mortgage Rates Maryland Mortgage Rates Delaware Mortgage Rates New Jersey Mortgage Rates Connecticut Mortgage Rates Rhode Island Mortgage Rates Massachusetts Mortgage Rates New Hampshire Mortgage Rates Vermont Mortgage Rates New Hampshire Mortgage Rates Maine Current Mortgage Rates Vermont Mortgage Rates Current Mortgage Rates - New York Current Mortgage Rates - Michigan Current Interest Rates - Wisconsin Current Mortgage Rates - MINNESOTA Ohio Mortgage Rates Current Mortgage Rates - Kentucky Current Mortgage Rates - Indiana Illinois - Current Mortgage Rates Current Mortgage Rates - Iowa Missouri Mortgage Rates Current Mortgage Rates - North Carolina South Carolina Mortgage Rates Current Mortgage Rates - Florida Current Mortgage Rates - Georgia Current Mortgage Rates - Tennessee Current Mortgage Rates - Alabama Current Mortgage Rates - Mississippi Current Mortgage Rates - Louisiana Current Mortgage Rates - Arkansas Current Mortgage Rates - Oklahoma Current Mortgage Rates - TEXAS Current Mortgage Rates - New Mexico Current Mortgage Rates - Arizona Current Mortgage Rates - Kansas Current Mortgage Rates - Nebraska Current Mortgage Rates - Colorado Current Mortgage Rates - Wyoming South Dakota Mortgage Rates Current Mortgage Rates - North Dakota Current Rates - Montana Idaho Current Rates Washington Mortgage Rates Current Mortgage Rates - Oregon Current Mortgage Rates - Utah Current Mortgage Rates - Nevada Current Mortgage Rates - California

Start by selecting your state

Get the Updated and Improved Mortgage Rates App from ERATE.com

ERATE App - Current Mortgage Rates and Credit Cards
FREE Mortgage Rate Widgets
Your State's Rates or National Rates
Get this Widget for any State you want