Before you Make an Offer

Telling a seller you want to purchase their home involves much more than just the sale price.  Below are some questions you will want to consider before making an offer. 

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1. Who are the buyers?

Are you buying the house with your wife? With your boyfriend? With your parents?  Is the person paying for the home different than the person who will own the home?  There is not always an obvious answer to who will own a house, so a discussion ahead of time can prevent an awkward conversation later!

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2. How much should we offer?

Most buyers would like to know if the seller would accept lower offers than the price the home is advertised – however buyers are seldom given that information.  Have a discussion with your agent about whether there are potentially other competitive offers for the property and how to protect yourself in that scenario.

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3. Earnest Money Deposit

When an offer to purchase a home is accepted by the seller, the buyer is required to put down an earnest money deposit as a show of good faith intention to purchase the home.  For many home purchases, this amounts to about 1% of the purchase price, usually not less than $500.  Discuss with your agent the amount that reflects your best interests.  This deposit gets credited back to you when the sale of the home is completed.

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4. Should we ask for seller assist?

Whether you can receive seller assist depends on the home loan you qualify for.  With conventional home loans, amount of seller assist may vary.  With most FHA loans, you can receive up to 6% of the sale price in seller assist – meaning the seller is willing to take proceeds from the sale amounting to 6% of the sale price and use that to pay down your closing costs.   A consequence of this is the seller is making less from the sale of the home, compared to a similar offer from a buyer that does not ask for seller assist.  You will want to have a discussion with your lender about the cost difference to you between receiving and not receiving seller assist.

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5. Should I have inspections done?

Yes.  Absolutely yes.

 A home inspection allows a buyer to have a professional walk through the inside and outside of a home to screen for any concerns a buyer may have heading into a home purchase.  If there are any small repairs required, the buyer may decide to renegotiate with the seller or accept the property "as-is".  If there are any major repairs required, the buyer can back out of the home purchase entirely – AND get their earnest money deposit back.   A general home inspection can cost between $400-500.  The types of home inspections a buyer may elect can include radon, well water, septic inspections, wood infestation, property boundaries, and more – and the inspections you elect to have done will largely depend on the home your interested in buying.  The home inspections are an expense the buyer does not get back – but could save you thousands in unexpected home repairs. 

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6. When do you want to move into your new home?

For buyers with FHA loans, it can take up to 45 days to close on the purchase of a home.  For buyers with conventional loans, it can take as few as 30 days, but you may want to allow more time if you are conducting inspections.  So if you want to move by a certain time of year, when you look for a home may be impacted by this amount of time.

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7. How much money will I need to purchase a home?

A lender will give you a cost breakdown that includes down payment, appraisal cost, closing cost, and other costs to summarize what your monthly mortgage payments would be and how much you need to bring to closing.  These costs will vary depending on the purchase price of your home and the type of loan.  You should understand these costs very early in the process.