Home-buying Series, Resources + Tools

I’m in Student Loan Repayment and Still Bought a House | Part 4: Making the Offer

**Disclaimer: All of the information included in this series of posts are a personal account of my experiences and my personal opinions. I am not a real estate agent, mortgage broker, financial adviser, or attorney.

Now that you’ve found your dream house (or something like it), what do you do? It’s time to make an offer, but where do you start? First of all, decide when to make your offer. What kind of market is it? Do you have time to sleep on it and take your time, or do you need to move quickly and jump on it before someone else does? When we bought our house this past summer, the market was H. O. T. If you liked a house, you had to move on it because, chances were, someone else had the same idea. And there was a chance they might outbid you even if you did make an offer. As you’re formulating what kind of offer you want to make, here are a few things to keep in mind…

Look at comps.

Use real estate websites like Realtor.com and Zillow to compare home prices in the neighborhood. If your prospective home is priced much higher than the others, but comparable in size and condition, the seller may have just priced it too high in hopes of making more money in a hot market. If it’s priced much lower than surrounding homes, you might want to inquire about this and find out if there’s something specific that’s dragging down the price. Remember that first home we looked at in the frightening neighborhood? If we had only paid attention to the surrounding property values, we would have known right away that something was amiss. It’s one thing for a home to be priced $20K more than the surrounding homes, but $100K?? Big red flag!

Be nosy.

Take all the time you need to walk through the house (just don’t be a creep and set up camp–especially if someone is still living there) and ask all the questions you can think of. Now is not the time to hold off! If you want to know something about the house or neighborhood, then ask. Why are the current owners moving? How long has the home been on the market? What additional costs exist (property taxes, HOA fees, average utilities, is trash included, is the water bill monthly or quarterly, etc.)? If there is an HOA, what deed restrictions exist? Check out any crime reports and see if the area is generally a safe one. You might be shopping in a nice neighborhood, but if you have some unsavory areas on either side, you might have to worry about cross-traffic and potential crime. If nothing else, you’ll definitely want to take the taxes and utilities into account because those are going to affect your monthly expenses.

Keep your budget in mind and stick to your price point. 

Are you going to low-ball, offer list price, or offer above list price? If the house is overpriced for what it is, low-balling may be appropriate. But be reasonable. Just because the owner has horrific taste in paint and drapes, that doesn’t warrant a low-ball offer because those kinds of things are aesthetic and can be changed easily. If the deck is rotting off the house or there are structural issues like crooked doorways or cracked dry wall, then you may have something. However, if the market is hot, you may not even get to consider an offer below list price. If this is the case, you need to think realistically about what your absolute price cap will be and what kind of house you’re seriously interested in, because if you make an offer, you need to assume that’s how much you’ll have to pay if it’s accepted.

We didn’t know about appraisals going into the home-buying process, but it was one of the most surprising elements. If we made an offer on a home for $200K and it got accepted, the deal would move forward to the inspection and appraisal phase. If the house appraised for only $190K, that is the amount we would actually end up paying (unless the seller gets overzealous and still tries to push for the higher price, in which case the buyer is allowed to back out). But DO NOT use this as a safety net just to get your offer accepted. This is because whatever you offer is usually what the house appraises for (funny how that works). So, with this in mind, whatever you offer on a house, you’d better be prepared to pay it.

No matter what the situation calls for, remember that the most important thing is to stay within your budget. Again, this will depend on what kind of market you’re in as well as how that relates to the property. This is also one of those times when it’s great if you’ve built a good relationship with your mortgage originator. We were consulting ours multiple times to keep track of what our monthly payments would be with different offers. Every home will be different, and the more accurate information you have, the more informed and calculated decision you can make.

Assemble your “package.” 

Unbeknownst to us, making an offer isn’t as simple as writing down an amount and sending it off to the seller. There are so many elements to include or not include. You want your offer to be appealing and the seller to accept it without completely burning all your resources. Will you offer below, at, or above list price? Will your offer to pay your own closing costs (usually no more than $3,000)? This depends on the home you’re interested in and whether you think it’ll be a hot commodity among other buyers. Again, you don’t want to get beat out because you put forth a weak offer, but you also don’t want to over-extend yourself financially.

Finally, take all this information (that you may have to process rather quickly), consult your realtor, and they will put together an offer with you. This is also where YOU. NEED. A. REALTOR. I will probably say this in every one of these posts. A realtor can guide you through every single part of this process. Our realtor would ask us questions as we viewed homes and helped us work through dilemmas we had about what kind of house we wanted, what different things to consider, and how we should decide what kind of offer to make. She didn’t tell us what to do, but explained how the process worked and gave examples from her past experiences that might help us. They have all the paperwork drawn up so that all they have to do is enter in the specific information and obtain your electronic signature before it gets emailed off to the sellers.

But remember–TRUST YOUR GUT. You may love a house, but if the price is wrong or there’s something about it that just seems off that you can’t let go of, it’s only going to cause you grief in the long run. If I’d been thinking of it, I would have opted to walk our dog through the house to make sure there were no demonic forces lurking in the closets or attic, but luckily, that doesn’t seem to be an issue (I might be only slightly kidding). Aside from supernatural forces, there were things about the other homes that prevented us from submitting offers, and I’m SO glad we trusted our judgement about them. When we walked through our current home, we KNEW it was our house and we had no reservations about making a strong offer. So that’s what we did, we considered our options, drew up an offer with our realtor, and then…

We waited.

Sellers have a certain amount of time they are allowed to consider your offer before they respond, which is usually a couple of days. If a bidding war is initiated, they can specify that all offers need to be submitted by a certain date at a certain time and they will notify bidders (the realtors) whether their offer has been accepted by a certain time the following day. In our case, there was no bidding war (surprisingly) and we heard back from the sellers that our offer had been accepted a couple of days later. WHAT. A. RELIEF. At that point, we could finally move forward to the next stage–inspections and negotiations. And let me tell you, we learned A LOT from that stage of the game.

Stay tuned, friends, for the nitty gritty on home inspections, negotiations, and how to find your zen in the midst of it all so you don’t lose your cool and threaten to destroy the entire deal over one misunderstanding because you’ve had enough of house-hunting and if you have to start over and walk through one more house, you’re going to burn it to the ground.

Totally kidding. #notreally


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