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Tips for Making an Offer

May 5, 2012

Tips for Making an Offer

What does a first-time home buyer need to know about making an offer?

First of all, you should realize that home prices in 2012 are lower than they were a few years ago — at least, in most parts of the country. So you’ll have to give some extra scrutiny to the seller’s asking price. Here are some other tips and strategies to help you through this stage of the process.

Offer / negotiating tips for first-time home buyers:

Earlier, I stressed the importance of researching home prices in the area where you plan to buy. It’s worth repeating. Before you make an offer, you should have a good feel for what homes are selling for in the area. This information is readily available online. Just visit Realtor.com or Trulia.com and look at homes that have recently sold in the area. If you do enough of this research, you will be able to tell the difference between a reasonably priced home and one that is overpriced.

First-time home buyers must realize that homeowners frequently overprice their homes. They might do this for a variety of reasons. Some homeowners set their asking price based on the amount they still owe on the mortgage. But these two numbers have nothing to do with one another. Remember, it’s called an “asking price” for a reason. You need to compare it to other homes that have sold recently in the same area.

Is it priced comparably–or is it overpriced?

When you make an offer, you should be prepared for three possible responses. The seller will either accept your offer as is, make a counter offer of some kind, or reject it outright. You should have a plan for each of these scenarios. And your plan will be limited by the next thing we’re going to discuss…

You should know the maximum amount you are willing to pay for a house, before you submit an offer. That way, if the seller comes back with a counter offer for a higher amount, you’ll be prepared for it. This relates back to the fair market value of the house. If the seller makes a counter offer that is still within reason, you should consider accepting. But if they refuse to budge on a price that is clearly set too high, you should be prepared to walk way.

Submit a letter of justification with your offer. Show them the data you are using to justify your offer amount. A good real estate agent will handle this for you. It’s rarely a good idea to submit an offer without supporting data. This leaves the seller to believe that you pulled the number out of thin air. You want the seller to know that your offer is based on current market data. They will be more inclined to accept your offer if you back it up with such data.

Some sellers may be more willing to make concessions, rather than reducing the sale price. Talk to your agent about these types of scenarios before you make an offer. Be open-minded about it. For example, a homeowner may be willing to make a contribution to your closing costs from the proceeds of the sale. Or they might be willing to throw in some furniture, in lieu of a price reduction.

As a first-time home buyer, it can be tempting to follow your agent’s advice blindly. You should not over-rely on your agent when making important decisions. They are your advisor. They are not your decision maker. These are your finances that are on the line, and it’s your potential home. Research the market. Use the data to validate the asking price. Trust your own instincts.

SOURCE:

Read more: http://www.homebuyinginstitute.com/mortgage/first-time-buyers-167/#ixzz1tekhIBWT

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