You've looked and looked, and you've finally found a lovely home! What's the best way to go about making an offer on the home that you've chosen to buy? Here are the three methods that have been successful for my clients:
1. The best way to get the home you want is to make a full-price offer. If the home is in good condition and/or is well priced, there is no shame in offering full price. Before you make an offer, I will check on the most recent comparable sales of similar homes, the same ones that an appraiser would use.
If you are getting a VA loan and the seller will be paying non-allowables, or if you need a contribution from the seller towards your closing costs, that amount can be added back to your offer price to add up to more than the asking price. The home would still need to appraise for that amount, however.
Before I submit an offer, I try to find out from the listing agent what the seller's needs are, why they are selling, and what kind of terms they might agree to. If the home is vacant, they might want a quick closing. If they have a lot of furniture and stuff to move, they might agree to a longer closing period or even a lease-back. They might not want the hassle of moving a refrigerator, so my buyer might as well ask for it, if nothing else as a negotiable item. I want to maximize the chances of my client's offer being accepted.
2. The second-best way to get the home you want is to make an offer at less than full price, including any contributions by the seller to your closing costs, but leave the door open for a counter-offer. If the home is in good condition and/or is already well priced, the seller will need time to consider your offer.
Whenever I submit an offer, I write a cover letter explaining that my buyer really likes the home and is qualified to buy it. I don't say anything negative about the property or say the asking price is too high. I assume that my cover letter will be forwarded to the sellers. I attach an up-to-date letter from my client's loan officer and/or a bank statement as proof of funds to close. I explain to my clients that the offer is a sales document, and I try to make it as "clean" and the terms as appealing as possible. I don't impose deadlines or write redundant, unnecessary clauses into the Special Provisions. I include reasonable deadlines for obtaining disclosures, inspections, surveys, and loan approval. I make it clear to the listing agent that my clients are not trying to take the sellers to the cleaners, but are trying to stay in their budget. In San Antonio, an offer of 3% under the asking price is not considered unreasonable, unless the home is in perfect condition.
The risk you run with a lower offer is that another buyer may come in with a better offer while the seller is thinking yours over. With this method, you at least have a good chance of getting a counter-offer, even if the seller has received another offer. If not, you might get your lower offer accepted, but you may get some resistance down the road if you ask for an extension of the time to close or for non-major repairs to be done at the seller's expense.
3. The third-best way to get the home you want is to lowball it. If the home is in good condition and/or is already well priced, your chances of getting the home are slim with this method. You run the very real risk of offending the seller, and they could counter back at full price.
It may be different in other states, but in Texas, the seller is not obliged to reply to an offer in a certain time period; in fact, they do not have to respond at all. Your offer can be accepted, rejected, countered, or ignored. If there are multiple offers, the seller can just pick the best one, or go back to all the buyers and ask for their highest and best offer. Then it's basically an auction.
In general, the farther away you are from the seller's asking price, the longer it takes to come to an agreement. And in the meantime, another buyer could be submitting an offer.
If you are trying to get the bargain of the year, it will probably not be this home. If you want a screaming deal, we need to go look at fixer-uppers, foreclosures, or other distress properties, which often (but not always) need a lot of work. Sellers are more likely to consider a lowball offer on a property that isn't in good condition, unless it's already well priced to take the need for repairs into account.
Consider this: each $1,000 adds about $5.37 a month to your mortgage payment at today's interest rate of 5%. That's $64.44 a year. Is it worth it to lowball the home and risk losing it for the price of a few burgers?
Having said that, if you still want to make a lowball offer on a home, I will write it up and do my best to get it under contract. My job as your buyer's agent is to give you all the information I can, as well as my recommendations based on my experience and knowledge, and then to carry out your instructions.
So if you have found the house you want, I recommend choosing one of these three ways to make it your home.
Robin Rogers, Realtor, Broker-owner, ABR, TRC, CRS
Also Cat Owner, Smartass, Aspiring Drummer but with no time to practice
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