If you've found a home that you really want, it's time to make your offer.
At this point, it's very important that you are already pre-approved for the purchase price or that you can get it done quickly. You should also take some time to really sharpen your pencil on your budgeting. You'll be entering a negotiation and you won't necessarily have all the time you'd like to sit back and think about it.
* Warning * When we found the home and felt "this is it!" you really do feel this internal pressure to put in a bid immediately. I remember being afraid that the next person to see the house would make a bid at the asking price and the seller would accept on the spot - we'd have missed out on our dream home!
In reality, this kind of a quick acceptance of an offer doesn't happen. The seller's agent may tell you or your agent that he's had a lot of interest in the property and try to persuade you to put in an offer, but I emphasize this enough - go home and sleep on it.
The most important thing you can do is go home and really take a look at your budget. Figure out what the highest amount is you could pay for the house. I think it is then also very useful to compare this house to the listing prices of the other houses you saw. If this is the best one in your eyes, is it also the highest priced? Is it somewhere in between? I think this is a better way to decide what the real value of a house is.
You will need all this information in order to put in a good offer. Unless your Realtor knows that the house is unlikely to sell otherwise, you need to put in an offer that is high enough for the seller to respond to. You have to expect the seller will then counter. And don't think that if you offer 20% below the listing price, the seller will then move down to 10% below his original ask. He might move down 5% or only 1%.
I can't stress enough here how important it is to know your limits. You'll soon be asked to provide your down payment, and while there are valid ways to get out and get your money back, if not handled correctly, your money could be lost.
Pamela and I didn't heed all of the above advice, particularly around taking time to step back before making an offer. We had a great sense of what we could afford before we made an offer, but we felt we had to put in an offer. We left the open house and went out to dinner with our Realtor who suggested we take our time to think about the offer. We'd seen so many houses and felt that this was the perfect house and it wasn't as expensive as some of the others we had seen. We felt that would make the house sell quickly and that the open house seemed busy enough that another bid might come quickly.
Given these feelings, we told our Realtor that we wanted to put an offer in that night. Our Realtor advised us that in more normal situations, a 10% or even 15% discount to the asking price would probably be a good opening bid. Since we were telling him that we really really wanted this house, we decided to put in an offer about 7% below the asking price.
After a day or so of waiting on pins and needles, the seller's agent told our agent that the seller was making a counter-offer at about 2% below his original asking price.
By not moving down much, we felt it was more likely that the seller felt he had a good chance of getting another offer in around the asking price. Or he could have been bluffing. So, you've got the house of your dreams somewhat within reach and there's a 5% difference between you and the seller reaching a deal. What do you do?
Here's where it's good to again think about all the houses you have seen and remind yourself of your budget. You could accept the counter, you could hold firm, or you could counter his counter. Holding firm essentially guarantees that the seller will wait at least a few more days to see who else might step up. He certainly won't jump at your original offer after just rejecting it. Do you want the seller to sit around and stew on it and perhaps get a competing offer?
Your second option is the most straight forward - accept the counter. You can feel good that you are getting some discount to the asking price. And in the grand scheme of things, whether you are paying 100% of the ask or 98% shouldn't make that big of a difference.
Your last option is to counter his counter offer. You could move up a little or a lot and hope that the seller will just accept. You risk a situation where the seller might counter your counter of his counter offer, at which point you'll probably be very close on price, but maybe in a staring contest.
What did we do? We countered. Our new offer was to "split the difference" with the seller at a 2% discount, and us at a 7% discount. Our final offer of a 4.5% discount was accepted. We were thrilled!
A funny thing seems to happen as soon as your offer was accepted - doubt creeps into your mind. It's not quite buyer's remorse, because you should still be very excited to be on your way to owning the home. It's more of a feeling that you may have overpaid... maybe even overpaid significantly. We were very fortunate to find out later that a competing and "competitive" offer did come in. Now, that could have just been the seller's agent trying to light a fire under us and make sure we were moving forward swiftly.
As we'll discuss in the next post, having your offer accepted is a huge step, but you aren't even close to the finish line.