Now that you are ready to make an offer this is another area where your agent is invaluable in negotiating for you. Before you submit an offer, have your agent pull up the most recently sold comparable (CMA) within a reasonable radius of the home, so you can compare the home fairly in terms of location, size, features, and amenities. Next, ask your agent about market conditions, so you can choose a strategy.
- In a buyer’s market, discounts are common because there are fewer buyers, more properties for sale, and home prices are soft or falling. In a seller’s market, homes sell quickly for full price or higher because there are plenty of buyers and few homes for sale. Whether you are in a buyer’s market or a seller’s market, your goal is to buy the home at a fair price. If you were the seller, what is the lowest possible price you’d accept?
- Low-balling the seller is risky. If the seller feels insulted by your offer, you’ve lost the opportunity to negotiate. On the other hand, some sellers are simply unrealistic about their home’s value. Maybe your offer will be their wake-up call. If the seller’s home is offered at a reasonable price, pay the asking price or close to it. A home priced to sell will sell quickly.
- Is there a way to sweeten your offer with a quick closing or an all-cash sale? To show the seller you’re serious, include a copy of your lender’s pre-approval letter, along with a cover letter summarizing your strengths as a buyer in terms of creditworthiness, flexibility in closing, and why you love this home. Include a copy of your comparable to show why you feel your offer is a fair price for the property. If your offer is conditional, such as your need to sell another home before closing on the seller’s, you’ll have to find a way to sweeten the deal, such as a full-price offer. Few sellers would accept a discount and a contingency at the same time.
Now that you know the lay of the land you need to decide whether you will go with the asking price. The offer will include conditions, or contingencies, necessary for the sale. Your real estate professional will help you draft the offer with a price, estimated closing date, and terms, including earnest money (a guarantee that you’ll perform as a buyer in good faith), final approval by your lender, and your right to have an inspection. When An Offer Is Generated On Your Behalf your agent will do the following:
- Go over every item in the contract with you so that you thoroughly understand what you are offering and what you are asking for.
- Present the offer for you personally.
- Share your Pre Qualifications letter to the cooperating Broker
- Discuss all offers with you in private, after listening to the other agent. Evaluating an offer is more than an arithmetic computation. There is no substitute for good instincts and experience. Your agent will help you answer all the above questions so that you may make an informed decision based upon your agents continuing involvement in real estate transactions on a regular basis. The first hurdle is usually the home inspection that is conducted by an inspector working on behalf of the buyer. Your agent will be present and represent you during the entire inspection that takes about two hours. Your agent will follow-up on the myriad of details that remain including handling the deposit, the appraisal, mortgage financing, survey, title insurance, and all closing documents for buyer, seller and attorneys. Your agent will review all documents with you, keep you posted on the progress of the final details and personally attend the closing.
Once your offer is negotiated and accepted, your earnest money will be sent to the escrow agent's office. Now the inspections
occur, and this is where the contract negotiations can break down. During the inspection process, the inspector will tell you about the condition of appliances, heat and cooling systems, roofs, electrical and plumbing systems, etc, and if your future home is up to current city codes. You should only renegotiate a repair when it wasn’t obvious before, or when a system is unsafe or not functioning. This is a good time to think about a Home Warranty
.Once the seller has agreed, your offer is now a binding contract, and you’ll proceed to closing. Talk over with your agent if you should get a Land Survey
and a Home Appraisal
at this time.Michigan Property Tax Estimator
Transfer tax needs to be paid at closing. I found a Michigan Government website
that will help you understand the tax. The example below from the state website explains how it works.Example
Calculating the real estate transfer tax is done in increments of $500. The state charges $3.75 for each increment and the county charges $.75. These combined represent the total tax obligation. The Michigan legislation states: That a discounted rate of $. 55 is allowed if the county’s population is less than 2 million.OH NO! Someone else has put in an offer on your dream home!
If you are disappointed to find that someone else has already submitted a contract on your dream house, you may want to consider making a backup offer. Discuss this option with your real estate agent if you really love the house. Backup offers don’t always work out, but enough do that you might want to consider the possibility.
Because the backup offer is a binding contract, you want to be sure that your financing is approved and that you’ve included all the contingencies that you would have in a first offer. If the original contract falls apart for any reason, you must be prepared to follow through with the purchase. Make your offer a fully executed agreement signed by you and the sellers, outlining price and terms. This will ensure that they must sell to you within a specified time period if the house becomes available again.Buyers always ask why an offer might fall through?
- The buyers’ loan might not be approved. Loans are becoming tougher to get and if they can’t get approval, the buyers will have to back out of the deal.
- The lender will require a home appraisal to verify the home’s worth. If the appraiser says the property is worth less than the price offered, the lender can deny the mortgage.
- The home inspection might uncover problems that the buyers don’t want to deal with and the original contract can fall apart.
- The buyers may have made a contingency contract based on the sale of their current home. If that sale doesn’t materialize in time, the domino effect could make your dream home available again.
- There might even be problems due to homeowner association requirements. For example, the buyers might have three pets and back out of the contract when they discover the HOA only allows two.
Several of these scenarios can work well for you and your backup offer. If the first deal crumbles, the sellers may be willing to move ahead very quickly with your offer. With a contract on the table, they had already begun the mental process of packing, moving and handing over the keys to someone else. If their deal comes to a screeching halt, the seller may be very willing to accept your backup offer just to keep the momentum going. You may also realize an advantage if problems were uncovered by the inspection conducted for the first buyers. Those issues aren’t going away, so the seller may be more reasonable in negotiations with you rather than lose the deal a second time. The seller is legally required to disclose any problems with the house, so you will know any issues uncovered by the first inspection before you start to spend time and money on inspections of your own. Estate transactions require many steps and something can go wrong at any phase of the process. Rely on your agent to walk you through every phase, including preparing a backup offer. It may save the day when your dream house is on the line.
Let Valerie Bomberger, ABR with REMAX Harbor Country help
you in the home buying process and answer questions on backup offers. Berrien County Michigan Waterfront Homes For Sale