When buying a home, it’s important to think carefully about your offering price—but also your offering terms. Most purchase offers define both. And in some cases, terms and conditions can represent thousands of dollars in additional value for buyers—or additional costs.
Terms may include inspections, requests for specific property repairs, or timing considerations, such as a conditional purchase clause (if, for example, you must first find a buyer for your current home).
Determining a price
Some buyers mistakenly believe there is a predetermined formula for offers—that offering prices should be X percent lower than the seller’s asking price or the amount they are really willing to pay.
In practice, your offer price actually depends more upon the basic laws of supply and demand. If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes even more. If demand is weak, then offers below the asking price may be in order.
How to make an offer
The process varies by state. In most cases, you complete an offer that your representative presents on your behalf. The owner, in turn, may accept the offer, reject it, or make a counteroffer.
Because counteroffers are common (any change in terms can be considered a “counteroffer”), it’s important that you remain in close contact with your representative during the negotiation process so that any proposed changes can be quickly reviewed.
Inspections are common in residential realty transactions. Depending on your needs and where you live, they may include:
- mold inspections
- “green” issues, including energy efficiency and eco-friendliness
- surveys to determine boundaries
- appraisals to determine value for lenders
- title reviews
- structural inspections
Structural inspections are particularly important. During these examinations, an inspector evaluates the property for any material physical defects and whether expensive repairs and replacements are likely to be required in the next few years.
For a single-family home, these inspections often require two or three hours. You should plan to attend too. This is an important opportunity to examine the property’s mechanics (plumbing, wiring, etc.) and structure, ask the inspector questions, and learn far more about the property than is possible with an informal walk-through.