You've finally found a home you like, and you're ready to make an offer. Be sure to keep these important details in mind:
- Documentation. Negotiations should be handled in writing, not verbally, so there is a clear understanding between parties. Verbal negotiations are usually not enforceable by law.
- Preapproval letter. A seller may give you priority if you have a preapproval letter, which states that you’ve been preapproved for a mortgage amount up to a certain limit.
- Earnest money deposit. You should have an earnest money or "good faith" deposit ready to put into an escrow account. The amount will vary, depending on the local real-estate market.
Even if you're using a real estate agent, it's smart to consult with a knowledgeable real estate attorney about the earnest money deposit and other parts of the offer process.
What's in an offer?
Your offer, also known as a real estate purchase agreement, will cover a number of topics including:
- Sales price. How much you'd like to pay based on your assessment of the home's value.
- Timeframe. When you’d like to close the transaction, which is generally anywhere from 30 to 90 days from the date the offer is accepted by the seller.
- Conditions. Items that allow you to cancel or renegotiate the contract if they’re not met, such as a satisfactory home inspection.
A general home inspection can give you a better understanding of the condition of the property and estimated costs for any recommended repairs. It's a good idea to accompany home inspectors during the inspections. To find qualified home inspectors, ask your real estate agent for a referral or look for members of the American Society of Home Inspectors (ASHI).
Depending on the location and condition of the home, you may want, or be required, to obtain specialty inspections, including termite and pest, radon, environmental, structural, plumbing, roof, electrical, or site and soil. Inspectors will give you a written report that describes the results.
In a competitive real estate market, it's common to see multiple offers on the same house. If this is the case, offer a reasonable price and if you're already preapproved, make sure you let the seller know. You can also try to be flexible in terms of the seller’s requirements. For instance, if you'd like to close in 60 days, but the seller wants to close in 30 days, and you’re confident that your lender can document and close the loan within that time, you may want to agree to the faster closing date to clinch the deal.
Who pays the closing costs for the buyer and seller, as well as various recording and transfer taxes, is almost always negotiated. In a competitive real estate market, you may want to pay all of these costs to make your offer more attractive. If the market is slow, you’ll have more leverage to split these costs or ask the seller to cover them.
If you’re getting ready to buy, contact a Wells Fargo home mortgage consultant today to learn more about getting preapproved.