When you find a home you’d like to buy, you’ll need to write an offer for it. Follow these steps to create a successful offer.
- Set a price: Before writing an an offer, you need to know how much to offer for the home. To determine the market price of the home, your agent will run a comparative market analysis (CMA).Another great idea before submitting an offer is to check the property’s sale history. A seller who bought a home several years ago and has seen built equity may be more willing to negotiate on price than a homeowner who purchased a home fairly recently and has seen little equity.
- Get financing: Unless you’ll be offering to pay cash for a home, you’ll need to obtain a loan. Arrange to be pre-approved by a lender before submitting an offer. When you are pre-approved, you have a guarantee from a lender that they are willing to lend you a certain amount under specific terms and conditions. A seller will take an offer from a buyer who’s been pre-approved more seriously than one who’s not. In today’s market, it’s almost mandatory and highly recommended that you are pre-approved for a loan.
- Seek help: It is highly recommended that a buyer gets a real estate agent to represent them and draft up their offer. In California, we use the a standard contract called the “Residential Purchase Agreement” or RPA-CA.The purchase agreement includes the date of the offer, the address and description of the property, the price being offered for the home, finance terms (loan details, how much of a deposit/down payment will be made, etc.), escrow details, closing date, possession date and any contingencies (clauses that allow a buyer to cancel a contract without penalty).You should fully understand your offer before signing it, and your real estate agent should explain to you what you are signing before you submit it to the seller.
- Make a deposit: Along with your offer, you will need to submit an Earnest Money Deposit (EMD). I usually submit an Earnest money deposit of $1,000, unless the seller specifies a minimum EMD.Arrange to have the deposit held in an escrow account (not with the seller), so your money can be returned to you should the offer fall through. If the offer is accepted, the deposit will be deducted from what you’ll owe the seller at closing.
- Negotiate and finalize: Your agent will submit the offer to the seller or to the listing agent.Once your offer is submitted, it’s a waiting game. The seller may be decide to accept the offer, reject it outright, or offer a counteroffer.If the seller offers a counteroffer, it usually suggests changes such as the sale price or the possession date. You can accept the counteroffer, or submit one of your own.
This process will continue until the seller and the buyer mutually agree, or until the offer is rescinded. Once an offer is accepted by both parties and signed, it becomes a binding contract.