In this segment of the course we get down
to business. We explore the intricacies of making an actual offer to purchase
the home you've chosen. You'll learn how to select the sorts of qualified home
professionals who will be a critical part of your pre-closing team and who can
help you avoid unseen, and often costly, mistakes. We'll also help you prepare
you for moving day.
Here's an outline of what's in store for you in this section:
A Typical Offer Includes:
The Buddy System . . .
Just the Facts, Mack
"Contingent Upon . . . "
The Home Stretch - Going to Closing
Locating Qualified Professional Service Providers
The Home Inspection
The Inspection Report
What if the Report Reveals Problems?
Do I Really Need an Attorney?
Down to the Wire . . .
Moving Day Battle Fatigue
Finding a Qualified Mover
Insurance for the Move
this time, you have already learned how to calculate your maximum monthly payment
and survived the loan application and approval process. You know how much you
can afford to spend on a house, which means you know your limit. Unfortunately,
this doesn't have anything to do with the seller's asking price for a particular
Your goal as a buyer is to purchase a home for the least amount of
money you possibly can. A seller's goal is to obtain as much money for the home
as possible. This is where settling on a price can become a little dicey.
The first step in determining a purchase price is to determine
what the home is actually worth. Just because it has a high selling price on it,
doesn't mean it is really worth all that money. Check it against other homes sold
in the neighborhood. Ask your broker to pull up the real estate comps for homes
similar to the one you're interested in. The comp (or comparable price) should
be for a home that is in the same neighborhood, with the same amenities and the
same approximate size. Comparing a two-story Tudor with a finished basement to
one that doesn't have a finished basement won't help you determine a purchase
price. The homes are too dissimilar.
Looking at the comps will tell you
how high the sales are for that type of home in that neighborhood. The more recent
the comps are the better. You should also ask to see the original list prices
for these homes. This will tell you the percentage of list price the sellers'
are receiving in that particular neighborhood. This percentage will guide you
in making your original bid.
Unless you're living in a very
tight housing market with little room for negotiating, never offer the list price
right off the bat in your first offer. You will want to offer at least five to
10 percent lower than the price that you actually want to pay. For example, if
you want to pay no more than $95,000, then your first offer should be somewhere
between $85,500 and $90,250. This gives you some wiggle room during negotiations.
Never start at the maximum amount you can afford. It doesn't allow you any room
for negotiation once a counter offer is given.
Always know your maximum
price before you start negotiating a final price. This will guide your negotiations.
It will also give you a rational, emotion-free bottom line. You don't want to
be cavalier when it comes to your finances. You must be able to walk away from
the home if the price is too steep. In some cases, you won't have a choice. You
can only qualify for a certain amount and if you can't make up the difference
with cash, you are stuck with that maximum loan amount.
official offer to purchase document is far simpler than the final contract to
purchase. Some states will accept an offer written on anything, including a napkin.
But the best idea for making a formal offer is to use a standard form appropriate
to your state or local jurisdiction. Your broker or settlement attorney will have
these forms available for you.
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