So you’re ready to buy a house, how exciting! Once you have talked with a mortgage banker about your finances, gotten pre-approved, and found the perfect house, you’re ready to make an offer and become a homeowner. But what goes into making an offer? We’ll guide you through different scenarios below.
This is where having a real estate agent is helpful. Together, you and your agent will draft and submit an offer. They’ll also help you negotiate, if necessary. The two of you will decide how much to offer for the property, which your real estate agent should be able to advise you on. Don’t worry — making an offer isn’t as complicated as it sounds. Your real estate agent should have a standard offer form that they will fill in with your specific information, so you don’t have to start from scratch.
A pre-approval letter from your mortgage banker is not required, but could help make your offer stronger (especially in multiple offer situations, which we’ll talk about later). A pre-approval letter shows the seller that you’re serious about buying — you’ve already secured financing for the home, which may make your offer stand out over someone who has not.
Your agent submits your offer on your behalf to the seller or seller’s agent and from there, a few things can happen, which we’ll discuss in the next section.
As a buyer, you should be aware that, in competitive housing markets, multiple offer situations are common. This means that while you put in an offer, someone else wants the house, too, so they also put in an offer. Sometimes, there are even more than two offers. In this case, the seller would choose the offer that is most appealing to them, considering things like how to close the offer is to the asking price (or how far above) and requested seller contributions to closing costs. As a seller, this is a great situation to be in, but as a buyer, it can be frustrating. If someone else makes a better offer, the seller may choose theirs over yours.
After you submit your offer, a few things can happen: the seller can accept your offer, reject your offer, or counter your offer. Let’s look at each situation.
When you make an offer, the seller may decide they can’t go as low as you want and may reject your offer. More often than not, they’ll counter your offer. But if the gap in what they want and what you’re willing to pay is too big, you might find that they’ve been offended and they fully reject your offer. You can put in another offer if your first one is rejected, but many buyers will just move on. Again, your real estate agent should be able to guide you to an offer price that won’t get rejected.
In most cases, the seller will submit a counter offer. For example, on your $200,000 dream home, let’s say you offered $190,000 with the seller paying 3% of closing costs. The seller came back with a counter offer: $195,000 with 3% closing costs. You and your agent will discuss and respond, either with another counter offer or acceptance.
If everything looks good to the seller and their agent, they’ll accept your offer. Congrats! Now there are a few things you need to do:
Secure Financing. If you have already been pre-approved, you’re ahead of the game. Let your lender know they accepted your offer and they’ll tell you next steps. If you haven’t talked to a mortgage banker yet, it’s time. Work together to get all the paperwork and information they need to give you a loan. Your lender will be able to guide you to the loan option that’s right for you.
Order the home inspection. This is usually done through your mortgage lender. After all, your lender wants the home inspection done just as much as you do — it’s their investment, too. The home inspection usually has to be completed within 10 days of the offer being accepted in order to close on time. After the home inspection comes back, you and your agent will make a list of issues you’d like addressed by the seller and submit it to the seller’s agent. The seller can negotiate what they’re willing to (and not willing to) fix.
You’re close to closing! In the few weeks between your offer acceptance and closing, your lender will be preparing your loan for closing. Most of this work happens behind the scenes, but a good mortgage lender will keep you updated throughout the process. In this time, you’ll secure homeowners insurance, work with your title company, and get your lender any last-minute information they may need.
Once your loan is clear to close, you’ll complete a final walkthrough of the home. This usually happens a day or two before closing to ensure that the house has not been damaged and that the items from the home inspection were addressed. If all goes well, it’s time for closing. Once you sign on the dotted line, you’re officially a homeowner. For information on loans, financing, and homeownership tips and tricks, visit the Atlantic Bay blog.