Tips & Tools : offer

Why Buy a Home?

RE.com Tips & Tools — Tue, 21 Aug 2007 18:30:00 GMT

Having trouble deciding whether to buy a home? While home ownership isn't right for everyone, there are a few advantages that are well worth considering.

Deciding to buy a home is a big step in anyone’s life. For first-time home buyers in particular, the financial commitment of a mortgage can be daunting. Why pay all that money up front when you can simply go on renting? The answer, of course, depends on many different factors. But there are several good reasons that everyone should consider.

1. The chance to build equity.
Aside from having a roof over your head, the ability to build equity is one of the most valuable aspects of home ownership. Each monthly mortgage payment you make helps you to build equity and brings you closer to owning your home outright. Home improvements that increase the value of your property may also add to your equity. And, if property values in your area rise, your equity will, too.

2. Possible appreciation.
Most large purchases, like cars, boats or electronics, go down in value as they age. Conversely, a home usually increases in value over the years, especially if it’s been well maintained. And if your home’s value has increased substantially by the time you’re ready to move, you may be able to profit from its higher resale price.

3. Preferential credit options.
Once you build up equity in your home, you can benefit from a new avenue of borrowing through home equity loans and lines of credit, and cash-out refinancing. Home equity loans -- loans that are leveraged against the value of your house -- are usually offered at a lower interest rate than conventional loans because, with the house as collateral, they represent a lower risk to the lender.

If you manage these credit sources wisely, they can become a valuable source of income for major purchases such as a new car, vacation property, home renovations or emergency funds to use in the event of such things as a job loss or unforeseen medical expenses.

However, because a home equity loan is secured with your house, it’s important to never borrow more than you can comfortably afford to pay back. Otherwise, if you miss your payments, the lender could end up taking possession of your home.

4. Beneficial tax breaks
Home ownership does require you to pay some extra fees, such as property taxes and interest on your mortgage balance. But fortunately, both of these expenses are usually tax deductible.

Borrowing against your home’s equity may provide a tax break, too. Home equity loans of up to $100,000 are usually tax deductible. In addition, if you’ve used your house as a primary residence for two or more years, you can exclude up to $250,000 (or $500,000 if you and your spouse file jointly) in capital gains when you sell the property. (Check with your financial advisor for advice on your personal tax situation.)

5. Personal control
As a homeowner you can often exercise greater control over your housing costs than renters. For example, you may choose to lower your monthly utility bills by reducing your energy consumption. This may not be possible as a renter if utility charges are bound up in your rental payment. Also, when you own your own home, you have more freedom to renovate as you choose without worrying about restrictions set out in a tenancy agreement. Plus, any upgrades you make may eventually pay off by increasing the resale value of your home.

6. Pride of Ownership
Finally, home ownership has plenty of non-financial benefits, too. When you own a home, it’s yours; you can do what you want with it in terms of decorating, gardening or renovating.

Remember, you not only own the house, but the land it sits on. There are few things as empowering as knowing that there’s a piece of the world out there that belongs to you; a place you can truly call home.

Top 10 Things Not to Do When Making an Offer on a Home

RE.com Tips & Tools — Fri, 20 Apr 2007 20:17:00 GMT

A lot of things can go wrong when you're putting in an offer on a home. Learn how to avoid them with the following list of common purchase-offer mistakes.

House hunting can be exciting and fun, but once you’ve found the home you want to buy, your next step should be all business. Making a purchase offer is a crucial part of buying a home, and one of the easiest to do incorrectly. Here are 10 of the most common mistakes you should avoid.

1. Not using an agent and a lawyer. You can purchase a home through a seller’s real estate agent, but remember that person represents the seller, which means he or she may not always be acting in your best interest. Using a buyer’s agent to prepare your offer will put an experienced negotiator on your side, and it doesn’t cost you any extra. Your agent splits the commission (that comes out of the sale price of the home) with the seller’s agent. Also, even if your state does not require one, using a real estate lawyer to review your offer will help make sure you haven’t left anything out that you may come to regret.

2. Making an unconditional offer. It’s always wise to make your offer conditional upon a professional home inspection. This will ensure you have a way out of the deal if the inspector finds a structural defect or other major problem. You should also make your offer conditional upon an independent appraisal to protect yourself if the home is worth less than what you’ve offered to pay. Finally, if your new home is in an area where insurance is hard to obtain, it’s a good idea to make your offer conditional upon getting coverage.

3. Including too many non-essential conditions. Sellers prefer not to deal with buyers who make too many requests. That’s why it’s a good idea to get pre-approved for a mortgage so you don’t have to make your offer conditional upon obtaining financing. This is especially true in a hot market where a seller may be receiving multiple bids and you may lose out to someone who already has their financing arranged. Your offer will also be less attractive if you make it conditional upon selling your own home, or on some other event the seller can’t control.

4. Lowballing. In a cooling market, your offer usually shouldn’t be for the full asking price, but you also don’t want to offer too little. If other buyers are considering the home, your offer will be quickly tossed aside. Even if there are no other offers on the table, insulting the seller may sour further negotiations. However, if the seller is highly motivated -- for example, if the house has been on the market for many months -- a lowball offer just may succeed.

5. Neglecting to price shop. Some sellers intentionally overprice their home to test the market. Before you make an offer, obtain a list of what other homes in the same neighbourhood have recently sold for. Your real estate agent, or even the seller’s agent, can provide one.

6. Getting caught in a bidding war. Don’t fall so in love with a home that you lose your sense of perspective regarding its true value. Set a reasonable upper limit that you’re willing to pay and don’t sign back an offer for a higher amount just to beat out other bidders. If you do, you could end up with the home, and a serious case of buyer’s remorse.

7. Allowing your agent to pressure you. While a buyer’s agent should always act in your best interest, it’s important to remember that he or she doesn’t make any money until you buy. Your agent therefore has a vested interest in closing the deal. Be careful not to get persuaded into offering more than you’re comfortable with, or into accepting a seller’s counter offer that you don’t like.

8. Getting cold feet. Making a purchase of several hundred thousand dollars can overwhelm if you dwell on it. But if you’ve done your homework and have checked out the house thoroughly, you should present your offer with confidence. Don’t get hung up on tiny details. No house is perfect.

9. Not asking for extras. In a buyer’s market, you have more negotiating power, so use it to your advantage. If you sense that the seller is motivated, see if you can get them to include such things as appliances in the deal. You may also be able to get them to pay for minor repairs or agree to pay the closing costs.

10. Accepting verbal agreements. If the seller has agreed to include certain items in the deal, such as a particular piece of furniture, put it in the offer. If the agreement isn’t in writing, you will have no recourse if you show up on moving day and discover the item is gone.

How much should you offer for that home?

RE.com Tips & Tools — Mon, 09 Apr 2007 20:20:00 GMT

You've found a home you want to buy, but how much should you offer to pay for it?

One of the most perplexing points in the home-buying process is the decision of how much to offer for the home you want to buy. If you offer "too much," you might experience buyer’s remorse or feel the house was "overpriced." Yet if you offer "too little," you might infuriate the seller and lose your opportunity to purchase the property.

So, what’s the right amount?

To answer that question, you’ll need to do some homework and give some serious thought to how sincerely you want to buy that particular home.

Your agent can make offer recommendations

Don’t rely on the listing agent who represents the seller to help you decide how much to offer for the home you want to buy. Rather, ask your own real estate agent about the asking and selling prices of other homes in the area and market conditions that might indicate whether you should offer more or less than the seller’s asking price.

If the market is characterized by multiple offers and strong demand relative to the supply of for-sale homes, you might want to offer more than you would if the market were characterized by price reductions and weak demand relative to supply.

You also might want to offer more if the home has certain features that are must-haves for you, but aren’t widely available on other comparable homes in the area.

Time pressure could be another reason to offer a higher price if your current home is already on the market or you need to move by a certain date due to school schedules, employment or other reasons.

Some buyers try to anticipate the direction of home prices and build that expectation into their offer. Future prices may be important if you intend to sell the home within a few years, but market cycles may be less relevant if you plan to stay put for a while. Moreover, sellers may be loath to discount their asking price simply because you think prices might be lower in the future.

Offers that are contingent upon an appraisal, financing, the sale your current home or other conditions are less attractive to the seller than are offers that don’t include such requirements. If your offer contains contingencies, you may wish to offer a higher price as an inducement to the seller to accept those conditions on the sale.

Be cautious about online estimates

Automated valuation services on real estate Web sites are a popular resource for home price estimates. These estimates are not appraisals; rather, they rely heavily on historical home-sales data. Consequently, they might not be a reliable indicator of a home’s current value, especially if the market is on a turning point.

A similar resource is local multiple-listing services data about homes that are currently on the market. This data may be available on local MLS or brokerage company Web sites.

Don’t exceed your budget

Never offer more for a home than you actually can afford to pay. Get a pre-approval letter from your lender that states how much you can borrow and an estimate of your closing costs. Be honest with your agent about how much you’re willing and able to spend and what features you must have in your home.

Step 6: Making an Offer

RE.com Tips & Tools — Sat, 20 Jan 2007 19:43:00 GMT

Once you've found the right home, the next step is to make an offer to the seller.

This can be a nerve wracking step in the home buying process, especially since you stand to spend a great deal of money and there is a chance that the seller will reject your offer. Here a few things to keep in mind when making an offer on a home.

You Don’t Have to Offer the Asking Price

Remember, an asking price is just that. Work with your real estate agent to choose the right price for your first offer. Some things to consider: what other homes in the area are selling for, the condition of the home, and how long the home has been on the market.

A home that needs considerable repairs and updates or one that has been on the market for a long time may warrant making an offer that is lower than the seller’s asking price. But if the house is in excellent condition and has gotten a great deal of attention from other buyers, it might mean that your offer should stick closer to the asking price, or even be higher.

Keep in Mind Your Bargaining Chips

Remember that price isn’t everything. Getting preapproved for your mortgage, not having a sale contingency and being flexible on the closing date can all make your offer more attractive. Contingencies can also include home repairs and leaving major appliances. There may be other parts of the contract that are important to the seller; being flexible will help you. The easier you make the deal for the seller, the better change you have of having your offer accepted.

Put it in Writing

Once you and the seller have agreed on an offer, make sure everything is in writing, even things that may not seem important. Perhaps you asked the seller to include drapes or bookshelves. To ensure those items are included in the deal, put them in the contract.

How to evaluate home sales offers

RE.com Tips & Tools — Tue, 16 Jan 2007 21:37:00 GMT

Q: I'm about to put my home on the market. What factors should I consider when I'm evaluating sales offers?

A: Obviously, you want to get a good price. But the closing date and other conditions can be just as important. Sometimes a lower price with fewer restrictions can be a better deal. Here are the major factors to consider:

Price. It’s important to know how an offer compares to the recent sale price of homes in your area. You can find out what your home is worth, free of charge, through LendingTree. Request a free home value estimation or market analysis by a pre-screened agent.
Timing. A closing date that meets your requirements, such as your need to move right away, or at the end of your child’s school year, might be worth more to you than the highest price.
Who pays for what. An offer that requires the buyer to pay for expenses you might normally cover, such as closing costs or legal fees, might add up to more dollars in your pocket than an offer with a higher price. Other costs that might be negotiable include the broker’s commissions, the price of a home inspection, lawyer’s fees, the title search and taxes.
Items included in the deal. Most buyers expect you to include everything permanently installed or attached to your property, such as light fixtures or a built-in dishwasher. The selling price should be slightly higher if your buyer also wants items such as your refrigerator, washer-dryer, chandeliers, furniture and curtains.
Is the buyer pre-approved? Even the best price will quickly lose its luster if your buyer can’t come up with the funds on closing day. To protect yourself, make sure the offer specifies that the buyer has been pre-approved for a mortgage big enough to purchase your home.
Size of the deposit. A serious sales offer comes with a deposit (also known as "earnest money" or "a binder") which is held in trust by your lawyer or the buyer’s real estate agent until the closing date. It can be anywhere from 1 to 10 percent of the selling price, but a higher percentage indicates a higher commitment on the part of the buyer.
Inspections and repairs. Don’t be put off if the offer is conditional upon a home inspection. The buyer usually pays for this. It offers reassurance that your home’s structure is sound and that your heating, electrical, plumbing and other systems work. And homes that sell "as is" usually go for a lower price than homes that have been inspected. Warning bells should start going off, however, if the offer requires you to pay for additional specialized home inspections and the cost of repairs. It can be expensive if the buyer wants you to pay for a roof inspection, inspection for termites or other vermin, inspection for earthquake or flood protection, and/or inspection for the presence of lead-based paint or radon.
If the offer is conditional. An offer that says the sale is contingent on sale of the buyer’s home is risky. It means the deal won’t close unless the buyer sells his or her home, usually within a certain period of time. If the buyer can’t or decides not to sell, your deal will fall through.
Clauses that can cost you money. Be leery of clauses that say you have to pay extraordinary costs, such as the cost of a home appraisal or the cost of the buyer getting a mortgage. Also, be careful that your closing date doesn’t require you to move out before you are able to move into your new home, or you could end up paying for expensive interim accommodation.

It’s important to sit down with your REALTOR® and go over every offer. A good agent will explain what every clause will mean to your bottom line. They are also skilled negotiators. They can often respond to an unacceptable offer with a successful counter-offer that includes a better price or fewer conditions.

Bill Yeager

Regional Vice President, Realty Services

Step 4: Reviewing and Negotiating Home Sale Offers

RE.com Tips & Tools — Tue, 16 Jan 2007 18:13:00 GMT

When considering offers, take into account more than just the price of the house.

Your house has been on the market and now you have an offer. What should you consider when deciding whether to accept, reject, or counter?

First, remember that the offer is not just about a price for your house. The potential buyer has written all sorts of other things into their offer. They want your refrigerator, curtains, and even your grill. Can they do that?

Understand what’s in the offer

A home sale offer can include these things and more. It is very common for
a buyer to want appliances such as your refrigerator, washer and dryer included in the home sale. Curtains are also a standard inclusion. However, the buyer might also want the custom-built furniture that fits perfectly in that little nook or your workbench in the garage. If the buyer wants it, they can always ask for it in the home sale offer.

Also look out for contingencies, such as the buyer needing loan approval or selling their home. These can create problems down the road, should either not come through.

Decide on your response

Once you have read through and understand the offer, how do you decide what to do next? First, is the price satisfactory to you? If the offer is at or above what you had hoped to get for your home, take another look at any contingencies. If there are none and everything else in the offer is satisfactory, then you should probably accept, or counter offer to get the sale details exactly right.

But what if the price is right, but the sale is contingent on the buyer selling his home? This is where you’ll want your REALTOR®’s expertise to help you gauge the market. Did you have a lot of other interested buyers? If so, another offer may soon come your way. But if it took a while to get to this offer, you may want to take it despite the sale contingency, or counter offer for slightly more because of the contingency.

Counter offers

Perhaps the offer was a bit under what you had hoped to get for your home, but the buyer is pre-approved and there are no other contingencies. In this case, it makes sense to counter offer. Many buyers submit first offers that are lower than what they’re willing to pay, so you’re likely to get a bit more for your home. Even if the offer price is right, you may counter offer on some other points in the contract, such as occupancy date or taking your appliances with you.

Low-ball offers

You may get some offers that are much lower than your asking price, especially if your house has been on the market a while. If the market is strong and you’ve had a lot of interested buyers looking at your home, you may not want to waste time on a low-ball offer. In this case, you can just reject the offer. However, if a lot of the offers you’re getting are low, you should talk with your REALTOR® about whether your home is priced correctly. Say your home is priced at $255,000 and you’re getting offers for much less. Reducing your price to $249,000 may bring in many more prospective buyers, who are capping their search at $250,000. By reducing the price slightly, the end result could be a better offer than the low-ball offers you’re getting now.

Multiple offers

A few sellers are lucky enough to have multiple offers to consider. This is a great position to be in, and you can use your leverage to get the price you want, with few contingencies. However, be careful not to get greedy. It is possible to turn off buyers, especially if there are other, comparable homes for sale in your neighborhood.

Negotiating points

When you’re negotiating, don’t forget the non-financial bargaining chips in a home sale:

occupancy date
home warranty
closing costs
major appliances
draperies, curtains, blinds and shutters
custom-built furniture
area rugs that fit a particular room
grill or fire pit
patio furniture, planters and garden benches
garden shed
lawnmower, leaf blower or other maintenance equipment
garden or household tools
recreational equipment, such as ping-pong and pool tables, above-ground pools, trampolines, climbers, swing sets and hot tubs

Decide what you can add to the sale of your home and what is non-negotiable. If your father created that built-in cabinet himself, no price could entice you to leave it. However, a refrigerator is easily replaced.

Make sure you work with your REALTOR® throughout the negotiation process. The last thing you want is for the deal to fall apart because you gave the buyer assurance that something was included, but didn’t talk with your REALTOR® about it. By negotiating through your REALTOR®, you have less to worry about.

Should your first offer be your best?

RE.com Tips & Tools — Fri, 12 Jan 2007 21:28:00 GMT

There are a number of factors to consider when bidding on your dream home.

You’ve found it, the house you can spend the rest of your life in. But before you start dreaming of arranging furniture and hanging pictures, you have to make the sellers an offer they can’t refuse. Do you give them what they’re asking for, or do you a whack a few thousand off the list price and see what they do?

Unfortunately, there’s no hard and fast rule regarding reasonable first offers. Your first bid is a signal that you’ve begun the negotiations, and chances are you and the seller will go back and forth with numbers and offers before reaching an agreement.

To give yourself room to haggle, it’s usually best to offer a first bid that’s below the list price and less than the maximum you can afford. A general rule is between five and ten percent below the list price. However, there are many factors that affect your opening bid, and the key to a successful offer is not percentages but information.

It’s crucial to know the state of the housing market in your area before making an offer. If your prospective new home is in a hot seller’s market, you are probably competing with other bidders and may have to offer the list price or even higher.

Where the market is stable or, if you’re lucky, favors the buyer, you will need to do research to establish a fair price range. Find out what similar houses in the area have sold for. Ask your real estate agent for his or her opinion and for competitive market analyses (CMAs) for homes in the area that are comparable in terms of size, rooms and construction. This will tell you what houses like the one you want to buy have sold for recently. You can also find sales statistics in the Multiple Listing Service (MLS) and public records, but these may be several weeks old.

Once you have a price range for similar homes, consider if there is anything about the house you are considering that could raise its value, such as additions or renovations, or problems that would reduce the price, including insect infestations or structural flaws.

A seller’s motivation is also important when determining what to offer. A seller who has to sell quickly, possibly because he or she has already bought another home, may be open to a lower bid. Sometimes this information is given as part of the MLS listing, or you can ask your agent about the seller’s motivation. But even if your REALTOR® knows, he or she may not be able to tell you, if they also represent the seller. They should, however, be able to tell you how long the house has been listed and about any price reductions. If the house has been on the market a while, the seller may be willing to accept a lower price.

Other bargaining chips include the occupancy date, items included in the sale, transaction costs and warranties. You may offer a higher price, for example, in return for the appliances or area rugs.

Your offer can also include things other than price to make it more appealing. Mortgage pre-qualification is a big plus, as it tells the seller you’re serious and makes it less likely the deal will fall apart. Also, try to have your offer personally delivered by you or your real estate agent. This allows any questions to be addressed quickly and easily. Some buyers also personalize the offer to give the seller an idea of who they are and why their offer should be accepted.

In the end, be prepared to negotiate, but also think hard about what to include in your initial offer. If it’s accepted, it will become a legally binding document and you will be required to follow through with the purchase or risk losing your deposit. Before submitting any offer, discuss the terms with your REALTOR® and consult a real estate lawyer.

How to buy a house fast: Tour, then transact

RE.com Tips & Tools — Fri, 12 Jan 2007 20:38:00 GMT

Quick decision-making is key to a successful long-distance move.

Suppose you’ve agreed to relocate to a faraway community at the request of your employer. You’ve researched your destination, chosen a REALTOR®, identified some homes that might meet your needs, and made a checklist of your home-shopping priorities. Next, you’ll be ready for your house-hunting trip, during which you’ll tour for-sale houses, select the one that you want to purchase and try to make an attractive offer to the seller.

Be ready to act

One of the biggest challenges of buying a home in a hurry is being ready to transact when you embark on your house-hunting trip. You’ll want to know your budget, be preapproved for a mortgage, be familiar with the basics of a typical real estate transaction, and be willing to trust your Realtor’s advice about the local housing market. You won’t have time to waffle, hesitate, dilly-dally or even sleep on your decisions.

Having to act in a hurry means you might feel a heightened sense of remorse or start second-guessing yourself after you’ve made your decision. Those responses are natural and don’t necessarily mean you made a poor decision or bought the "wrong" house.

Take your time

Even savvy and experienced home buyers can become exhausted and overwhelmed if they try to tour a dozen houses in one day. Limit yourself to no more than, say, half-a-dozen properties on each day of your trip, and be sure to allow plenty of time before you leave town to decide which home you want to buy and make an offer. If you’re house-hunting with your spouse, stow your temper and bring along plenty of patience.

If you find a house that fits your budget and meets your needs, it’s okay to forgo your tour of other properties and focus on that house. Don’t keep looking just because there are more possibilities on your list.

On the flip side, if you don’t find any houses that meet your needs, you might want to rent a home when you first move to your new community. Remember, it’s easier to exit a temporary rental than it is to sell a property that wasn’t suitable for your needs.

If no one house is the obvious choice, but you still want to choose among a number of possibilities, focus on your priorities and your must-haves checklist: Is a certain school district a requirement? Which properties are closest to your workplace or convenient transportation routes? Which house would best suit your lifestyle? If you plan to relocate again within a few years, you might want to consider the likely resale value of the properties as well.

Make a strong offer

Make an attractive offer for the house you’ve selected because if the seller doesn’t accept your offer, you won’t have time to start over and negotiate another deal. Offer a fair price, avoid unnecessary contingencies and don’t nitpick over defects you can repair after you’ve bought your new home.

Checklist: Making an Offer

RE.com Tips & Tools — Thu, 11 Jan 2007 21:36:00 GMT

So you've found the perfect house and now you're ready to make an offer

Making an Offer

Since offers can quickly turn into contracts, it’s best to make sure you’ve got your bases covered from the beginning. Use this checklist to make sure you don’t omit any items from the document.

Proposed selling price (your offer).
Any concessions you want the seller to make.
Any financing contingencies (for example, subject to you being able to obtain a satisfactory mortgage. You can go as far as to state maximum interest rates, specific terms, etc.)
Any home inspection contingencies (for example, subject to an acceptable whole-house inspection report).
A clear definition of precisely what is to be included in the sale. (Don’t simply assume that items such as porch swings, fireplace doors and refrigerators are included. Name them in your offer.)
The amount of earnest money (your deposit) that is being tendered with the offer.