So you’ve found a home you really love, now what?? In this video, I help you understand the terms of the offer, how to negotiate and once your offer is accepted, what to do next.
Hey everyone, it’s Andrea Lutz and today we’re talking about buying a house. You have been out there shopping for houses, looking around, trying to find that perfect mix of all the things that you want in a house and you finally found the house that you love. Now comes a time when you’re ready to write an offer. This can be really scary and pretty intimidating but if you have a good real estate agent by your side like myself, we’ll go through it step by step and make sure that you’re protected throughout the process. When you’re getting ready to write this offer, the first thing you want to do is make sure that you understand all the terms of the offer. Let’s go through step by step so that you can understand what you’re going to be looking at while you’re writing this offer.
The first and most important thing that you want to consider while you’re thinking about writing this offer is what you’re going to offer for the house in terms of price. Now, your real estate agent should be able to do a very good job of educating you on what that house is worth, what fair market value is for that house and give you some comparables in the neighborhood to show you what other houses like it has sold for recently. Now you’ll want to consider things like the market, what’s going on right now, is it a buyer’s market? Is it a sellers market? Those comparables that you’re looking at, were those sold in the spring when things are really moving quickly versus the winter when you are buying, all of those things need to be considered. But really what are you willing to offer for that home?
You want to make sure that you are making that offer with the condition of the home as it stands. Now a lot of people are thinking about this inspection process that’s going to come later on and that’s going to give you an opportunity to negotiate some repairs but you want to make this offer right now, like you’re not going to get another dime okay? So you look at that house and you say, “That roof looks old.” Or, “That front porch is sloping.” You want to look at that house and you want to make sure that you’re making an offer that’s consistent with the current condition of the home.
You look at the roof and you say, “That roof is really old. That’s going to need to be replaced soon.” Or, “I can see that that furnace is 30 years old and I’m going to need a new HVAC system soon.” You make that offer with all of that in mind. If they’re asking $300,000 for that house and your agent says, “Yeah, you know what, it’s probably worth all 300,000.” Then maybe even if it does have an old roof in an old HVAC, that’s what you need to offer to get that house. But don’t go back later and say, “That roof is old and I need a new roof and I wouldn’t have paid $300,000 if I knew it needed a new roof.” You’ve got eyeballs, use them. Look at the house really carefully and make sure that you understand the condition of the home when you’re making that initial offer.
Okay. We’ve talked about price. You also want to think about what’s included in the home. There’s going to be an area in your contract that’s going to allow you to write in what’s included in the home. Now banks do not like it when you include personal property in that line. Usually what you’re going to write there is what’s included in every home purchase and usually that’s kitchen appliances like refrigerator, range, dishwasher and those things. If there are other things that are really important to you that you want as a part of the purchase of this home and they are not attached to the ceiling, the walls or the floors, then maybe what you want to do is add on a Personal Property Addendum, which will include some other personal property items like maybe a lawn mower or a piano or a couch.
Those should not be included in the purchase agreement but you can write them into your original offer as long as you put them on a Personal Property Addendum. You’ve got your price, what’s included in the home, right? And then you move into more details like what’s your closing date? Usually you can count on a bank getting things together about 30 days but you need to think about things like, “Wait, am I selling a house to buy this house? Is it currently listed? How long will it take me to sell?” All of those things have to be taken into consideration when you’re thinking about what is your closing date going to be. Typically, that’s between 30 and 45 days and you can work that out based on your personal situation. The next thing is possession. Most people will take possession at closing, which means you go to the closing table, you sign all the paperwork and in your hand right after that are the keys and you needed to go and move right in.
But there are situations where you would actually move in before closing, which is called pre close possession. There are other times when the seller may ask you to stay in the home for a little bit of time after closing. It’s really hard to move from one house to another house in the same day. People do it all the time but it is tricky. Occasionally you can work out a little bit of flexibility before or after. Keep that in mind when you’re working through the terms of the contract. It is going to talk about financing and that’s going to protect you in case you can’t get the financing you need to buy the house. Just put in some terms there that makes sense to you that are pretty general but if for some reason you cannot get the loan that you want to buy this house, you can get out of the deal without having to let go of all of your earnest money that’ll be able to come back to you in those situations.
Also, it’s going to talk about inspections. Inspections are really, really important and for more details on inspections, please watch my next video, which is going to be about inspections and appraisals. But for this video, the thing to consider here is just your term and the amount of time that you have to do your inspections. I usually put in about 15 days there, gives you a couple of weeks to get on the inspector schedule, get into the home, do the inspection, then of course read the inspection report and write up your response. Like I said, more information now on that, on the next video but usually give yourself a couple of weeks there just to give yourself enough time to look through the home thoroughly. There are a couple of terms in the contract that are not as often reflected on and but are also very important. One of them is the survey.
Okay. If you’re buying a house in a subdivision and it’s a platted subdivision and you have like a quarter acre lot or something like that, a survey probably isn’t that important to you. But if you’re buying a huge piece of land out in the country and it’s like 40 acres and it’s got a pole barn on it, it’s got fences and it’s got horse stalls, you probably want to have a survey in hand so you can know all of those things are on your property and that you know the corners and you know where your lines are at. Make sure that you include that. The other thing that’s in there is called a home warranty. Now a home warranty is an insurance product. This is going to ensure the appliances in the home. If you have a problem, like let’s say you move in and your refrigerator stops working, with this insurance policy, you can pay your deductible, which is usually 50 or a hundred dollars and somebody will come in and fix that refrigerator for you for free and… well, free considering that you have to pay the deductible.
If that refrigerator cannot be fixed, it will be replaced with a new one. It’s a nice thing for some people who really enjoy an insurance product and want that peace of mind. Especially for first-time home buyers that don’t have a lot of liquid cash in the savings account, that can protect you for that first year of home ownership. That home warranty can be paid for either by you the buyer, by the seller or you can split it half and half or really any way you want. That’s something to think about as well.
All right. Lastly, in the contract you’re going to have an opportunity to put an expiration time on the offer. Depending on how fast your market is moving, you can be tight on this timeline or you can be a little bit more free on how much time you’re going to give the seller. Remember that as much time as you give them, that’s as much… they have all of that time to get other offers in, continue to show the house. Most people like to keep that time period pretty tight. Usually a couple days, a 48 hour time period is pretty standard. But in a very fast moving market, you might want to consider about 24 hours or if it’s not something you’re really concerned about, you could give it three or four days if you want to give them a lot of time to think about it.
That is really the big things when it comes to the terms of the offer. Work with your real estate agent, that’s what they’re there for. They’re there to be your advocate and protect you and just know that this purchase agreement, the way it’s written here and in the state of Indiana, is really a great protection for buyers. You have a lot of ways in this contract for protection. If your financing falls through, you can get out with inspections. If you need repairs that they are unwilling to do, you can get out of it. There’s a lot of options there for you to feel protected but never make an offer on a house if you’re not willing to buy it.
I have some people who I’ve worked with in a fast-moving market and they get a little anxious and they start writing offers and they’re really not committed to the home. Don’t do that. Make sure that if you’re writing the offer, you’re going to be moving into that house unless something that is unexpected comes up. Just for next steps, let’s say this offer, you send this offer in and there are three different ways that that seller can respond.
They can either accept the offer, which would be awesome because then you’re in, you got the house, they can counter it. Any of the terms that you wrote in the offer can be countered. They could count a closing date, they could counter a purchase price, they could counter the home warranty, they could counter anything or they could counter a lot of it, a lot of different terms. Or they could just fail to respond or decline it. If you don’t hear from them by the expiration time on your purchase agreement, that means they’ve declined. Those are the three ways they can respond. Now your real estate agent will be very good at helping you negotiate those terms if they counter this conversation did go back and forth for as long as you’re both willing to have a conversation. But remember, anytime you counter an offer, that house is still available.
Even though you’re in a current negotiation with those sellers, they can still receive other offers. They can still show the home. If you are countering them on something that’s not really that important to you and you really love that house and they get a better offer, they can take it. Keep that in mind when you’re negotiating. Let’s say that they accept your offer, which would be awesome because you really, really want that house. Make sure you get started off on the right foot and there are three things to do right away. Make sure that you submit your earnest check. You’re going to write that earnest check to the listing agency, the brokerage that has the house listed.
Number two, you want to make sure to get that loan application started. Get with your bank or your loan officer and get that cooking because that loan process can take a while. It can take up to 30 days, sometimes a little bit more. Get that loan application in. And number three, be sure to call your inspector and get on his calendar. These inspectors can book out one to two weeks and if you wait too long, you might just run out of time on your inspection timeline. Get that cooking and get that house. Next time I’ll talk to you about inspections and appraisals. I’ll see you then. Please don’t forget to subscribe. See you next time.