Suze Orman On Mortgages
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Preparing Your Offer to Buy Your New Home: Buying a home is an exciting and potentially nerve racking time. Thankfully preparing an offer is one of the last steps in the home buying process. By this time you have found a property that suites your needs (and hopefully a little more) and your ready to finalize everything. If your comfortable doing this on your on great, however it is strongly recommended that when you are preparing an offer you have a real estate agent or another certified professional by your side. When writing up an offer there a few points to consider: how much will you offer for the home? Do you have and terms or conditions that the seller must meet? How much money are you willing to put down on good faith (this is called earnest money)? Let’s look at these questions in more depth to make sure you make the best decision in preparing your offer. |
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How much will you offer for the home:
Maybe you don’t like to negotiate or the seller is asking a fair price other wise you have to consider how much your willing to spend on the purchase of the property. If the market is booming you may not have a choice however its rare to pay the asking price. Exception to this rule include: situations where two parties want the property and start a biding war, there are previous offers pending on the home, or you think you cut a deal on another are of the deal, like closing costs. Keep the following in mind how much you can afford for your mortgage, do you have any completion for the property, why is the seller selling, do you need to spend any more money on repairs or renovation to the home, is the price competitive with the market and of course…how much do you want the property.
Placing terms and condition on an offer:
It is important to note that once you place conditions on an offer they must be met, other wise you are not bound to the offer. Common conditions include: your ability to obtain mortgage financing (this is a must as if left out you stand to lose your deposit). Get a home inspection and report done on the property, if you don’t and miss something like a bad foundation you’re in for a nasty and expensive surprise. Once the inspection is complete and you’ve read the report carefully you can make decided if you should add any further conditions or ask the seller to make the repairs. Your real estate agent will help you with any other terms or conditions they feel you should add to your offer.
Putting money down on the property is a sign of good faith and is away of securing your offer on the home. When you submit an offer, be prepared to make a deposit. The deposit is put toward the amount you’ve agreed to pay for the home in your offer. If your offer isn’t accepted or the terms aren’t met the deposit is returned to you.
In most cases people are not in a big hurry to sell their homes so its up to you as the buyer to make a good impression. It is in your best interest to let the seller know you’re serious by: Being preapproved for a mortgage from a financial institution or another lender. Having done the prequalification for the home loan at X amount of dollars when you put in your offer will let the other party know you’re not wasting anyone’s time. Note: you may want to keep the amount you’ve been preapproved for under raps until you’ve come to a decision regarding the amount you’re willing to offer; after which time you can go to a prime max mortgage lender and get the document stating you will have no problem with following through on your offer to buy. That way the seller never needs to know that you may have been approved for more.
Now after all the work of finding a property that suits you, looking at the advantages and disadvantages of a mortgage and making that leap to organize and submit your offer comes quite possibly the most nerve raking part if the process. Once your offer is in the seller will have a chance to review your offer and decided whether or not to accept it. Don’t be surprised if the seller counteroffers. Understand counteroffers are not always about the money (although, more often than not it is) it may be in relation to the terms and conditions laid out in your offer. You’ll have decided where to draw the line, what are willing to accept and how much are willing to pay period. Be prepared to go back and forth until both parties are content (if you dislike negotiating, make sure you have a professional onboard). Keep on mind if the seller does counter you have the ability to reject the offer at which point the deal is either off or the seller will try to compromise (it is however best to attempt to find a solution that meets both of your needs, after all if you’ve placed an offer down to buy a home you must like it enough to be a little flexible). With a bit of luck and perhaps a tweak here and there your offer will be accepted and both you and the seller will be happy. Which means it is time to go back to your mortgage lender and finalize your financing.
That essentially covers how to make an offer, as I have said several times, unless you are a professional make sure you have a licensed pro that can help and guide you through the process (it’ll just make everyone’s life so much easier). For information on how mortgagerates are determined see our post. Fixed rate mortgages at great rates here.
Suze Orman: Moneysmartz Personal Finance Guide and Blog
Suze Orman from the Moneysmartz Personal Finance Guide and Blog, your guide to smarter financial decisions.
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