Making an Offer
Can you buy homes below market?
While a typical buyer may look at 5 to 10 homes before making an offer, an investor, who makes bargain buys, usually goes through many more. Most experts agree it takes a lot of determination to find a real “bargain.” There are a number of ways to buy a bargain property:
- Buy a fixer-upper in a transitional neighborhood, improve it and keep it or resell at a higher price.
- You can buy a foreclosure property (after doing your research carefully).
- Buy a house that is due to be torn down and move it to a new lot.
- Buy a partial interest in a piece of real estate, such as part of a tenants- in-common partnership.
- You can buy a leftover house in a new-home development.
What is the difference between list price, sales price, and appraised value?
The list price is how much a house is advertised for. It is usually only an estimate of what a seller would like to get for the property. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area.
The sales price is the amount a property actually sells for. It may be the same as the listing price depending on how accurately the original price of the property is and on market conditions. If you are a seller, you may need to adjust the listing price if there have been no offers within the first few months of the property’s listing period.
The appraisal value is a certified appraiser’s estimate of the worth of a property. It is based on comparable sales, the condition of the property and numerous other factors.
Are low-ball offers advisable?
A low-ball offer is a term to describe an offer on a house that is substantially less than the asking price. While any offer can be made, a low-ball offer can sour a prospective sale and discourage the seller from negotiating. Unless the house is very overpriced, the offer will probably be rejected. You should always do your homework about comparable prices in the neighborhood before making any offer. It also pays to know something about the seller’s motivation. A lower price with a speedy escrow, for example, may motivate a seller who needs to move quickly.
Is a low offer a good idea?
While your low offer in a normal market might receive immediately, in a buyer’s market a motivated seller will either accept or make a counteroffer. Full-price offers or above means it is more likely a seller will accept. But there are other things to consider:
- Is the offer contingent upon anything, such as the sale of the buyer’s current house? If so, a low offer, even at full price, may not be as attractive as an offer without that condition.
- Is the offer on the house as is, or does the buyer want the seller to make some repairs or lower the price instead?
- Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.
What contingencies should be put in an offer?
Most offers include two standard contingencies:
- A financing contingency, which makes the sale dependent on the buyers’ ability to obtain a loan commitment from a lender
- An inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction
A buyer could forfeit their deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. The purchase contract must include the sellers responsibilities, such as:
- Passing clear title
- Maintaining the property in its present condition until closing
- Making any agreed-upon repairs to the property
Who gets the furnishings when a home is sold?
It depends. Any kind of personal property that is permanently attached to a house, automatically stays unless specified otherwise in the sales contract. This includes:
- Drapery rods
- Built-in bookcases
- Tacked-down carpeting
Anything that is not nailed down is negotiable. This most often involves appliances that are not built in, such as:
Although, certain sellers will be interested in negotiating for other items, such as a piano.
Whose obligation is it to disclose pertinent information about a property?
In most states, it is the seller, but obligations to disclose information about a property vary. Under the strictest laws, you and your agent, are required to disclose all facts materially affecting the value or desirability of the property. These facts of which are known or accessible only to you. This might include:
- Homeowners association dues
- Whether or not work done on the house meets local building codes and permits requirements
- The presence of any neighborhood nuisances or noises which a prospective buyer might not notice such as a dog that barks every night
- Any death within three years on the property
- Any restrictions on the use of the property, such as zoning ordinances or association rules
It is wise to check your state’s disclosure rules prior to a home purchase.
How do you determine the value of a troubled property?
Buyers considering a foreclosure property should obtain as much information as possible from the lender, including the range of bids expected. It also is important to examine the property. If you are unable to get into a foreclosure property, check with surrounding neighbors about the property’s condition. Also, it is possible to do your own cost comparison by researching comparable properties recorded at your local county recorder’s and assessor’s offices, or through Internet sites specializing in property records.
What are some tips on negotiation?
The more you know about a seller’s motivation, the stronger a negotiating position you are in. For example, a seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. Other so-called “motivated sellers” include people going through a divorce or who have already purchased another home.
Remember, that the listing price is what the seller would like to receive, but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller’s asking price stacks up. Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can sour the sale and discourage the seller from negotiating.
Do I need an attorney when I buy a house?
In some states, you do need an attorney to complete a real estate transaction, but in others you do not. Most home buyers are capable of handling routine real estate purchase contracts. This is as long as they make certain they read the fine print and understand all the terms of the contract. In particular, you should be clear on the terms of any contingency clauses that will allow them to back out of the contract. If you have any questions at all, it may be advisable to consult an attorney to avoid future legal hassles.
In looking for an attorney, ask friends for recommendations or ask your real estate agent to recommend several. Call to inquire about fees and to check on their experience. In general, more experienced attorneys will cost more. But real estate fees as a rule are small relative to the cost of the property you are buying.