You've found the home of your dreams and you rush back to the office of your real estate agent to start putting the offer together. When to make an offer on a home depends on when you and your real estate agent have all of the information together to make an educated and complete offer.
You should place an offer on a home you find as soon as possible. In short, if you see a house you like and are ready to buy, then you should head back to the office of the real estate agent and work out the details. It is best, however, to make the offer once you and your real estate agent have done the research and gathered the information necessary to put together the best and educated offer you can. While you'll want to do some upfront research before finalizing the offer, typically, you can find the information you need within one day or so.
Whether you are working with a real estate agent or not, the first step in compiling the offer is do some behind-the-scenes research. Look for current homes that are on the market and homes which have sold in the past six months or less that are similar to the home you want to buy. These homes are referred to as comparables or comps. The comps you look for should have:
- Similar square footage
- Similar amenities
- Be located within a file mile radius
- Same type of home (single-family, duplex, condo, etc.)
How long the home has been on the market
Gathering this information allows you to determine the current housing market situation. You can then use this information to work out the details of the offer. Try to obtain at least three properties that have sold and at least three that are still on the market. Gathering this information typically only takes approximately an hour or so. If you are working with a real estate agent, the agent can gather this information for you. If you are not working with a real estate agent, you can use online real estate websites such as Realtor.com and Zillow.com to find comparables.
Calculate Price per Square Footage
Now that you have gathered all the information, it is time to put it to use. This information will allow to determine the market value of the home. In order to calculate the approximate value of the home, you first have to calculate the price per square foot that homes are selling for in the area. You can do this by taking the average sales price of the home, divide it by the square footage of the home. Multiply the price per square foot by the number of square feet the desired home has in order to make a reasonable offer.
Pull up the real estate taxes on the property as well. You should be aware of the amount you will be paying each year in taxes as part of the process in determining how much you should pay for the home as well. This is an added expense that will and should have an effect on the price you ultimately pay for the home. For example, if you are comparing two properties with similar prices but the taxes on one is significantly higher than the other, you want to know this and factor it into your decision as to if and when to make an offer on the home.
Put the Offer in Writing
As soon as you have done all of your homework or the real estate agent has, evaluate the information carefully. Work with the real estate agent or a real estate attorney to put together an offer in writing that includes all of the contingencies (appraisal, mortgage financing, etc.) of you buying the home. Once all of the offer information is in writing, your real estate agent should submit the offer to the seller or the seller’s agent right away.
Pros of Quick Offers
First, the faster you are able to put together and submit your offer to the seller, the faster the seller has the opportunity to evaluate the offer. The fact that you are the first bidder and it meets the requirements of the seller may get your offer accepted before any other potential offers come in the door.
Second, not all offers are accepted in the first submission. Some sellers will negotiate some of the terms and conditions that are in the offer. This is another reason why you want to submit the offer right away, so that you have time for the back and forth that may occur until you and the seller come to a final agreement via counteroffers.
Cons of Quick Offers
Putting an offer in a house right away does not ensure your bid will be accepted. This means you may have to continue to look for other homes while waiting for a response from the sellers. This way you have backup homes available for bidding on, if the first bid falls through.
LawDepot - Offer to Purchase Real Estate retrieved at http://www.lawdepot.com/contracts/real-estate-purchase-offer/?pid=googleppc-soffpu_us-home_a1-s-ggkey_make%20home%20offer&&s_kwcid=make%20home%20offer|1895680913.
CNN Money - Home Buying Tips retrieved at http://money.cnn.com/magazines/moneymag/money101/lesson8/index.htm.