How To Put A Strong Offer On A House

When you’re in the market for a new house, finding the perfect one is no easy feat. So when you find one you love, it's essential to make sure the offer you present to the seller is as strong as possible. If you’re not sure what exactly makes your offer stronger than the rest, lucky for you, we do! Here are a few ways to ensure your offer has the best chance of getting accepted and helps you lock in the home of your dreams.

Make sure you’re pre-approved for a mortgage.

The last thing any aspiring homeowner wants is to find a house you love only to discover that you can't afford it. That's why getting pre-approved for a mortgage is crucial before you even start shopping for homes. By getting pre-approved, you'll know how much money you can borrow and what kind of interest rate you'll be paying. You'll also be in a much better position to negotiate with sellers — the ideal spot to be in as a buyer.

It's important, however, to remember that being pre-approved for a mortgage does not guarantee that your loan will be approved. Lenders will still need to assess your financial situation and property before giving the final go-ahead, but getting pre-approved is a crucial first step in the journey to homeownership. Frankly, a seller won’t even consider your offer without a pre-approval, so don’t put yourself behind the eight ball before you even begin.

Lean on your real estate agent to lead the negotiation.

The initial offer is your real estate agent's time to shine and the moment when you’ll realize why working with an agent is always the right thing to do (to learn more about finding a good one, click here). They will lead the charge on determining fair market value and developing a negotiation strategy based on their knowledge of the market and comparable properties in the area. A high-quality agent (like the agents on The Ben Lalez Team, of course) will negotiate upwards of a dozen deals a year, making them pros at getting the best deals for their clients. 

Every realtor's strategy will be a little different; some are bulldogs, others kill with kindness, and some are masters of the poker face. There is no one way to go about it, so trust that your agent understands the dynamics of the seller and the market to make the offer a winner.

Remember, your offer is a package. 

One thing home buyers often forget is that your offer is a package. The price will be the main factor sellers care about, but many other pieces to the puzzle can make an offer more enticing to a seller, even if you don’t have the highest bid. Think of it more like a recipe with many ingredients that work together to make a delicious meal — and the recipe could fall apart with one missing ingredient.

Here’s what your offer will include:

• Purchase price

• Down payment

• Earnest money 

• Closing date

• Your real estate agent

• Your lender

• Your attorney

• Your inspector

Now, let's dig into how each component affects your chances of getting an accepted offer:

• Purchase Price

  
  The purchase price will be the most important factor in your offer. How far above or below the asking price you offer will depend on the current market conditions, which your agent will help you understand. They’ll do this by creating a CMA (Comparative Market Analysis) to determine a fair value for the house depending on similar homes sold in the area recently.
  
  For example, if there's a lot of competition in the market, your agent might recommend starting with an aggressive offer above the asking price. On the other hand, if the house has been on the market for a while without an offer, your realtor may suggest starting negotiations below the asking price, assuming the sellers may be more eager to get the home off their hands. 

• Down Payment

The size of your down payment will affect the amount of money you'll need to finance and the interest rate you'll pay on your mortgage. The larger your down payment, the lower your interest rate will typically be. Lenders see a larger down payment as a sign of financial responsibility, and your future interest rate will thank you for it.

But a large down payment isn’t only a good sign for the lender — a seller might see a higher down payment as a sign of financial viability, making them more likely to accept your offer. This may not always be feasible, depending on your financial situation, but it is a great tool you can use to strengthen your offer if need be.

• Earnest Money
  

  Earnest money is a sum of money you put down to show that you are serious about buying the house. It is typically held by the seller’s lawyer until the sale is finalized and is normally between 1-3% of the total sale price. If the sale falls through for any reason, the earnest money is usually returned to the buyer. However, if the buyer backs out for no good reason, they may forfeit their earnest money.
  
  Generally, the bigger the earnest money deposit, the more likely it is that the seller will accept your offer. A larger earnest money deposit shows you are more committed to buying the house, so if you want to sweeten the deal, this can be a great strategy to lean on.
  

• Closing Date

  
  Not all sellers are motivated purely by price — some may need to close quickly and may be more receptive to an offer with a shorter closing timeline, even if it's for less money. This is why reading the room and understanding what the seller is looking for before making your offer is critical. With that information in hand, you'll be in a much better position to negotiate a fair deal for both parties.

• Your Buying Team

When you buy a home, you'll rely on a team of experts to successfully guide you through the process: your real estate agent, lender, attorney (watch our video on this here), and inspector. Their reputation and professionalism will be a huge sign to the seller (and their agent) of your likelihood of closing the deal, so a top-notch home-buying team is a significant part of the offer.

Considering every factor in your contract will ensure you bring a well-rounded package to the table and give you the best chance to entice the seller.

Your first offer is just a starting point.

It’s normal to feel anxious about signing a contract and sending your first offer (you’re only human, after all), but it's important to remember that nothing is binding until your attorney reviews everything. During this process, the seller will send you a list of disclosures that tell you anything wrong with the property in general, like the roof or sewers, which can help you feel more confident that you're buying into the right place. But even after you’ve sent in the initial offer, don't pop the champagne yet. The first offer is rarely accepted, so be prepared for something called a counteroffer (for a good agent, this is the fun part). 

The most commonly negotiated items are price, earnest money, close date, and how long we have for the attorney review period. You should discuss likely scenarios with your broker and determine which parts of your contract you’re open to negotiating. This process could take anywhere from 24 hours to a few days or even weeks, so stay patient during this time. Know that everyone is working towards the same goal; if you can’t agree on terms, it might not be the right home for you. 

Understand your "walkaway price.”

Before you even start negotiating, setting a walk-away price is important. This is the upper limit of what you're willing to spend. Remember that you’re dealing with a purchase price usually in the hundreds of thousands or potentially millions of dollars. $10,000 sounds like a lot of money, and it is. But when financing it over 30 years, you're talking about paying $2,000 out of pocket and $50 a month. Don’t let a 1% difference in purchase price stand between you and your dream home.

Let’s be clear — putting together a strong offer, as we see it, is mostly about price. But more often than not, there are other factors that will come into play. If there are no other offers on a given property, then, by all means, stack the deck in your favor! But the minute there’s another offer on the property, every piece of your offer will be considered. So get ahead of the game and remember, it’s more like creating a Grammy-winning album, not a one-hit-wonder.