How to Make an Offer on Your First Home
If you're a first-time buyer, define exactly what you want with these 8 steps
By John Feathers, FrontDoor.com | Published: 6/20/2008
So you've found a house, and you're ready to make an offer to the seller. Some words of caution: Don't let your emotions dictate what you "think" you can afford and what you "actually" can afford. Follow these eight steps to create a solid offer.
Step 1: Set Up Your Financing
At this point, you've spoken to several lenders and know how much of a house payment you can afford and how much financing you can get. Make sure you get a pre-approval letter from a lender. You'll include this with your offer to show the seller you have pre-approved funds to meet his or her "for sale" (list) price. If you're making a "cash" offer, include a letter from your bank stating funds are available in your account.
Step 2: Examine the House Carefully
Walk through the house again, and pay close attention to anything you haven't observed before. Take your time. Place furniture in your mind. Consider any improvements you might want to make.
If the house is "previously owned," make note of unpleasant paint colors, nail holes, nicks in the walls, stuck drawers and other normal wear and tear issues. Look out for more serious problems like ripples in the carpeting, turned-up edges in wood flooring, loose handrails on stairs, moisture in basements or on the outside of the house (without there being any recent rain). Estimate how much it would cost to fix everything. You may want to include a condition in your offer requiring the seller to make or pay for these fixes.
Step 3: Set a Limit for Yourself
If you're in a market with multiple buyers, you may be tempted to offer a higher price to prevent a bidding war. Don't stretch your budget with the monthly payment. Remember, you'll have additional expenses you may not have had before, such as utility bills (electricity, gas, water and garbage pickup), property taxes, roofing repairs, lawn maintenance and other expenses such as driveway maintenance, fencing or a security system. All these things add up and can quickly blow your budget.
Step 4: Decide on an Offer Price
Research recent house sales in the area or houses currently on the market for price comparison. Ask your real estate agent, go to the local courthouse to search public records or do research online. Caution: Do not make a "lowball" (an extremely low offer) unless you are prepared for a total rejection of your offer. Typically, you would offer 5 percent to 10 percent below the list price (more if the house has been listed on the market for some time). By doing so, the seller is more inclined to consider your offer and make a "counteroffer."
