Bee | High IQ Buying: How to make an offer on a home
January 5, 2023
The best way to make an offer and what to look out for when buying a home.
When you and your agent make an offer on a home to buy, the seller will want a copy of your pre-approval letter verifying you to be a qualified buyer. This is normal. However, high IQ agents and buyers don’t let the seller know the highest amount the buyer is pre-approved for, and instead provide a copy of the pre-approval letter that matches the offer they’re making.
So, for example, if the home is listed for sale for $300,000 and the buyer is pre-approved for a loan up to $350,000, the agent is going to make an offer with a pre-approval letter for whatever their offer is, not what the max the buyer is pre-approved to borrower. So, if they offer $290,000, they’ll include a pre-approval letter for that amount, not $350,000.
This works to the buyer’s advantage in negotiating a better price for the home. After all, how flexible would you be on the price knowing the buyer is approved to buy more than what you’re asking for your home?
This is real estate agent best practices 101, and if your agent doesn’t do this, fire them.
You wouldn’t hire a clown to fix a leak in the john, would you? So, why let some hooligan agent let the seller know how much you’re qualified to buy way higher than what they’re asking for? If you do find yourself in this situation, tell your agent you want them to submit your offer with a pre-approval letter to match the offer, and if they don’t, seriously consider letting them go and finding another agent.
The lender or broker should allow you to customize your pre-approval letter to match whatever offer you’re making on a home. This is mortgage lending 101, and if they don’t, fire them and go with someone else. Exceptional lenders calculate the max you’re able to borrower then give you the ability to change the amount on your own, that way you can put in offer quickly without having to wait on a loan officer to change the numbers.
Making an offer that’s going to get the seller’s attention is all that matters, and a part of negotiating to get the best deal on the home. Certainly the seller wants to sell their home for as much as possible, and you want to buy the home for as little as possible; but at the end of the day they’ve got to work with a buyer or risk not selling it at all. Most sellers and their listing real estate agent know they’ll have to come down some on the price, and set the asking price with some cushion in the first place.
Unless you’re buying a very unique home with legendary architecture or ultra fancy design, most sellers will come down on the price.
Here's 8 things to consider when making an offer on a home to buy:
The Home
You want to know as much as possible about the home. This means researching online to get as much information as you can. Have your agent do a search on MLS to see the sales and price history of the home. You also want to know why the seller is selling. There’s no such thing as bad information so get as much info as you can.
Current Home Mortgages
The state of the seller’s finances or mortgage on the home might be a factor in determining motivation to sell. And while mortgage information isn’t public record like property sales are, simply asking might give you some valuable info that impacts the sales prices of the home in your favor.
Permits
Simply put, you want to make sure that everything done to the home was properly permitted, and that there are no current permits for construction on the property. All additions should be permitted and the square footage accounted for. If something was done to the home without proper permitting, get with your real estate agent and legal counsel for advice. If it doesn’t stop you from buying the home, it will certainly give you leverage in negotiating a better sales price.
Comps & Inventory
Comps or comparables are similar homes in the area that have recently sold. You want to know what’s going on in the local market. No one wants to blindly move into a neighborhood that’s on a downtrend and everyone is fleeing for some reason. Signs of a good real estate market are steady and consistent home value appreciation and few home sales. The fewer the home sales, the less people want to leave.
Be sure to look at what’s sold, what’s under contract, and what’s listed for sale. Be sure to ask if there’s any whisper listings, which are home sales done privately, not listed for sales on the MLS.
Property Taxes, Dues and Cost of Living
You want to know all about what residents are paying for taxes in the area. From what your property taxes will be to every other area of your life that will be impacted by taxes. Some areas have lower taxes than others, while some have very high taxes. Local area cost of living and property taxes are one thing that’s difficult to budget for in the beginning if you don’t know exactly where you’ll be buying a home.
You’ll also want to consider any dues the home might have such as HOA (homeowners association) or CDD or co-opt dues. These two are hard to budget for in the very beginning, but need to be accounted for as soon as possible because they impact whether or not you qualify for a mortgage on a particular home.
It’s okay to speak with a neighbor about how the HOA is, or someone at the local bank or supermarket to get more information on day-to-day living expenses. You’re going to be stuck there so you might as well get to know some of the people in advance. If they’re not very polite, you might not want to live there to begin with. Look at area crime and how the local schools are. Even if you don’t have children of your own, how good or bad the schools are could affect you selling the home in the future. See where the home is in relation to the grocery store, your favorite restaurant, and your job.
Utilities & Upkeep
Find out from the current owner what they pay for all utilities, and what they spend per year to keep the house up. While upkeep might be harder to estimate, you can know exactly what they pay for utilities. If they’re paying a lot, there might be a draft problem with how well the home seals. The windows and doors might be old and letting air in. If you get this information up front from the seller, your inspector can be on the lookout for anything that is damaged or needs to be replaced that affects the utility costs for the home. If you find something that needs to be replaced, the seller will either replace it or give you a credit for the cost to do it yourself after you buy the home.
Homeowners Insurance
This is a big one. Insurance is important. The last thing you want to do is get a policy that won't work, have the carrier cancel the policy, then have the lender put forced-placed coverage on the home. Forced-placed coverage is very expensive.
Where the home is can affect the cost of insurance dramatically. In Florida, one house can have a small cost for insurance and the next house down the street can be 3x as much.
Day to Day Living
Lastly, before moving into the community, you want to get a sense of what living there is like. If you don’t know someone personally who lives in the community that can tell you all about it, social media and news outlets are a great resource to find out what day to day life is all about.
Nocatee, Florida is constantly ranked a top place to live in Florida by many publications and websites. In addition to the various community groups, schools, entertainment, churches and shopping, homes are in high demand and don’t sit on the market very long.
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