Offering to buy a house is more than just saying "I'll take it." Your purchase offer might (depending on the custom in your state) take the form of a nearly complete contract, showing not only the price you're offering, but other important terms such as closing date and various contingencies you're requesting as a condition to finalizing the deal. And you may be competing with other prospective buyers, who've fallen in love with the same house.
Here are some commonly asked questions about what should or shouldn't go into a purchase offer.
My husband and I are trying to buy our first house, and the local market has gone nuts. Sellers are receiving multiple offers, buyers are bidding far over list price, and so on. We’ve already been outbid on three houses. Short of doubling the list price, what can we do to make sure the sellers choose our offer?
A bit of luck will obviously help, but here are potential strategies for competing in a hot market:
One last thing to remember: When competing against other bidders, you are unlikely to get a second bite at the apple; that is, a chance to negotiate or improve your offer. Put your absolute best offer forward at the outset.
We are buying a home in another state and selling our home in Seattle, and we notice that the standard form purchase contract doesn’t contain a “neighborhood review” contingency. When we bought our Seattle home, this contingency gave us three days to check out the surroundings and the crime rate and make sure these were acceptable before continuing with the purchase. Can we add this to our contract to buy our next home?
The so called “Neighborhood Review” clause is fairly unique to Washington state purchase contracts. As you described, it gives home buyers a three-day period in which to investigate things like the quality of local schools, how close the home is to bus lines and shopping, local noise levels, parking availability, and other environmental and safety conditions.
This clause has been good for helping Washington buyers remember to do things like knock on doors and check crime stats. But it also draws complaints from the Washington real estate industry and sellers, because it gives buyers an easy “out” if they get cold feet.
So yes, you can try adding the clause to your purchase contract if you wish. But unless your offer is the only one on the table, be ready for the seller to refuse to agree to a three-day period of such uncertainty. Strategically, you’re probably better off checking out the neighborhood in which you plan to buy BEFORE making an offer on a particular house.
My wife and I would like to put in an offer on a particular home, but its list price is higher than its online Zestimate. What’s more, our real estate agent says other bids are likely to come in on the place, and so we should offer even more than list. What’s going on? I’m worried our real estate agent is scamming us, to increase her commission.
You’ve raised two issues here: one regarding the value of online estimate (or “Zestimates,” when found on Zillow), and one regarding whether your agent has a conflict of interest in suggesting an offer amount.
Online estimates of home value should always be taken with a grain—or maybe a pound—of salt. They are computer generated, based on objectively determined (but sometimes inaccurate) factors gleaned from public records, such as number of rooms and square footage.
The computer can't know whether the house overlooks a botanical garden or a garbage dump, smells like the nearby pine woods or like the last owner’s cats were incontinent, or is streaming with sunlight or in the shadow of a nearby high-rise. The very reason you and your wife fell in love with this house could be overlooked in its online estimate.
Are such estimates entirely irrelevant? No, in that other buyers may be viewing them and asking the same questions. But if you’re in a multiple-bidding situation, then counting on all the other buyer lowballing their offers is not likely to get you the house.
The best way to figure out how much to offer if you aren't entirely confident in your agent's recommendation is to develop a sense of the market yourself, as described in How Much Should I Offer for a House: List Price, Higher, or Lower?.
Now, to the matter of your real estate agent’s conflict of interest. It’s true that the more you pay, the higher the agent's commission. But unless you have other questions about your agent, there’s no reason to assume he or she will act unprofessionally. Hopefully you checked the agent out carefully in advance, using the criteria described in Choosing a Real Estate Agent to Help You Buy a Home.
You could actually ask the seller’s agent directly how many offers are expected. If it’s several, listen to your agent—you’re in a bidding situation where you should be calculating how much the house is worth to you and how high you’re willing to go to beat out other offers. This house won’t be a bargain.
We recently made a full-price offer on a house. It's a bargain, but not an unfair price. We told the seller that we're pre-approved for a loan. But they rejected our offer! Can they legally do this?
Sellers do not have to accept full-price offers. Even if the buyers agree to not place any contingencies on the deal, there are many more terms that the parties need to agree on, such as closing date, earnest money amount, and title insurance matters. Additionally, real estate purchase contracts must be in writing and signed by all parties--and no one can force a seller to sign a document.
You might never know why the seller rejected your offer; perhaps second thoughts about selling or the list price, or the seller's agent personally disliking your agent based on past negotiations. If the problem could have been fixed, the seller most likely would have counteroffered. Your best bet is to move along to the next property.
For help in crafting an offer that a home seller will happily accept, see Nolo's Essential Guide to Buying Your First Home.