The process of making and accepting an offer

The process of making and accepting an offer can seem tedious, but having a realtor represent you during these negotiations will be a valuable decision.  A standard offer begins when you authorize your realtor to submit a real estate contract to the sellers.  Both you and your realtor will sit down and together you will determine the best price and terms to offer the sellers for the purchase of their home.  The sellers will then be given ample time to review the offer and (depending on what the sellers are willing to do) then can accept, reject, or counter your offer.  Once all parties consent to the terms an executable contract is signed by all parties and a closing date is determined.  This is the simplest way to describe the process of making and accepting an offer.  Now let us review what takes place during each phase, from an offer to acceptance. 

The real estate offer will be initiated with a contract.  A contract, once executed, becomes a legally binding document, so it will be imperative to understand the offer you make.  Most realtors can provide you a blank real estate contract upfront, which allows you to review the contract before you make an offer.  Your realtor will also play a critical role in the process, by helping answer the tough questions.  You want to be clear that everything you seek in the offer is put to paper. In the eyes of the law, a verbal agreement is not legally binding.  For this reason it is encouraged to use a real estate professional to protect your needs. 

From time to time, items are omitted from the contract or renegotiated after the contract has been accepted.  Under these circumstances real estate law allows you the opportunity to submit an amend/extend that will supersede the terms of the original contract.  Only the conditions listed in the amend/extend will be changed, leaving all other provisions outlined in the original contract in place. In order for an amend/extend to be legally binding the seller and buyer must both agree and sign the changes outlined in the document. 

The offer you make should be as close to fair market value as possible; low-balling an offer will most likely result in a rejection by the sellers.  Hypothetically, this can be argued until the end of time, but if a seller is willing to accept a low- ball offer, odds are the home will actually be worth less than what was initially estimated.  No matter what condition the housing market is in, we can guarantee that only reasonable offers will be considered.  Look to your realtor to help you find out where that price point might be. 

When distinguishing the best offer to make on a home, you and your realtor should identify what is the actual fair market value of the home.  Depending on the demand in the market, you can adjust your offer accordingly.  In a buyer’s market it is not uncommon to offer around 3% below fair market value when making the initial offer on a property.  On the other hand, in a seller’s market, only full price offers will be considered by the sellers.  Another consequence found in a seller’s market is the advancement of multiple offers on the same home.  This could spark a bidding war for the property; however, we have not witnessed that type of market in several years. 

The listing price on a home will always be negotiable, but it is not the only thing that can be negotiated.  You can also negotiate the amount of funds credited back to you, in the form of seller concessions, which can then be applied to help pay for closing costs.  This is particularly important in situations where the buyers are limited in the funds they have to close on a real estate transaction.  You will need to remember that when you request for seller concessions, the price you offer should in turn reflect the amount you request.  For example, if you ask for 3% in seller concessions to be used for closing costs, you might consider offering the full asking price in return.  In essence, an offer like this would model an offer a buyer could make when offering 3% below the fair market value on the home, without any requested seller concessions.  Understanding the market and being aware of the types of offers currently being accepted should help you in the preparation needed to make a serious offer on the home.

After you submit the initial offer the sellers can either accept, decline or counter the offer made.  While not an exceptionally difficult decision, once made, the decision will impact the offer and acceptance process.  The first choice the sellers can make on an offer is to accept it as is; this would conclude the offer and acceptance process.  The second choice available to the sellers is to decline the offer out right.  When an offer is rejected in this manner, it typically means that either the offer made was considerably below fair market value, or the sellers have the wrong expectation of what is the fair market value of the home.  The third choice that a seller can make is to counter the buyer with another offer, known as a counteroffer.  The seller will ordinarily make a counteroffer when the initial offer, while a bit lower than expected, is close enough to encourage the sellers to find an amenable point with the buyers.  Most counteroffers made by a seller will place somewhere lower than the seller’s initial expectations for the sale of the property.  If, in fact, the seller’s expectations were realistic, the counteroffer made to the buyer will traditionally favor the buyer in a real estate transaction.  Once all parties have reached an agreement, the contract will be signed and the offer and acceptance process will be complete.