Making an Offer & Closing the Sale
Step 4. Price Negotiation
So you’ve found the house you want and you’re ready to make an offer on the property. Remember that it's called an "asking price" for a reason. It's what the seller hopes to sell the home for, but the price needs to be validated against the current real estate market. This is another area where your real estate agent will prove invaluable.
An agent with Abraham Legacy Realty will be aware of
- prices in your neighborhood,
- whether the local market is a buyer’s or seller’s market,
- where to start a negotiation that leaves room for flexibility, and
- how to successfully make an offer (in light of closing costs, property taxes, and home insurance).
**Important Note** Your purchase offer is a legally binding contract so if the seller accepts your offer, the house is yours as long as everything goes smoothly with the home appraisal and the home inspection.
Step 5: Home Appraisals, Inspections & Insurance
Though you've entered into a legally binding purchase agreement for the house, there are still several ways the contract can be change or even canceled. Both the appraisal and the home inspection can negatively affect the contract. Learn more below.
APPRAISAL A home appraisal is when a professional home appraiser looks at the home and assigns a value to it. Since the lender wants to ensure the home is worth the amount you've agreed to pay--the amount they are lending you--the mortgage lender will have the home appraised in most cases.
If the appraised value is equal to or greater than the sale price, the lender will be more inclined to give you the loan. If the home appraises below the price you've agreed to pay, you will have to figure out a course of action.
INSPECTION Most purchase agreements are contingent upon the successful completion of a home inspection. This is wise, because it gives you a way out of the contract if the home inspector finds some kind of serious discrepancy.
If you choose not to have any other inspection done, you should at least get a termite inspection because termites can dramatically decrease the value of a property and serious infestations can make a home uninhabitable.
Flickr photographer: Mark Moz
INSURANCE If you take out a mortgage, your lender requires home-owner’s insurance, often referred to as “hazard insurance”.
It is included in your monthly payment and protects you and your house against losses from fire, theft, liability, vandalism, water damage, wind damage, tornadoes and loss of use.
FINAL WALK-THROUGH A day or two before the final closing / settlement process, you will need to walk through the home a final time. The primary purpose of this inspection is to make sure the home is still in the same condition it was when you first saw it, and to follow up on any inspection items the seller was supposed to correct.
Step 6: The Closing Table
The closing process (also referred to as settlement) could warrant a full page to itself. But for now, it's suffice to say that the closing process requires a lot of paperwork, the settling of any outstanding fees or costs, and the transfer of the deed to the new owner.
The best way to prepare for this process is by asking a lot of questions leading up to settlement, staying in close contact with your agent and the escrow / settlement company, and making sure you have some cash put aside for final expenses.
At the end of this process, the seller will hand over the keys to the property and you officially become the new owner of the property!