The size of your offer should be based on
- the seller's asking price
- comparable sales in the neighborhood, and
- your agent’s advice.
The seller might accept your offer, reject it, or make a counteroffer. Your offer may be the only one the seller has received, or you could be competing with several other buyers--so make sure to work with your agent to have a plan and be ready for any of these possible outcomes.
It’s rare that a seller accepts or flat out rejects your initial offer. Usually the seller will make a counteroffer which changes the terms of your initial offer. If you’re willing to accept the seller's counteroffer, you can. But your agent can help you decide whether it's better to accept the offer or make another counteroffer.
Talk to your agent about including closing costs or repairs in your offer. Good agents will do everything in their power to look out for their buyers’ best interests and will know what to include in your offer and will advise you accordingly.
The final say, however, rests with you--the one buying the home. If you want to be successful in your price negotiations, here are some things you should avoid doing (that your agent will probably advice against):
- Lowballing the seller. Making an offer 20% or more below market value will probably insult the seller and lead to him or her totally rejecting your offer. Once an offer is rejected, that’s pretty much the end of the negotiation in most cases.
- Asking for too many repairs and upgrades. Reasonable requests, like fixing a leaky faucet or putting up a new fence, are not usually a problem and can be included in your offer. But don’t be too nitpicky. Asking for a fence is fine, but dictating the model, color and manufacturer is too much. Remember, this is the house you want to buy. You don’t want the seller to reject your offer out of fear that you’ll be too difficult to deal with throughout the transaction.
- Offering more than you can practically afford. Just because you’ve been approved for $200,000 doesn’t mean you can truly afford the monthly mortgage payments along with all of your other expenses. Make sure to factor in how much you’ll be paying for home insurance, health insurance, car insurance, gas, utilities, childcare and any other applicable expenses before making an offer so you don’t end up with monthly payments that can’t afford.
- Waiving the inspection period. You may think you’re 150% sure that this is the home for you, but waiving the home inspection period could cost you in the long run. You can’t tell if a house has termites or faulty wiring just by looking at it and either of those issues could significantly lower the value of the home at best and cost tens of thousands of dollars in repairs at worst. If you want to show the seller you’re really serious, go ahead and ask for a 1-3 day inspection period. But don’t waive your right to inspect your future home completely.
- Asking for too many days in the home inspection period. While you don’t want to to waive the inspection period, you also don’t want to ask for too many days. In Florida, most home inspection periods last 15 days or less which is more than enough time to have all the inspections you want on the home. Since the home inspection period is a way for buyers to back out of the contract for any reason, asking for too many days will make the seller think you’re on the fence about buying the home and feel uncomfortable about keeping the home off the market for you.
- Waiving the appraisal contingency. Definitely don’t do this. If you’re taking out a mortgage, the lender will have the house appraised to make sure that the house is worth what they’re loaning you. If it’s not, you can either come out of pocket the rest of the money or back out of the contract. If you waive the appraisal contingency, you’ll have no choice but to come up with the rest of the money if the bank decides that the house is worth less than the loan amount.
Ideally, you’ll want your offer to create a win-win situation for both you and the seller(s). Work with your agent to make an offer that makes you both happy and reassured. Everyone involved wants to get the best deal and it is possible, as long as you’re willing to be considerate and follow your agent’s advice.
Your purchase offer is a legally binding contract so if the seller accepts your offer, the deal has been made. You’ve essentially committed to buying the house and the seller has committed to taking the home off the market. As long as everything goes smoothly with the home appraisal and the home inspection, the house is yours!