Making a Winning Offer
You really want a property and are keen to put in an offer but where do you start?
No one wants to pay more for a house than the market value, so how do you get the best deal? What is the magic figure to start the negotiation process?
Basically, making an offer on a property is similar to playing a game of chess – each party waiting to see what move the other party is going to make. We are here to help you understand the game.
We Recommend Using a Pre-Approved Mortgage
While this is not a must-do, when homebuyers have a copy of their loan pre-approval, it shows maturity in how proactive they are as legitimate home buyers. This step is akin to showing up at the garage as a new car owner versus someone who knows what’s going on on the inside; one is taken less seriously than the other, which can certainly work to the advantage of the one who shows up, fully prepared and informed.
Another reason to have your pre-approval taken care of before you start looking for your home is because your offer may get held up waiting on the letter, and in a situation with multiple offers, this can be a deal breaker. For added peace of mind, do not skip this step.
Offer to Purchase
After you have found the home you want to buy, you need to give the vendor an Offer to Purchase (sometimes called an Agreement of Purchase and Sale). It is very helpful to work with a REALTOR® to prepare your offer. The Offer to Purchase is a legal document and should be carefully prepared.
What Happens After You Make an Offer to Purchase?
Imagine that your realtor has helped you prepare an Offer to Purchase. This offer includes all the details of the sale. To be extra cautious (since you know an Offer to Purchase is legally binding) ask your lawyer to look at it before showing it to the vendor. The realtor presents the offer to the vendor. What can you expect to happen next? There are three possible responses.
The vendor accepts your offer. The deal is concluded and you move on to the next steps in the buying process.
The vendor makes a counter-offer. The counter-offer might ask for a higher price, or different terms. You can sign the offer back to the vendor, offering a higher price than your original offer, but lower than the vendor’s counter-offer. If the vendor accepts this counter-offer, the deal is concluded.
The vendor makes a counter-offer, asking for a higher price or different terms. If a counter-offer is returned to you at a higher price, ensure that you know exactly how much you can afford before you start negotiating. You don’t want to get caught up in the heat of the moment with costs you can’t afford. You reject the counter-offer because the price is still too high, or you can’t agree to the conditions. The sale doesn’t go through, and your deposit is returned.
Tips to help you negotiate and arrive at a suitable compromise
Choose your battles wisely
You really want to jeopardize the whole sale haggling over the inclusion of comparatively insignificant items like your old drapery or a rug? Save your stubbornness for the issues that matter most.
Keep it real
Sure, a big saving would be nice, but if you insist on a price too far off the fair market value you may frazzle the seller.
Know when to hold ’em (and when to fold ’em)
Prepare for negotiations ahead of time by knowing what terms of the deal you can compromise on, and by opposition which terms are deal-breakers. Ensure your priorities are communicated clearly, and don’t be tempted to exaggerate your position. This is no time for bluffing, lest your bluff be called. And remember, negotiation is all about give and take, so expect to make some concessions. By establishing your position in advance you’ll be able to handle a little of the give painlessly and with certainty.
Know when to walk away
The strongest position in any negotiation is the “take away”. It’s unlikely that you and the seller will be unable to come to mutually acceptable terms, but you have to prepare yourself for that eventuality. If it eventually becomes clear that the seller will never budge on terms you deem vital (no matter how long talks extend), it is time move on.
Terms Used in Offers
An offer includes certain “terms”, which specify the total price offered and how the financing will be arranged, such as if you will arrange your own with a financial institution or mortgage broker or if you wish to take over the seller’s mortgage (assumability).
Inclusions and Exclusions
These are specifications within the offer that detail the items to be included or excluded from the purchase of the property. Typical inclusions are appliances, window coverings, fixtures and decorative pieces.
A deposit is provided from the buyer to the seller as a token of the buyer’s assurance and intention to buy the property involved. The deposit is applied against the purchase price of the home once the sale has closed. Your RE/MAX Sales Associate can assist you in proposing a certain and appropriate amount for the deposit.
Items that are usually put in place to protect a party’s interests upon selling or buying the property and refer to things that must occur or be in place before the sale closes.
Possession or Closing Date
This is usually the date that the legal ownership of the property transfers from the seller to the buyer and, unless otherwise noted, when the funds for the purchase are concluded.
This is the amount that the buyer is offering to pay for the property. The price is usually dependent on market conditions and may differ from the seller’s current asking price.
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