Part 4 of a ten part series of post on the real estate process. I’m ready to make an offer. What happens now?
Answer - If you have settled upon a house that you think you would like to make an offer upon, inform youragent. This is where your Realtor does some of his/her most critical work. It
doesn’t quite happen the way it portrayed on television on shows
like House Hunters and The Property Brothers. There’s a little more to it that
you see on TV. It also takes a little more time than they portray.
It might be a mistake to eagerly head back to the Realtor’s office after seeing the house that you want and trying to do all of the necessary work on the fly, so that you can make an immediate offer. It can be (and has been) done, but doing so in such haste can also lead to mistakes or costly errors. If you try to do that, figure on a good hour or two at the office. After the showing of the house that you want to bid upon have a good discussion with your Realtor at the house or back at the office; so that he/she can go over all of the things that you can accomplish at that point and help you make a list of things that may need to be quickly done by you or by him.
Hopefully by now both you and your Realtor know how you are planning to finance the purchase – Conventional, FHA, VA, USDA or other. That will influence which Addendums might need to be added to the Purchase Agreement (PA). The agent will also need a copy of the Mortgage Pre-Approval letter that you
If you haven't already done so, you should think about or research the other neighborhood factors that may still influence you - location of nearest shopping and eating facilities, location (and reputation) of the nearest schools, location of churches, and any other factors that could cause you to reconsider the area. This homework should be done with all possible haste, since you don't want to lose the house that you want just because you took too long to make up your mind(s). Use Goggle Local to help find most of this information.
That all sounds like a lot of things that need to get done; but, you and your agent should be able to get all of those things done at the showing, at the meeting right after the showing, or easily within a day.
There will come a moment during this process of filling out the Purchase Agreement when you will need to make a final decision on an offer price. Obviously you will have discussed this with your Realtor and with your mortgage agent. Your Realtor will tell you what his/her research says the current market value is for the property. Your mortgage agent will tell you what you can afford and what help you might need in the form of Seller Concessions to help pay for your closing costs.
In pre-Recession days well-priced homes would sell on average for 97% of asking price. That went out the window during the Great recession and buyers started low-baling and offering only around 90% of asking price and asking for Seller Concessions on every deal. Those days are over, too. In the current tight-inventory market (a Seller’s Market) offers are again at or sometimes above asking and bidding wars between buyers for good houses are not uncommon. Certainly, it is not the time to low-ball; especially if you will need a Seller’s Concessions to help with closing costs. In the current market environment, asking for Seller’s Concessions can be a deal killer, especially iof you’ve also discounted the asking price a little. My best advice here is to listen to your Realtor’s advice.
Your Realtor will make sure that all the proper fields are filled in correctly on the Purchase Agreement and any Addendum and have you sign and initial the forms in the proper places or mark them for later electronic
Your agent will also have you make out a check for what is called "Earnest Money Deposit (EMD)"; which will be held in the buyer agent’s company escrow account and applied against the sale at the time of closing. The earnest money is also what you are putting at risk to get the seller to accept your offer and take his/her house off the market. If you change your mind about buying the house after the seller has accepted your offer, you could lose the earnest money to the seller depending upon the circumstances that lead you to make that mind change. In the time before the great real estate bubble burst and before the Great Recession an EMD of 3% was normal; then it dropped down to $500 or $1,000 during the time of high distressed property sales. It is headed back to the traditional 3% level; so don’t be surprised if the Realtor asks for a check for 3% of the sale price. In Michigan the brokers are required to deposit that check within 48 hours of receipt, so make sure that the money is in the account.
There are still several things to come in the process that could impact the sale price and drive it down some – the appraisal and the home inspection. Your goal at this point should be to get a signed agreement with the seller and then go from there. That will be the next installment in this series – OK, I signed the contract and gave my EMD; what comes next?