After determining your goal, you went shopping and found the perfect house. Now what? To some home buyers, the next step is the most stressful. You need to make an offer on the home of your dreams. Depending on how many offers the seller receives and how much your offer differs from the asking price, you might have an answer within hours… or not for several weeks. To borrow an old phrase from sports, the price negotiations are when the games begin!

Sometime during your house shopping or meetings with your buyer’s agent, you might’ve heard the phrases seller’s market or buyer’s market. A seller’s market means you’ll probably have to offer close to (or more than) the asking price. A buyer’s market means you might be able to purchase the home for less than the asking price. Realtors are usually honest, but a few might try to scare you into making a higher offer than you should. Remember, realtors work on commission. The more you pay, the more the realtor earns. If a realtor claims it’s a seller’s market yet you find an abundance of homes for sale, you can assume it’s actually a buyer’s market.

How do you submit an offer that’s guaranteed to be accepted on the first round? Even your realtor can’t answer that question. Sellers have different reasons for wanting to part with their homes. Some want to quickly unload a home because it has bad memories (such as a divorce). Others are reluctant to part with their property for sentimental reasons (death of a spouse). Perhaps sometime during the listing process, a realtor, banker, friend, or family member or appraiser suggested that the seller not let the house go for less than a certain price. Maybe the sellers are a family moving upward in their careers and just need to get rid of the house in order to buy one in a different area. Unless you speak directly with the seller during an open house or other meeting, you might never know his or her real reason for selling.

In an earlier lesson we suggested attending open houses. If you didn’t view the home during an open house, we assume you checked it out during a viewing of the property. You should have a list of concerns or defects you noticed in the house. Now is the time to bring out that list and incorporate items into your offer. Perhaps you noticed that the windows need to be upgraded to energy-efficient ones. Maybe the tub was ugly as sin and you couldn’t possibly see yourself in it. You can present your negotiations in the initial offer. Your offer might be $190,000 provided that the seller installs energy-efficient windows prior to the closing. Or, if you intend to install the new windows yourself, you could deduct an appropriate amount from your offer. Your offer would be something like $185,000 due to the fact that the windows will need to be replaced at an estimated cost of $5,000.

In most areas, if your offer matches the asking price, the owner must sell the house or remove it from the market. If the asking price is $199,999 and you offer the full $199,999, the house should be yours. However, some realtors are greedy. They work on commission. If a buyer working with a different realtor knows that the seller has received one or more offers at full asking price, the realtor might suggest that a new buyer offer more than the asking price. In other words, the realtor might convince another buyer to offer $205,000. Since the homeowner obviously can’t sell the house to two different parties, he or she would have to decide which offer to accept.

Making an offer and negotiating the final price are when your buyer’s agent will really earn his or her commission. There are standard conditions that most realtors include in every offer to purchase a house. Some realtors call these contingencies. These include final inspection of the property, obtaining financing, obtaining clear title, seller’s disclosures, and many other things. By law the seller must provide a list of known defects with the house, property, and title. You can withdraw your offer if the seller discloses a defect that isn’t acceptable.

An offer also includes a lengthy list of items you probably wouldn’t think of as a first-time home buyer. Below are a few of the key items normally included in an offer to purchase real estate.

Price you’re offering

Deposit you’ll include with the offer

Amount of down payment

Long list of conditions or contingencies such as

• Final inspection of the property
• Financing
• Clear title
• Seller’s disclosures

Length of closing

Closing costs (whether buyer or seller pays them)

Personal property of the seller that you would like included in the sale

Companies to be used for escrow, closing, settlement, and title

Exact date you would like to move into the home.

It’s not over yet! Most of the time, initial offers are not accepted by the seller.  Let the games begin! If the seller rejects your offer, you can either submit a new offer or find another house. In one of the examples mentioned above, you offered $190,000 for a house with the condition that the seller install energy-efficient windows. Subsequently, the seller just refused your offer because of the windows. You could submit a counteroffer of $190,000 with no mention of the windows. That means you would have to install the new windows yourself. Your decision should be based solely on the house itself and whether you think it’s priced right. However, if you’ve fallen in love with the house or your spouse has convinced you that no other house will do, you’ll either have to submit a counteroffer, install the windows yourself, or start looking at other houses.

Don’t take it personally if your initial offer is refused by the seller. Most initial offers are. House shopping is not like a flea market where you might be able to convince the seller to accept less than the asking price. Some realtors advise sellers to set the asking price high in order to allow room for negotiation. Others want their full commission and will suggest that the seller not accept an offer less than the asking price. Regardless of what any realtor suggests, you should do what you feel comfortable doing. Don’t allow a realtor or anyone to force you to buy a house you’re not ecstatic about or offer more than you feel comfortable paying.

One final note about offers. It’s not unusual for the seller to make 3 or 4 or more counteroffers. The more counteroffers the seller makes, the more seriously you can assume he or she wants to sell the house. Counteroffers should not be interpreted as personal rejection. Keep submitting offers until one is accepted or you decide to look at other houses.