Submitting and Accepting Offers
Buyers – you found it. The home you’ve been looking for. You have a great agent, you’ve been pre-approved, you’ve made your list, and this home checks the boxes. You are ready to submit an offer. What do you do now?
Sellers – the offers are in. You’ve spent months preparing your home for the market, you have a great agent, and you’ve received multiple offers. What do you do now? In this blog post, we are going to break down the offer submission and acceptance process for both sides.
Submitting an offer
It’s a big step, but it’s the step you need to take to make sure you are being considered to purchase a home. You can do this, and your real estate agent will be beside you the whole way. Here is what to expect:
- Look at comps
Your agent will present you with “comps” – comparable properties. You’ll be looking at these properties to learn more about the listing price, and more importantly, the sold price. You’ll look at properties that match the house in location, size, layout, age, condition, and upgrades.
- Review the numbers
You’ll want to go over the numbers. How much do you have for your down payment? Can you afford the estimated monthly payment on the home? Keep in mind there will be additional costs such as property taxes and HOA dues (if applicable). Your lender can help you by showing you the total monthly payments based on different purchasing prices. Keep in mind that buyers pay the closing costs in escrow. These are varying costs, but can generally be benchmarked as about 1% of your final sale price, assuming you are financing the loan.
- Determine your contingencies
Contingencies are conditions that must be met in order for the contract to become binding. All parties must agree to the terms. Examples of typical contingencies: financial contingencies (to make sure you get your loan), home inspection (the property can be inspected and the purchase price can be negotiated based on any findings), appraisal contingency (to make sure that the property is valued at, or above, the sale price), house sale contingency (the buyer needs to finalize the sale of their current property), and title contingency (buyers can walk away if the problem with title cannot be resolved before closing).
- Determine your offer price
You want to go in with a strong offer. You will be doing this with your agent’s help. You’ll look at the comps, the market, your budget, and the home itself. Often your offer price will be in direct correlation with your eagerness to win. At the same time, the goal is to win, but not to overpay. This is a tricky outcome to achieve, but it is possible with an experienced agent with exceptional negotiation skills. Trust your agent’s knowledge and expertise, and make sure you feel comfortable with the price you are submitting on your offer.
- Draft and submit your offer
You’ll be including your contingencies (if any) along with your initial offer price. A deposit (earnest money – typically at 3%) will also be required to create a binding purchase offer. Talk to your agent about this. Make your offer even stronger by including a letter; putting a face and story behind the offer can help a seller choose between multiple offers.
Offer has been submitted
Now you wait. Your agent will be in contact with the seller’s agent, so you will get an idea on when you will hear back. One of the following will happen:
- Seller accepts your offer
- Seller counteroffers
- Seller rejects your offer
Accepting (or rejecting) an offer
Sellers – you either have a scheduled day when all offers are due, or you have been considering offers as they come in. This is what your decision process may look like:
- You consider the offers
Besides just looking at price, you’ll be looking at terms and contingencies. For instance, you may not be able to accept an offer with a house sale contingency due to time constraints. Your agent will review the offers with you and will explain anything that seems confusing. Your agent will not be making the decision for you, but will be guiding you so that you have all of the information you need to make the best decision.
- You counteroffer
You have a few offers you are considering, and you have a buyer you are ready to negotiate with. Discuss your counteroffer and negotiation strategy with your real estate agent. When you respond to a buyer with a counteroffer, you are accepting some of their terms while modifying others. A counteroffer is now the new version of the offer, and the buyer has to approve or reject it. There are also multiple-counter offer scenarios where more than one buyer party is sent a counter-offer. Some of the parties may choose to accept your new terms, others may walk away or counter back at their original price, and finally, some may counter you back with a price in between where they started and where you countered. Buyers and sellers can continue countering each other until both parties agree to all of the terms.
- You accept an offer
By accepting an offer, you are agreeing to all of the terms in the binding contract. You now sign a purchase agreement with the buyer, which spells out the price, terms, and dates. An escrow account is opened, and earnest money is deposited (usually within two days of ratification). A title report is ordered, inspections are scheduled, and finances are worked out. Once both parties have signed all the necessary documents, your mortgage balance is paid off, and all parties involved have been paid, the closing process is complete! Congratulations!
Ready to start?
Real estate negotiations are a give and take. A great agent works with you to make the process less stressful, and more successful. We love working with buyers and sellers, and always make sure their interests come first. Call the Krishnan Team at 415-735-5867 for a no-obligation consultation. You can also email us at info@ruthkrishnan.com.
