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Joy Whitney Guttenberg's Blog

By Joy Whitney Guttenberg | Broker in Staten Island, NY

House Hunting Step 2: Submitting Offers

One of the most interesting and unfortunate things I have found in my experience is that most first time home buyers are completely terrified of submitting offers. Without really knowing what an offer, or “offer to purchase” actually is, buyers automatically feel they are signing their life away once they sign the “binder”, or “offer to purchase” form.  They waste time by wanting to see the house at least 3 times before submitting an offer, and they wait and wait and worry and ponder, and once the moment finally arrives where they are ready to submit the offer, the house is already under acceptance with somebody else. This is when the heartbreak sets in and when the buyer may feel resentment towards their Realtor, because their Realtor did not properly explain the process, and they may not have lost the house if they knew better.

So, lets break down the offer submitting process:

What entails submitting an “offer to purchase” on a property? There are a few different parts to this question, and we will discuss the below topics in detail:

1. What Information Do I need to Put in the offer?

2. What do I need in order to submit an offer?

3. How Do The Offers Get Discussed?

4. How binding is an offer?


We will go over all of these questions, but before we get into it, lets quickly go over how sellers will price the houses you will be looking at: Buying real estate is different than buying absolutely anything else imaginable, due to the simple fact that there is no set price for any piece of property. There is no book or website or person that can definitively determine an exact price for any property. Real Property is owned by individuals that have the ability to drastically change the value by what they decide to do with it. Unlike buying an article of a clothing from a store where the number on the price tag has been strategically determined due to mathematical factors, the “list price” or “asking price” for a piece of property is merely an opinion of what the house should sell for, based on comparable sales of like houses in a close proximity within a certain period of time. Whew! For example, if you are looking to sell a house that is a 3 bedroom, 2 bathroom colonial that was built in the 1970′s that has been upgraded and renovated since you bought it, you would look to see (with the help of a Realtor of course) what other houses within a 1 mile radius that also have 3 bedrooms and 2 bathrooms and built in the 1970′s sold for within the last 6 months. We do this because, like i said before, one person does not determine the sales price of a house, the market does, and the recent sales activity must act as your guide. Once a seller gathers all of this information, they make the final decision on what they want to ask for their house, and they may or may not chose to follow the market trend, which is something you and your Realtor need to determine before you submit an offer, to make sure the property is priced fairly and according to fair market value. If you do not look into this and do not question the asking price, you may be victim to overpaying for your house.

Ok, so now we as house hunters know that the “asking price” for a house is simply a suggestion of where to start the negotiations, based on comparable sales within the market.

Here’s the bottom line: Submitting an initial offer is simply starting the negotiations. I would say in my experience, buyers today typically offer $20,000-$30,000 below asking price for a slightly higher listed property, $10,000-$15,000 below for a fairly priced property, and $2,000-$5,000 for a slightly below market asking price. All in all, buyers seem to always start below asking price, no matter how well listed a property is.

When you submit the offer, you are just starting negotiations. You can expect a counter offer from the seller, and you will counter back, and the counter offers can go back and forth many times, until eventually you meet in the middle where everyone agrees, or someone won’t budge, and you move on. There is nothing binding about an offer; you don’t put any money down, you don’t lose anything, and you didn’t just purchase a house once you get an accepted offer. Far from it, in fact! You have absolutely nothing to lose when you submit an offer on a property, so I encourage my buyers to submit offers as soon as they can, to get the ball rolling, and to just get accustomed to the back and forth, the negotiations, and the playing with numbers, to see how it feels and what kind of buyers they really are. I say, put as many offers on as man different houses as possible, because you never know which one is going to offer the best price, the best investment, the right timing.

1. What Information Do I need to Put in the offer?

Here is the most important information you need to include in your offer: purchase price, down payment amount, loan or cash amount, contingencies, contract signing date, closing date, attorney information, home address. All of these pieces of information make up a full offer, and can sway a seller in many different directions. Price is obviously the most important part of the offer, but if that price is contingent on the buyer selling their own piece of property, it could turn the sellers off. If a seller receives two offers for their property, one being slightly higher than the other, but the lower offer is a cash offer and is willing to close in 30 days, while the higher offer is subject to an FHA mortgage approval and needs 90 days to close, the seller may opt to go for the lower cash offer, because they just want to get out of the house already and want the quickest way possible.

2. What do I need in order to submit an offer?

These days, the most important part of the offer is the proof that you have the funds to back up the offered purchase amount. If you offered cash, the offer must be submitted with Proof of Funds, to show that you actually have the cash you are offering to purchase the house with. If you offered to purchase the house with a mortgage, the offer must be submitted with a legitimate mortgage prequalification from a direct lender, received within the last 30 days. Offers are not acknowledged without these important documents, so make sure that you have your financing documents in place before you even begin your house hunting. It is crucial that you have these documents if you are looking to purchase a property, because most Realtors today will not view you as a “serious buyer” if you do not. Furthermore, how will you know what your budget is if your finances have not been assessed by a professional, and no exact number was given to you? Do yourself a favor and get a prequal if you are thinking of buying a home! It is free at most banks and it is a great assessment of where to begin your house hunting.

3. How Do The Offers Get Discussed?

Once a buyer is ready to submit an offer, their Realtor fills out the “binder” and has the buyer sign it. The Realtor then contacts the listing agent, and if they are any good at what they do, will call to say hi, introduce themselves, let them know they are working with a buyer who is interested in the property, and that they have an offer to submit. This way, you are making nice off the bat, getting the listing agent excited that you may actually be the one to sell their listing, and they cannot wait to hear the offer. This way, if this actually turns out to be your buyer’s house, you have already made friends with the listing agent, which helps the process (there are so many key players involved that can make or break a deal, you want to try and get on everyone’s good side from the get go). I usually give them the option to hear the offer verbally, or to wait for the fax. If you are able to give the offer verbally, you get the chance to explain the offer a bit, which is better than just seeing a number on a piece of paper. The listing agent then goes to their seller to give them the offer, and the seller tells their listing agent how they would like to proceed, usually with a counter offer. The listing agent then calls your agent to relay the counter offer, and your agent will then call you to with the number. And that is how the process works. Once a final number is agreed upon, a final fax with the updated amount is submitted to the listing agent, who then gets the binder signed by the seller. The binder is now fully executed and is ready to be sent to the attorneys.


4. How binding is an offer?

Contrary to its name, a binder is not binding at all. Once both the buyer and seller agree on a purchase price, and both parties sign the document, the offer has been “accepted” and the house changes its status to “acceptance” in the Multiple Listing Service. There are no legal implications of this accepted offer until you go to contract, which is still a couple of steps away. So relax, breathe, you haven’t sold your life away just yet. There is still time to back out, time to change your mind, time to renegotiate, all without penalty. Enjoy your acceptance, whether it progresses to a contract or dies before it ever had a chance, its still a rush, and its still all part of the process!

Stay tuned for step 3: the home inspection!

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