In today's market, it's important to make a competitive offer once you've found the right home. Our latest forecast shows that while the housing market has remained strong during the pandemic, in large part driven from today's historically low interest rates, housing supply has not caught up to high demand.
With strong competition, you'll want to stand out from other interested buyers and convince the seller to accept your offer. Consider these tips to help you make a confident and informed offer while avoiding some of the most common homebuying pitfalls.
1. Check your emotions
Buying a home is a big financial investment - and because of that, it's easy to get caught up in the stress and excitement of the process. After a long home search, it's easy to overlook some red flags because you have fallen in love with a home that checks the boxes on your home wish list.
Remember to let your homebuying team guide you on your journey, not your emotions. Their support and expertise will keep you from compromising on your must-haves and future financial stability.
2. Run the numbers - again
A pre-approval letter is a great tool to show the seller that you are a serious buyer, but be wary of bidding the entire amount you qualified for. Remember, the amount you are pre-approved for is simply the maximum amount your lender is willing to loan you, not necessarily how much you should spend. Plus, if you go all-in on your first offer, you might lose room to negotiate if the seller responds with a counter offer.
The amount you borrow for a mortgage should depend on your comfort level given your unique financial situation. Talk with your lender to get a better understanding of how to budget for sustainable homeownership.
3. Come to a fair offer price
While you want the best deal, avoid submitting a low-ball offer. Offers that are significantly lower than the home's list price may insult the seller and lead them to not even consider you.
Your agent will work with you to make an informed offer based on the market value of the home, the condition of the home and recent home sale prices in the area.
4. Put on your negotiating hat
After submitting your offer, the seller can accept, reject or counter your offer by requesting certain changes, such as a higher price or adjusted closing date. This is where negotiations come in.
Flexibility is key as you work with your agent through the negotiation process. Adjusting the closing date or accepting a higher price (within your budget) can help strengthen your offer and increase your chances of landing the home when negotiating. Your agent will communicate between you and the seller to reach an agreement.
5. Remember contingencies
It's recommended that you include contingencies with your offer, which are conditions that must be met before the purchase is finalized, to help avoid costly surprises down the road. For example, making your purchase contingent on a home inspection and appraisal will ensure that the value of the home matches the sales price.
Resist the temptation to waive the inspection contingency, especially in a hot market or if the home is being sold 'as-is', which means the seller won't pay for repairs. Without an inspection contingency, you could be stuck with a contract on a house you can't afford to fix.
Finalizing your offer is one of the last steps before getting the keys to your new home. The homebuying journey is different for everyone, so it's important to do your homework and with your homebuying team throughout the process.
For more tips about buying a home, visit My Home by Freddie Mac®.