Real Estate Negotiations: What You Need To Know & How to Make a Strong Offer on a Home
by Lino Arci
on Friday, April 19th, 2019 at 10:05am.
Few feelings compare to the one you get when you find the house of your dreams. It’s the moment when the time you’ve spent pouring over listings and attending home viewings finally starts to pay off. While you’re certainly entitled to celebrate at this stage, remember that you don’t own your ideal property just yet. Now is the time to secure your new home by impressing the seller with a truly irresistible offer.
To start, there are 6 parts to a home-purchasing offer that you should know:
Price - Depending on the local market conditions and information provided by your Real Estate Professional, the price you offer may be different from the seller's price.
Deposit - Your deposit shows good faith and will be applied against the purchase of the home when the sale closes. Your Real Estate Professional can advise you on an appropriate amount.
Terms - Includes the total price offered and the financing details. You arrange your own financing or ask to assume the seller's mortgage, especially if it has an attractive interest rate.
Conditions - These might include "subject to home inspection", "subject to you obtaining financing", or "subject to you selling your property".
Inclusions & Exclusions - These might include appliances and certain fixtures or decorative items, such as window coverings or mirrors. These items would remain in the house.
Closing or Possession Date - Generally, the day the title of the property is legally transferred and the transaction of funds finalized
Furthermore, an offer can be "firm", meaning without conditions, or "conditional" if it is subject to some of the conditions mentioned above. After that, an offer can be accepted, rejected, or met with a counter-offer. The counter-offer may be in reference to the price, closing date, or any number of variables. Offers can go back and forth until both parties have agreed to terms or either side ends the negotiations.
If you’re planning to put in an offer on a property in the near future, here are a few tips for making sure it stands out...
How to Make a Strong Offer on a Home:
Chances are, you’ll need to obtain financing before you can make your home purchase. We suggest starting the process early on by obtaining a pre-approval letter—and including it in your offer once you find that perfect home. When a lender pre-approves you, they look closely at your financial situation and determine how much financing you’re likely to receive. Knowing that you’ve gone through this process instills sellers with a sense of confidence, which could further encourage them to accept your offer if it’s attractive.
Consider making your highest bid first
During the home-buying process, negotiations can help you lock down the best deal possible. That said, buyers don’t always get the chance to negotiate. If you’ve opted to put in an offer on an in-demand property, you may want to consider making your highest bid first. In our experience, sellers with several lucrative options will often choose the best one right off the bat—and avoid going back-and-forth with buyers. If you find yourself in a potential multiple offer scenario, your agent can help you assess the situation and come up with the right offer strategy.
There’s no doubt that money talks. Having said that, some sellers are just as interested in making a no-muss, no fuss sale as they are in taking home some extra cash. For this reason, upping the convenience factor can make your offer a lot more attractive. If possible, be flexible about your timeline. Whether a seller needs to relocate in a hurry or wants to take their time, your willingness to help make it happen could be one of the keys to having your offer accepted.
Form a connection
It’s one of the most overlooked tools in a home buyer’s toolbox: the offer letter. The truth is, most people would prefer to deal with a buyer who they feel some sort of connection with. Your offer letter is an opportunity to remind sellers of any common ground you might have (whether it’s a love of rescue animals or a favourite hockey team). Even more importantly, it’s a chance to tell them why their house is your dream home—and how you plan to take good care of it. While letters don’t always hold a lot of sway, they can in the right situation. If you choose to write one, be friendly, genuine, and concise.
Remove unnecessary contingencies
Contingencies are events that must occur before a deal can be considered complete. For example, including a financing contingency in your contract will allow you to get out of a home purchase if your mortgage falls through. While these stipulations can protect buyers, sellers often see them as annoying obstacles to a smooth sale. As a result, forgoing them can make your offer far more appealing than it otherwise would be. Just be sure to consult with your agent before going this route—they’ll look at your circumstances and ensure that you’re not exposing yourself to undue risk.
Preparing to buy a home? From starting your search to making a highly-appealing offer, we can help at every step. Get in touch to learn more about the process!