Step 4 | How to Make an Offer | How to Buy a Home | Murrieta Ca

You’ve finally found your dream home and you are ready to make an offer! How do you decide on an offer price? And besides price, what are the other terms are you going to be negotiating in your offer to make sure you get the best deal possible? Today’s video is all how to write an offer and we are starting right now.

Hi, welcome to my YouTube channel!  I’m Jessica Genung, a Reator here in the Murrieta/Temecula Valley with Realty One Group Southwest. Just a reminder to hit the subscribe button if you haven’t already so you don’t miss out on even more great home buying tips.

So let’s get to it.  The standard purchase contract that we California Realtors use is now 10 pages long, our association is constantly making changes to it, and it can seem quite overwhelming. But basically, when making and offer, it boils down to 3 main things we are negotiating:

1. Price

2. Timelines & Contingencies

3. Possession

I’m going to be explaining each of these.

The highest priced offer is not always the BEST offer.  The seller will be taking into account all the terms in the offer.  Keep in mind that every home purchase transaction is unique, but in this video, to keep it simple, I’m going to be discussing a “typical” transaction.  But it is not unusual for transactions to be quite complicated, it’s of vital importance that you work with a very experienced and knowledgeable agent first and foremost.   This video is just a basic overview.

#1 Price: How much should you offer for the home?

Now that you have identified the home you wish to purchase, your awesome agent will put together a Comparative Market Analysis for this home.  They will be analyzing similar homes that have recently sold and comparing them to the one you wish to purchase.  They will come up with their option of how much the home is worth.  But that’s not where it ends.

The single most important factor when trying to decide on an offer price, is to first find out if you have competition.  If there are not other offers that typically means there might be some room to negotiate and if the home has been on the market for lets say a month or more, that gives the buyer some leverage as well. If there are multiple offers on a property, your agents needs to try and get more information.  How many offer are there?  Are we over list at this point?  Is the other offer contingent upon that buyer to sell their existing home before they can close on the new home?  This type of contingency puts that offer at a disadvantage compared to a non contingent offer. Does the seller like the other offer(s) or do they want to see more? I always try and get this info for my clients from the listing agent.  They do not have to give me this information, but I do my best to get a sense of the situation

A quick note about making an offer on a property that has multiple offers.  Sometimes buyers don’t want go after this type of property because they don’t want to get in a “bidding war”.  But I would encourage you to still consider it.  Typically a house gets multiple offers not because the buyers are trying to overpay, but because it’s priced very well (maybe under market) or it’s a particularly special home with great features, location and/or wow factor.  Your experienced and knowledgeable agent will be very comfortable negotiating in a multiple offer situation. 

Along with deciding on an offer price, you will also be deciding, with the help of your lender, if you are going to be asking the seller to pay for any of your closing costs.  About half of the transactions I’ve done recently, they buyers have received closing cost assistance from the seller. Seller’s don’t love to pay closing costs, but if they like the overall offer, they often will.

Lastly, you’ll be deciding how much earnest money deposit to put down.  The Earnest money deposit is money you put down as a good-faith gesture that you’re serious about buying a house.  In my market, it’s typically about 1%. You can make that deposit higher if you want to sweeten the deal for the seller.  Your earnest money deposit is held in an escrow account, if everything goes the way it’s supposed to, the earnest money will get folded into your closing costs. But you’ll need to be careful and read your contract because there are some ways you could lose your earnest money deposit. Make sure your agent builds these contingencies into your contract so you can get back your earnest money. Next I’ll tell you about these contingencies in our second section.

#2 Timelines & Contingencies

In the purchase contract, you will be telling the seller when you plan to close on the home.  Again very important here is to understand as much about the seller’s situation as possible. Have they already moved out of the home and are paying 2 mortgages, so they want it sold asap? A buyer that is agreeable to the seller’s timeline is a great way to sweeten your offer without paying a higher price.  Typical closing timeline is 30 days.  If the seller wants a quick closing, you could try for a 21-25 day closing.  If the seller needs more time to get things together to move out, you could offer a 60 day close or more.

Next we are going to talk about the timeline of your Contingencies. A contingency is a provision in the contract that makes the contract null and void if a certain event were to occur.  Think of it as an escape clause.  There are many types of contingencies, but the main ones are the inspection contingency, appraisal contingency and financing contingency.  The purchase agreement has default timelines, but they can be modified as needed.  The inspection and appraisal contingencies default to 17 days.   The loan contingency removal defaults to 21 days.

To sweeten the deal for a seller in multiple offer situations, you can shorten those contingencies or even waive some of them altogether with CAUTION.  For example, a seller would prefer a 10 day inspection contingency instead of the default 17 days.  If any issues arise during the inspection period and you decide not to go through with the purchase, you can cancel.  As long as these contingencies remain in place, the buyer can cancel the transaction and get their earnest money deposit back.  One side note about contingencies…for contingencies to be removed, it has to be done so in writing.  Just because the time period has lapsed, it doesn’t mean you contingency is no longer in place.  But if your contingencies do lapse, the seller can begin the process to cancel the transaction.

#3 Possession

When will you be getting the keys and taking possession of your new home? The day we have all been waiting for. The contract defaults to possession passing to the buyer at 6pm on the day that escrow closes.  This is what typically happens, but in some cases, the seller needs more time to move.  Sometimes they request close of escrow, plus 3 days.  Sometimes they request even more time.  If both parties agree the seller can remain in possession past the close of escrow…let’s say the seller wants a week to close on their new purchase, and another week to move…then an addendum will be added to the purchase contract and additional terms will be negotiated such as if the seller will be paying the buyer rent for them to stay past the closing date.  Another instance is when a tenant will be remaining in possession…this is another type of addendum that can be added to negotiate possession.  Regardless of when the seller actually vacates the property, our California purchase contract automatically defaults to the seller giving the keys to the buyer at the close of escrow…not when the seller actually moves out.   A lot of agents don’t know these precise details, but that’s how the contract is written as of now.

If you hung in there with me this long, kudos to you and I hope you feel more informed for when it comes time for you to write an offer on a home!  This was step 4 out of 8 in my series on “How to Buy a Home.”  If you would like a copy of my roadmap “here” outlining the 8 steps, I’ve included a link below in the description that you can put in your email and I’ll send it on over to you.

Just a reminder to subscribe and thanks as always for watching!