Components of a real estate offer: what a first-time home buyer needs to know
Our first-time home buyer has been pre-qualified with a Lender and has been shopping online and in person with his/her Realtor.
Now you’ve found the perfect house and are ready to make an offer.
The first thing your Realtor will do is prepare a CMA (Comparative Market Analysis) to show comparable properties in the neighborhood and what they have sold for. We study what has been sold in the past six months and use this data to determine a fair market value price. What you decide to offer depends on how quickly the properties are selling in that particular area, how long the property has been on the market and other factors - your Realtor representing you will advise you.
In the price range in which first-time home buyers are shopping, the pricing may not be as competitive as you might expect as we near the deadline to get under contract.
Although we consider the purchase price the largest component of a real estate offer, other components come in to play.
- Are you asking the Seller to contribute towards your closing costs?
- How quickly can you close?
- Are you asking for a residential service agreement and home repairs?
- Are you writing a large earnest money check to make your offer look attractive?
- What TYPE of financing are you using?
When the Listing Realtor presents an offer to his/her Seller, he/she will point out:
- Sales price
- Amount of earnest money
- Type of financing (FHA, VA, conventional, RD, cash)
- Amount requested in repairs
- Seller concessions (amount Seller may contribute towards Buyer’s closing costs)
- Closing date
- Other additional provisions
Components of a real estate offer: what a first-time home buyer needs to know
If you are looking at a home your heart is set on and it’s possible for it to receive multiple offers, you want to begin with a clean and attractive offer. If you have the funds available, write a STRONG earnest money check - in our area, 1% of sales price is typical, but I encourage first-time home buyers to write their earnest money check for a larger amount if they intend to make a “low-ball” offer.
If first-time home buyers NEED to ask the Seller to contribute to your closing costs, it may be necessary to offer more than list price. Keep in mind that the property must appraise for the amount you are going to borrow, and you don’t want to spend money on an appraisal and inspections if it’s not likely to appraise. Again, your Realtor can advise you in this area.
TYPICAL first-time home buyers are using FHA financing and paying the minimum 3.5% down-payment. Your closing costs can be $4,000-$7,000, depending on the price of the home.
The expenses you can expect to pay up front include:
- Appraisal $375-$400
- Earnest money: 1% of sales price
- Inspections: $300-$500
Some home inspectors will be willing to be paid at closing, but may expect a credit card on file, should your contract fall through.
Good luck to first-time home buyers in crafting your offer. Rely on the skills of a competent, full-time Realtor to advise you and represent you.
Lori is a residential Realtor serving the greater Tulsa area, and specializing in midtown Tulsa real estate. Please visit Lori’s web site, LoriCain.com or call 918-852-5036.
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Lori is a residential Realtor with Chinowth & Cohen Realtors serving the greater Tulsa area and specializing in downtown Tulsa and midtown Tulsa real estate.
Thank you for the informative article. Chad.
Lori, Very Well Written and Informative.
Great article....thanks for the information
Thanks for the info. I'll be sending this to my new clients today.
Lori - very well put and so consise...I am sure that a lot of home buyers will appreciate the information ... and I also cannot stress enough how important this phrase is:
'Rely on the skills of a competent, full-time Realtor to advise you and represent you.'
With smiles,
Bo in Yukon
Lori, good information and I wish all buyers got the "offer more than list price" when asking for closing costs.
Lori - Great information on a real estate offer. Clear and to the point. So many don't really understand the offer, the concessions, etc. - they just want "a deal."
Great series for first-time home buyers, Lori. Very well presented.
Thanks for stopping by everyone. Feel free to re-blog!
Excellent post Lori: So many times we forget to really explain and outline all of these important details! Bravo!
Thank you Jane! Happy to report that the first-time buyers are keeping me busy. It's helpful to e-mail them a link to this blog post!