Home Buyers Guide: Deciding On An Initial Bid

Purchasing a home is both a financial and emotional investment. Here's what you need to know befor eyou make that initial bid.

Making an offer on a house is a big commitment. Before you do anything, evaluate whether or not the property is right for you and your needs. Even if the seller doesn't accept your offer, you have a certain amount of emotion invested into the home buying process. There's no point in making an offer on a home that isn't the right fit.

At the point when you become ready to make your offer, you should already have a relationship with a Loan Officer and know how much home you can afford. If you haven't been pre-approved, don't bother making that bid. You need to make sure you can qualify to buy a home and then determine the maximum loan amount you can possibly borrow from the financial institution. By no means do you need to look at homes in the range of that loan amount. In fact, that dollar figure should be kept in mind, but what is most important is what you feel comfortable with financially. You may qualify for $200,000 however once you go over your expenses you may only feel comfortable looking at properties in the $180,000 range.

When you get that pre-approval figure you can also have the Loan Officer go over a few possible scenarios. Different loan programs require different down payments, closing costs, etc. Don't hesitate to contact your Loan Officer when you find the right house. He or she will be happy to help you crunch the numbers on that particular property.

When you debate over your initial bid with yourself and your agent, keep in mind that the earnest deposit and down payment can be a very important piece of the home buying puzzle. The larger the amount of earnest money put on the property, the more serious your offer looks to the seller. The seller realizes that you are putting money on the line to indicate your level of interest in the home.

It's tempting to offer a significantly different amount of money to the seller than the original asking price. Don't just lowball to see if the seller will accept your offer. You risk the chance of the seller becoming offended and not wanting to work with you at all.

Most sellers are not so desperate or stupid in regards to their home's worth as to accept such an offer anyway. It's fine to offer lower than the asking price, however you should be able to justify this low bid. Does the home need repairs? Is it over-priced for the market?

Your agent can run the sales figures of comparable homes over the last several months to see what the current market value is for the home you are interested in. Before you make your initial bid determine if this particular property is better or worse than those similar properties that have sold recently. You should bid in the ballpark of the recent sales figures, but again, you should adjust for the condition and amenities of the property you plan to make an offer on. For example, if a similar home in the neighborhood just sold for $250,000, and the home you want has an asking price of $250,000 but requires a new roof, you may comfortably make an offer of $10,000 to $20,000 less than the asking price. The seller may balk, but you can point out that a new roof is needed. This may bring the seller back to reality when it comes to the actual value of his property.

If the market is hot and homes are selling fast, it may be in your best interest to place your initial bid at the full asking price. In many areas homes are selling for asking price or even more. Your agent should be able to find out if there are (or expect to be) multiple offers on the property. If you have competition, be prepared to make a higher initial bid.

Lastly, leave yourself some breathing room. Never place an initial bid that completely taps you out financially. If the seller counters, you will have nowhere to go. You want to make an offer that you think (and hope) will be accepted, and you also want to be prepared for the seller to counter with a slightly higher amount. If you anticipate the seller's counteroffer before it is made, you may actually get to the price you feel comfortable with in the long run.

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