10 Steps to Making an Offer on a Home

You found the house you love! You want to make an offer! What’s the process now? This post has a lot of words and not really any images to liven it up. It’s a good outline though for first time home buyers on the whole process from finding a house and making an offer to closing and getting keys. I hope you find it helpful!

Once you decide to make an offer or bid on a house, your agent will go through the paperwork with you and ask questions about the details of the offer. The major questions are:

  • The amount you want to offer.
  • Whether or not you’ll ask for seller assist and how much.
  • How much hand money you’d like to give.
  • Information about contingencies. Whether or not your offer will be contingent (dependent upon) the results of a home inspection, pest inspection, mortgage financing, the sale of your current house, etc.

Things you’ll need to submit the offer:

  • A pre-approval (or pre-qualification) letter from a lender.
  • Hand Money (or earnest money) check
  • Initialed and Signed disclosures for the property (from your agent)
  • Signed Consumer Notice (from your agent)
  • Signed Estimated Costs sheet (from your agent)
  • Completed Sales Agreement (completed with your agent)

Once the paperwork is signed, your agent will send the offer information to the seller’s agent, likely in an email. The sales agreement will have a deadline date for the sellers to respond, usually a couple of days.

After you send over the initial offer, negotiations usually happen pretty quickly. The two agents will email, text or call back and forth with counter offers until an agreement can be made or an agreement can’t be reached and the deal falls through.

As an example of the timeline, we submitted an offer for clients a couple of days ago at about 5:30 PM. By 9:50 PM, a verbal agreement was made! And that was after a few counter offers back and forth.

The next step in the process is for the buying agent to update the sales agreement with the agreed upon terms and have the buyers and sellers sign. Once the paperwork is fully signed, the due diligence period begins! Your agent will send the sales agreement to your lender and title company so they can begin their process and you can schedule inspections.

The amount of time for due diligence is outlined in your sales agreement but is usually up to 14 days if you’ve elected to do inspections. This is the time when you have your home inspection, sewer inspection, etc. After you get the results of your inspections, you can go back to the sellers with more requests.

For example, if your home inspector says that the roof is on the last 2 years of its useful life, you can get quotes from roofers and then request some amount of the repair as seller concessions. You can ask for seller concessions in a dollar amount and do the repairs on your own after closing or you can ask the sellers to have the work done prior to closing.

If the buyers and sellers cannot come to an agreement during the due diligence period, (e.g. if you want $10k in repair money and they’ll only give $5k), you can back out of the deal and get your hand money back.

If the buyers and sellers are able to come to an agreement, a Change of Terms document is completed and signed by both parties outlining the concessions and changes to the sales agreement.

When the due diligence period ends, the lender will schedule the appraisal of the house. The appraisal needs to come back at the sale price or higher or else you won’t be able to finance the loan. This can result in the deal falling through, having to bring more money to close in order to lessen the loan amount or having to renegotiate the sale price lower to meet the lower appraisal amount.

During this period before closing, your lender might request some additional documentation but generally you’re just waiting for the title search to be completed, the loan to be underwritten, etc.

Finally, closing time! Closings are generally scheduled 30 to 60 days after the sales agreement is signed. You specify the closing date when you complete the sales agreement. 30 day closings are usually when you are paying cash (as opposed to financing) or if you are not doing any inspections. It’s pretty difficult to close a loan in 30 days if you have a 14 day due diligence period.

The day before the closing or the morning of the closing, you’ll usually walk through the house to make sure everything is as it should be. You’ll also receive the final dollar amount that you need to bring to close and initiate the wire transfer with your bank.

Your closing will be scheduled at an agreed upon location by both parties and the realtors. We’ve had a closing at a real estate office and closings at the title company office but it can be anywhere. There will be paperwork to sign, you might meet the sellers for the first time, and you’ll get the keys!!

And that’s it!

To recap here’s a quick outline of the steps from making an offer to closing on a house:

  1. Get a pre-approval from a lender. (You don’t have to actually use this lender. You can shop around for quotes still)
  2. Tell your agent you want to make an offer
  3. Complete all the paperwork with your agent
  4. Negotiate the terms of the sale
  5. Due diligence period (inspections, etc.)
  6. Communication with your lender while the deal is underwritten. They may request additional documentation, letters of explanation or different wording in the sales agreement.
  7. You’ll need to set up a new homeowner’s insurance policy and have the utilities transferred to your name.
  8. Wiring the funds to the title company usually the day before or more of closing.
  9. Closing time
  10. Get the keys and drink celebratory champagne at your new house!

I started to write a post about different types of mortgages but it was getting way too long. I’m going to try to simplify it and hopefully post next Monday. I’ll have to break it up into a couple different posts. My plan is to put up a new post every Monday 🙂

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