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 🙂

Millage Totals for Allegheny County

I got a couple of guesses on the highest millage on Facebook. One person guessed Mt. Lebanon and one person guessed Wilkinsburg. Wilkinsburg is correct! It is the highest of all the municipalities.

Here are the top 10 highest:

We used to live in Mt. Lebanon and people always think Mt. Lebanon taxes are one of the highest but they are actually 45th on the list! They have lower real estate taxes than both Upper St. Clair and Dormont.

The lowest real estate taxes in Allegheny County (other than the city of Pittsburgh) are McCandless.

Here are the 10 lowest:

I have the full spreadsheet embedded below, highest to lowest. I included the school district for each in the spreadsheet because that can be helpful too when looking in different areas for a home.

The millages change year to year a bit but this is the most up to date information available now.

And here is a link to the actual spreadsheet in case that is helpful.

Are you surprised by the results? I was when I put all of the information together.

My next post is going to be about different kinds of mortgages that are available. Conventional, FHA, VA, down payment choices, PMI, MIP. All sorts of acronyms 🙂

Calculating Real Estate Taxes

One of the things that always comes up when discussing real estate are questions about property taxes.  Will I be reassessed?  What is millage? What’s the homestead exemption?  How do I calculate the taxes?  

I thought this would be a good first topic because it applies to every single person that owns a home.

Here is the definition of millage: The millage rate is the amount per $1,000 of property value that is used to calculate local property taxes. Assigned millage rates are multiplied by the total taxable value of the property in order to arrive at the property taxes.

For example, if the assessed value of your home is $100,000 and the millage rate is 30, you first convert 30 to a decimal by moving the decimal place to the left 3 spaces.  30 = .03 or 3%.  Next, multiply $100,000 x .03 = $3,000 which is your annual tax amount.  

Now let’s talk about figuring out your municipality’s millage rate.  This is all going to be based on Allegheny County.

There are three parts that make up your millage number:

  • County
  • School District
  • Municipality

All municipalities in Allegheny County have the same County millage which is 4.73.

You can find the list of school district millage rates here: http://apps.alleghenycounty.us/website/millsd.asp

You can find the list of municipal millage rates here:  http://apps.alleghenycounty.us/website/millmuni.asp

For an example, here are the millage rates for the city of Pittsburgh:

  • County – always  4.73
  • School District     9.84
  • Municipality         8.06
  • TOTAL MILLAGE : 22.63 or 2.263%

If you live in the city of Pittsburgh and your assessed value is $100,000, multiply that by the millage—
100,000 x .02263 (millage converted to decimal) = $2,263 would be your annual real estate tax amount.

You can find your assessed value on the Allegheny County Assessment Site. Click the link in the line above, click I Agree at the bottom and then search by address. The General Information tab comes up first and this is where you will see your assessed value. In the screen shot below, the assessed value is $78,800.

Note: City of Pittsburgh has the lowest real estate taxes in Allegheny County but the local income tax that you pay if you live within city limits is higher (3%). Most other municipalities have a local income tax rate of about 1% so factor that in when thinking about your purchase.  You’ll probably be paying lower real estate taxes but higher income tax if you choose to live in the city.

Homestead Exemption

Now let’s talk about the homestead exemption also called Act 50.  When you buy a house, or already own a house, and it is your primary residence, check to see if you have the homestead exemption.  It’ll take $18,000 off of the assessed value of your home.  Meaning, if your home is assessed at $100,000, you would only pay taxes based on $82,000.  ($100,000 minus the $18,000 homestead exemption). 

Here’s a link to the county page where you can download the Homestead Exemption application. You can check whether you have the exemption on the Allegheny County Assessment site. Just click the following link and then search for your house by address: Allegheny County Assessment Site.

This is problably enough info for my very first blog post but how about fun real estate trivia?

Which municipalities have the highest and lowest tax rates?
(other than city of Pittsburgh) 
Leave your answer in the comments and I’ll put the answer in the next post.

I’ll also be posting a spreadsheet of all of the total real estate taxes in order for each municipality in Allegheny County.  🙂