How to Make an Offer to Purchase Real Estate

By: Jerry

In some parts of the country, the housing market is starting to bottom out and home buyers and investors are starting to take advantage of the huge inventory of houses on the market.  But it’s important to remember that an offer to purchase real estate and actually buying the home are two completely different propositions.  Lots of things can derail the home buying process after you make an offer.  The loan can be scotched in the underwriting process, there can be title problems or liens, a low (or high) appraisal can blow the deal, or contingencies in contracts can mean that the offer is not the final word (even if it’s been accepted).

The best you can do is to come well-armed with knowledge before you even think about making an offer to purchase real estate.  Here are a few pointers:

• Find out (if you can) why the seller is selling.   Money trouble?  Mortgage trouble?  Relocating?  The listing agent may not tell you, but having that knowledge could inform your own decision when you make an offer.
• Research the market.  In many parts of the country, it’s still a buyer’s market and sellers are going to be more receptive to bids.  
• Research the neighborhood.  Look at crime statistics, think about the home’s location relative to schools, main thoroughfares, shopping and business.  Drive around and look at other properties in the neighborhood and get an idea of comparables from their selling prices.  Remember that smaller houses will ask more money per square foot (depending on amenities and improvements), while larger houses will often be the opposite.
• Find out what the seller paid initially.  In a flat or upside-down market (like many parts of the country), the asking price should be close to the seller’s purchase price.
• Find out, if possible, what’s still owed on the house.  If the seller still owes a lot on the house (or is in default), he may be motivated to sell quickly.
• Ask your agent for a trend report that will detail list prices vs. sale prices in the area for the last six months.  That should help give you another yardstick by which you can offer to purchase real estate.
• Finally, look into the house’s history.  Has it been offered for sale, then pulled off and re-listed?  How many days has it spent on the market?  Anything more than 30 days can mean that the seller might be pretty motivated to cut a deal.

Regardless of what happens, keep your options open.  Have a few other properties under consideration should the one that you’re making an offer on not come through.  This may take some detachment so that you don’t get too much invested emotionally in the house you’re looking at, but it’s just realistic.