House hunting is stressful. Making an offer on a home is even more stressful. How much should you offer? What else should you ask for? Will the seller work with you on the price? It’s a process that’s full of landmines, and you’ll likely lose a lot of sleep. At the very least, you’ll be signing a LOT of documents. Here are the pitfalls and pleasures of home purchase offer process that we’ve come across so far.
Pitfalls of Making an Offer
This is the biggest hurdle. With foreclosures, the bank is usually realistic because it’s just a number for them. Not always, though. Sometimes they decide a house is worth way more than the market will bear so it sits and sits and sits.
The bigger issue is unrealistic sellers that aren’t a foreclosure or short sale. In this case, the seller has both an attachment the house and a “perceived value” that’s probably set somewhere back in 2007. This is especially true if they’ve refinanced enough times to pull out all the equity. They have an inflated idea of what the home is worth, and may not accept a realistic offer. Even if they get an offer at their asking price, it may not appraise and the deal will fall through.
We’ve seen several listings touting the 2006 or 2007 sales price as a reason to buy the house, except those prices were nowhere near the true value. Recently, an agent told us we were looking at a $900,000 house, but it’s not. In 10 years it might be a $900,000 house. Right now it’s worth what the market will bear. If you’ve got an unrealistic seller and an unrealistic agent on your hands, good luck.
If a house is priced well, then it’s likely to get multiple offers and go into a bidding war. Make sure you don’t get so caught up that you end up offering more than the home is worth. Make sure you have a real estate agent who understands value and can tell you when a number is too high.
Finding the Right Price
This is the biggest difficulty we’re having right now. Rather than the traditional 6 months worth of comps, banks will only look at 3 months worth of comps. Then you have to sort out the banks buying back houses, the trashed houses that investors bought, and houses that are completely different in size and condition. It makes for pretty slim pickings, and makes it especially hard to compare.
The Pleasures of Making an Offer
I’ll be honest, there aren’t many pleasures to the offer process, but I can think of two.
Finding the Right House
For now, our biggest pleasure has been finding the right house. We walked in the door and knew it was the house we wanted. We did sleep on it (or attempted to), but we just couldn’t get it out of our heads. I started fantasizing about paint colors and planning our move. I also started fantasizing about not having to look anymore! We’re trying not to get too attached, in case the sellers can’t meet our goal price, but it’s hard.
Getting the Offer Accepted
We haven’t experienced this yet, but I think this will be the past of the process. Agreeing on a price and moving into escrow. There are plenty of pitfalls once you get into escrow, but I expect that being so close to actually owning a home will be thrilling.
For now, we can only hope and wait to experience all the pleasures. We’ve already been through the hurdles.