Your Initial Offer
You may hear people say that 10 percent below asking price is a good first offer. It isn't, really. There is no one good initial offer based on asking price. Why? Because there are so many variables in real estate and because sellers rarely set their asking prices with consideration to market value or other rational thought processes. They want to get the most they can for their properties, and many have emotional ties to their homes. Would you offer 10 percent less than the asking price of a home that is overpriced by $25,000 or more?
Earnest money is a sum of money you provide along with your offer that demonstrates to the seller the seriousness of your intent to buy. A standard amount of earnest money is $500–$1,000.
Each and every piece of real property is unique, and so is each selling situation. So, you can understand why generic rules of thumb in real estate are dangerous. But if you must have a guideline, a first offer that is 10 percent below your fair market value estimate — not the seller's asking price — will keep you from insulting the seller. It will also keep you from having your first offer snapped up because it was higher than the seller thought he would actually get for the property.
So now that you have a figure in mind for your first offer, how do you go about making that offer?
Your offer cannot be verbal only. Most residential sales agents will refuse to present a verbal offer to the seller that is not accompanied by an earnest-money check and specific information on financing, closing date, and other details of the sale. A buyer cannot call an agent and say, “Ask them if they'll take $139,500.” That buyer could be asking the same question of four different agents about four different properties, a situation that can end up presenting serious problems. Your offer must be presented to the sellers in writing.
Most agents will want you to sign a contract before they present your offer to the seller. If you sign the contract, and if the sellers agree to your offer and also sign that form, you have bought the house.
When your real-estate agent hears the word offer, she might whip out a binder, a short form that includes your name and address, a few lines about the property being bid on, and the amount of your earnest-money deposit. If you are handed a binder, it may contain the clause “subject to review by the buyer's attorney within five business days.” That will allow you to have your lawyer look over the form, and will also allow you an out if you change your mind about that property. Check to see if this clause is added; if it is not, and you would like it added, just ask your agent.
