Once you have found a home that you are interested in making an offer, your Realtor should produce a Comparable Market Analysis which will indicate the prices of what similar homes, in similar condition, have sold for in the recent past. The best measurement of the is the price per square foot and the ADOM/CDOM for that home as it compares to other recent sales.
Market value is one factor you must strongly consider because the house has to appraise for at least what you are offering, or a lender won’t fund the sale. However, you must also take into consideration the competition for housing at the time that you are buying. Low demand and an excess of houses available is a “buyer’s market” which means that the buyer has leverage in negotiating the sale. High demand and a shortage of houses available is a “seller’s market” which results in the buyer having less leverage in negotiating the sale. The appraisal is the overriding stability to keep inflation of housing prices in check.
Making an offer to purchase a home is in the form of a contract. Most contracts for purchase of a homes have recently been in the FAR BAR As Is form which, among other things, specifies the following:
- amount you are offering to purchase the home
- amount that you will put up as earnest money to be escrowed and applied to the sale
- proportion and type of financing (if any)
- date in which the sale is to take place
- amount of time the seller has to consider the offer
- fixtures or appliances that will be included or excluded in the sale
- if a home warranty will be included and who will paid for it
- if there is any seller financing involved
- number of days to inspect the home
- if the home will be sold with a lease in place
- Who pays for any assessments on the home or community
- If the contract is assignable
- Who will select the title company and pay for the title search
- Many disclosures and dispute resolution measures
The seller can accept all aspects of the offer and execute the contract by initialing and signing in the appropriate locations. All aspects of the contract can be negotiated by the seller and returned to the buyer as a counter offer. The buyer can accept these changes and execute the contract, or make new adjustments in a new offer. Note that there is NO requirement for the seller to respond.