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Deciding how much to offer on a home — quite possibly the most valuable item you’ll ever own — is a little like Goldilocks’ experience with the fairy tale bears. You don’t want to make an offer that’s too big or too small. Instead, to have the best chance of reaching a deal, you need to make an offer that’s just right.

Tips for making an offer on a house

Once you’ve decided to buy a home and found one that you love, it’s time to get down to business. Writing an offer that gets a seller’s attention is about standing out from other buyers. Here are five quick tips for making an offer on a house:

  1. Work with your real estate agent to evaluate comparable listings in the area to determine the right amount to offer. A good rule of thumb is that the more competitive the market, the closer to asking price you should be.
  2. Write a personal letter detailing why you want the home.
  3. Wait for a response from the seller.
  4. If the offer is accepted, you’re ready to move on to the other steps in the home-buying process (finalize financing, get a home inspection, etc.).
  5. If the seller declines or counteroffers and you still want to buy the home, come up with a more attractive offer and resubmit.

Making an offer under asking price

“I advise my clients to make an offer they feel good about, and that can sometimes mean offering under asking price,” explains Casey Moynihan, a Realtor and broker based in Nashville, Tennessee. “In situations when my buyer is questioning the value, we look at a few things, including days on the market, if the house is currently occupied, neighborhood comps and if there are multiple offers on the property.”

Offering less than asking price can be a risk, but if you determine you’re willing to chance it, it may be better to offer a price that you feel good about.

How to back out of an offer

If you start having second thoughts about a home and want to back out, keep in mind that there are different versions of real estate contracts, which can vary even within a single state.

“Most real estate offers are binding once the seller accepts, signs and the contract is fully executed,” says Hillary Hertzberg of The Jills Zeder Group at Coldwell Banker Residential Real Estate of South Florida. “We draft offers with inspection periods which allow for due diligence and the buyer may have options to potentially cancel the contract depending on the terms.” A buyer should speak to a lawyer for situation-specific clarity on contract questions.

A good rule of thumb is that once earnest money has been exchanged, you risk losing that deposit if you back out. “There are a few opportunities during the buying process when a contract can terminate and the buyer is not penalized,” Moynihan says. “(This could include) if you have an inspection contingency and something comes up in the inspection that can’t be resolved between buyers and sellers, if you have an appraisal contingency and the appraisal comes back short on the home’s value, or if you have a financing contingency and the bank can’t get your loan approved.”

Advantages of writing a personal letter

Sellers can be emotional about moving away from a home they love, so writing a personal letter can offer a glimpse into why you want their home — and what you love about it.

“A residential transaction almost always has an emotional component,” Hertzberg says. “The seller originally bought the home as there was something they loved about it. A personal letter from the buyer can set one buyer apart from a pile of impersonal offers. In a competitive market, this can make all the difference. A handwritten note has incredible power in the digital world we live in today.”

Avoid common deal breakers

If you want the best shot at scoring your dream home, it’s wise to know what pitfalls to avoid. Common deal-breakers can include too many contingencies, asking for personal property, demanding a really fast closing date, and other potential turn-offs to sellers. Talk with your real estate agent to craft an offer that shows you’re willing to compromise rather than make demands.

Can I make an offer without a real estate agent?

Bottom line: you don’t need to work with a real estate agent to buy a home. You can write your own offer and submit it to the seller (if it’s for sale by owner) or to the seller’s agent. However, going it alone without the help of a savvy agent (especially if this is your first time buying a home) may not be the best idea.

“It is critical to work with an agent that not only has market expertise but also has deal negotiation expertise,” Hertzberg says. “The value of the agent’s negotiation skills is paramount. The savings or loss can be very significant.”

Plus, Moynihan adds, “Real estate is an emotional process, so it’s my job to make sure my clients are protected and educated throughout the process.”

Having an agent who can calmly explain every step of the process can give the buyer peace of mind — a benefit that’s hard to quantify monetarily.

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