Just like marriage, home-buying is one part love, one part legal transaction, and starts with a proposal.
Unfortunately, home-buying, like love, isn’t always easy. Once you’re pre-approved for a mortgage and enter the market as a viable home-buying bachelor/bachelorette, you may discover that finding your dream home isn’t as easy as it seems. Some homes don’t look like they do in their photos, while others come with extra baggage like costly repairs or assessments. You could find the perfect home in the wrong neighborhood, or debate settling on a home that lacks the qualities you’re seeking in a living space.
When you find your dream home, you’ll want to do everything in your power to get the keys—and we help you find your match.
Here are 5 simple steps for how to make an offer on a house:
1. Deciding on How Much to Offer
When you make an offer on a house, you’ll want to act fast, but not without first doing your research. You want your initial offer to be strong—not low enough to not be taken seriously, and not high enough that you’re conflating its value.
With the help of your Vancouver real estate agent, you should ask yourself the following questions:
- What’s the local housing market look like? If it’s a seller’s market, you’ll probably have to at least offer the asking price to keep up with the competition. In a buyer’s market, you may be able to offer a lower price–-especially if the property has been on the market for a long time.
- How long has the house been on the market? If the house is just recently put on the market and it’s a competitive market, you’ll want to act fast to beat other buyers to the punch.
- If it’s been on the market for a long time, why? If a home in your local market has been available for a while, there’s probably a reason. Ask your real estate agent if they can find out why. The seller’s agent may provide information that will influence your offer.
- Why is the current resident selling their home? What’s motivating the seller to sell their home now? Are they taking a job in another city? Moving to a bigger place? Falling behind on payments? Recently divorced? The more you learn about their situation (without becoming a full-on stalker), the better you can appeal to them when writing your offer letter.
- Will you need to make renovations or repairs? You’ll dive deeper into these details after a home inspection, but for now you should at least know if there are any major costs associated with the property. Does the HOA have a $20,000 assessment for a new roof? Does the kitchen need a total demo and rebuild? These factors will impact your opening offer.
- Are there other offers on the table? The seller’s agent may let you know if there are other offers? It’s usually to their benefit, because hot properties can inspire a bidding war. If you learn how much the other offers are, you’ll have a better idea of how much your offer should be.
If you’re still interested once you’ve gathered the information you need, make your offer!
2. Earnest Money Deposit
In BC, the earnest money deposit is usually 5% of the offer price. It’s due on the subject removal date, which is when you’ll remove the conditions from your offer and agree to pay the property’s purchase price when closing.
Don’t worry—this isn’t extra money you have to come up with. Your earnest money deposit goes towards your down payment, and you can get it back if you don’t end up purchasing the property. Basically, it lets the seller know that you’re serious about your offer.
3. Deciding on Contingencies and Terms of Sale
Contingencies are clauses in the contract that need to be met to ensure the deal is successful. They are escape clauses in the contract that allow buyers to walk away from the deal with your earnest money and no legal ramifications.
There are several types of contingencies you should consider, including:
- Home inspection: We can’t emphasize enough how important it is to get a home inspection before starting the closing process. If the home inspector discovers serious issues, this contingency lets you renegotiate your deal or even walk away from it.
- Appraisal contingency: The appraisal contingency can protect you from spending too much on a property. If the appraisal is less than your offer, you can renegotiate or exit the transaction altogether.
- Financing contingency: If your mortgage lender fails to come through with financing, this contingency protects you from losing your deposit.
- Strata documents: Your strata documents inform you of your townhome or condo’s financial health, the condition of common areas, and any bylaws or rules you’ll have to follow as the property owner. If there are red flags or you or your real estate agent believe the property is poorly managed, you can walk away from the contract.
- Title contingency: If there are problems with the property’s title, such as ownership disputes, easements, or liens, you can terminate the contract.
4. Completion and Possession Dates
Another fundamental term on the contract are the completion and possession dates.
- Completion Date: Also known as the closing date, the completion date is when you pay the property’s purchase price and closing costs, and become the registered owner of your new home.
- Possession Date: The possession date is when the seller is officially moved out of the home, so that you can move in.
Both parties must decide on these dates. See when the seller is looking to move or negotiate on dates that work for both parties. An offer has an expiry or deadline for when the seller needs to respond. This is usually 12-24 hours.
5. Negotiate the Price and Terms of the Sale
Once you make your offer price and decide on your contingencies and completion and possession dates, the seller responds in one of three ways: they’ll either accept, reject, or counter the offer.
If the seller accepts the offer, congratulations! You’re basically the housing equivalent of engaged. If they reject the offer, there are plenty of other fish in the sea. If the seller makes a counteroffer, you can decide if the offer is reasonable, or counter with an offer of your own.
If you and the seller can reach an agreement, you’ll experience one of two outcomes at the end of the subject removal period:
- You’ll have satisfied your requirements and remove subjects. This is when the contract is binding and the deposit is due.
- You haven’t met one or more of the subjects, and you can withdraw the offer without any penalty.