Buying Tips & Resources

Making an Offer

There are several factors to consider when deciding how much to offer: the listing price of the home, the prices of comparable properties that have recently sold, and of course what you can afford.

Once you have considered the factors at hand, it is time to decide on a number. In competitive areas or “hot markets”, you may have to offer no less than the asking price. You should be mentally prepared for negotiations, and in some cases even bidding wars, which can erupt among aggressive buyers. In hot markets, properties often sell for 10% to 30% above the asking price.

If you are making an offer in a hot market, you may need more than just a well-priced bid. Considering the seller’s needs is the best way to achieve an advantage in the competition. Your ability to close the deal quickly is often an advantage. For example: buying with all cash or having your loan pre-approved tells the seller that you are a serious buyer. Your flexibility and accommodation of seller time frames can also be beneficial. For example: extending the closing time frame for a party that cannot move for several months; or making your offer for the property “as is”, meaning you will pay for any needed repairs.

In less competitive areas, or “cold markets”, you will have more room to negotiate with the seller at a lower purchase price. REO, short sale, and Bank Owned properties can often be obtained at great prices, but be prepared for a long and challenging closing process.

In any market, you will want to bid to win. Be sure to discuss the best strategy for your offer with your REALTOR®.

 

Also called the “asking price”, this is a rough estimate of what the seller would like to receive. It is important to consider how long the property has been on the market and if there have been any price reductions. Other factors that should affect how seriously you consider the listing price include whether the property is a foreclosure or short sale and if there are multiple offers being presented to the seller.

  • Your REALTOR® can provide you with a list of comparable properties, or “comps” that have recently sold in the area near the property you are about to make an offer on. The most relative and supporting comparables should fall within these guidelines:
    • Sales that have occurred within the last three to six months – the more recent, the better.
    • Sales of properties similar to the one you’re making an offer on, in terms of age, size, and bedrooms and bathrooms.
    • Sales within a reasonable proximity (six to ten blocks in an urban area; consult your REALTOR® in rural areas) of the property you are making an offer on. This radius may need to be reduced if a freeway or other dividing line splits the neighborhood.

You should come to the offer table pre-approved. When figuring the total cost of the property, be sure to include closing costs into your budget. Closing costs are typically 2%-5% of the final purchase price.

Insurance

Home insurance, also called hazard insurance or homeowners insurance, is a type of insurance that covers private homes. It combines various personal insurance protections, which can include: losses to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy’s territory.

A dwelling policy (DP) is similar to a home insurance policy, but is used for residences which do not qualify under various circumstances, such as vacancy/non-occupancy, seasonal/secondary residence, or age.

You should refer to the actual policy for specifics to what will and what will not be paid in the case of various events. Basic policies protect you and your house against losses from fire, theft, liability, vandalism, water damage, wind damage, tornadoes, and loss of use.  Traditionally, claims due to termites, floods, earthquakes or war (typically including a nuclear explosion from any source), are excluded; however special insurance can be purchased for these circumstances.

There are several types of homeowner’s policies available. Understanding the coverage that each type offers will help you select the right policy for your needs. The following three policy types are the most common coverages available:

  • Standard Policy requires coverage for at least 80% of the value of your home, excluding land and the foundation. It will usually insure your personal property at actual cash value.
  • Broad-From Policy is more inclusive than the standard policy and covers additional named perils such as glass breakage, smoke damage, etc.
  • All-Risk Policy covers even more than the standard and broad-form policies. An example of a covered risk might be damage caused to your roof from ice build-up in the gutters.

Some of these policies offer optional guaranteed replacement cost coverage on your home and its contents. Replacement cost coverage will pay to rebuild your home and replace its contents with no depreciation coming into play.

The premium of a home insurance policy varies and typically depends on the cost to replace the property (including contents and personal possessions), and will also factor in the likelihood of the home being damaged or destroyed. Deductibles also vary and will affect the annual price of the policy you choose.

It is important to understand that the replacement value of your home is based on your insurance company’s estimate of the cost to rebuild your home on your property. It is not based on the purchase or appraised value of the home. Most policies have a built-in annual increase of replacement cost coverage.

When purchasing home insurance, there are ways of lowering your premium. Most insurance companies offer discounts for smoke alarms, fire extinguishers, deadbolt locks, and whole-house alarm systems.

If your home is fairly new, or if you elect to insure your automobiles with the same company, you are likely to receive an additional discount on your premium.

Again, you can reduce your premium by electing to have a high deductible, but make sure to keep the number realistic should you need to make a claim.

Insurance is the type of service you buy hoping that you will never have to use it. Unfortunately, in the world we live in, there is always the potential for the unexpected. Wherever you live in the world, there is the risk of natural disaster, accident, and sadly theft. Because all of these factors are out of your control, you will want to protect yourself from loss with home insurance.

Discuss your unique needs and concerns with your insurance agent before purchasing a policy, or whenever your needs may change. The right policy can give you a sense of security in knowing that you are adequately protected. If you do not have a trusted insurance agent, your REALTOR® can refer you to one.

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Work With Stephanie

I am currently an Affiliate Broker at Zeitlin Sotheby’s International Realty and have been an active member of Greater Nashville Realtors since 2009. I came into the business during a challenging time in the market. Through determination and a desire to succeed, I am now one of the top producing agents at Zeitlin Sotheby’s.

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