Ok, so when I last left you dangling off the edge of a cliff, Chris and I had just seen a home that we really, really, really liked and were on our way back to Jersey City. Well, as we were about a mile from home, my cell phone rang. It was our realtor telling us that there was an offer on our home! *yes you really do start to think of it as “your home” right away. Not only that, but the seller’s wanted to make a decision on the offer by noon of the next day! If we wanted to bid on the house, we had to come up with an offer and have it signed and delivered in about 14 hours.
Now, conventional home-buying wisdom will tell you to stay away from this. Getting involved in a bidding war while still thinking emotionally about a house you just fell in love with definitely does not put you in a position to negotiate a favorable price. The thing is, we had looked at a ton of houses online and nothing comparable to this house was available in our price range. This place was priced to move, so we had to be ready to go if we wanted it. We did.
Our wonderful realtor stayed up until 11:30 with us explaining the process of putting forward an offer. In case you’re unfamiliar it goes something like this:
Normally, you come in at a low number which gives the sellers an opportunity to come back with a higher number and allows you to meet in the middle at what is hopefully the price you wanted all along. You tell your realtor the price you’d like to offer and she writes up a contract which all buyers have to sign and initial many times. This contract is then presented to the seller and negotiations begin. The problem was, our sellers already had an offer on the table which weakened our negotiating position. We had no idea what the other offer was, so the sellers could play each offer against the other. We decided to offer a price that was higher than our planned low-ball number. We wanted to the sellers to know we were serious rather than risk losing the home to the other potential buyers.
The next morning, our realtor prepared the contract and Chris and I printed it, signed it, scanned it and emailed it back to her. Typically this is done in person, but because of the speedy nature of this deal it was done electronically. Our realtor formally submitted our offer a little before noon, and there was nothing Chris and I could do but wait.
Luckily, we didn’t have to wait too long. Our seller’s got back to us within the hour. Unluckily, they came back with a higher number. They wanted the asking price on the house. Chris and I debated what to do. We knew when we visited the house that we might end up paying the asking price. We could afford the price, but it was higher than our original budgeted amount. Our realtor asked us to think about it this way, “In two weeks if you found out the house sold for $x to the other buyers, would you be upset you lost the home or glad you saved the money?” It sounds intuitive, but we were so stuck on the problem that it really made everything click for us. We decided we’d definitely be sad we lost the house because we knew we couldn’t find something like that even at the asking price; so we decided to go for it.
Our realtor called their realtor and told them we’d meet them at the asking price. Then, our sellers asked for more. It wasn’t a lot more, but we thought it was kind of rude. I understand that this is the nature of negotiations, but we’d met all their demands in a very timely fashion, and the amount of money was so small (in the scheme of things) that it was almost insulting. It felt like they were just pushing us to see how far we’d go. We were peeved. We actually almost cancelled the deal then and there. Luckily, our realtor reminded us that we’d likely really regret losing the house over that amount of money, and that while it was annoying, it wasn’t unprecedented. We agreed and met their higher number.
Our realtor updated our contract to reflect the new price and forwarded the changes to us to sign off on. We did, and just like that, we had a deal! Sort of.
Now, because I know you’re all dying to know… here’s our *hopefully* new home
Um… I’M LYING. We walked by this absolutely gorgeous house in Westfield on Sunday, but I’m guessing it costs $2 million. No kidding. And I work for the government. I’d like to share pictures of our home, but I’m waiting until we have a better idea of where we stand.
I’ll get into what happened next later, but now I’d like to share some other tips we picked up along the way. In our case, it ended up being purely about the money, but if that wasn’t the case, we were prepared to offer a few non-monetary incentives to sweeten the deal and hopefully swing the sellers in our direction. If you’re in a bidding war and think the offers might be monetarily close, here’s a few things you can consider adding in:
- A quick closing! We felt like we were in a strong position as first time home buyers because we’re coming from an apartment, so we don’t have an existing home to sell. That means we can move out and into the new place in about 30 days. Most sellers are buying their next home somewhere else and often have their own move-in date to consider. Offering to close on (move into) the home in less than 60 days can make a similarly priced offer much more appealing.
- Scheduling the home inspection during attorney review. After both parties sign the initial offered contract, each side is given time for their attorney to review the contract and negotiate changes. This can be a long or short process, but either way, the deal isn’t going anywhere until it’s over. A way to speed up the overall sale is to schedule an inspection of the home during attorney review. It’s also a show of good faith that you’re really interested in the home.
- Offering to waive the first $x in inspection findings or any findings under $x. This one is a little trickier. You can, if you choose, offer to waive let’s say the first $1,500 in inspection findings. That means that if the home inspector finds issues that will cost the sellers $3,000 to fix, they’re only on the hook for $1,500 of those issues. The alternative is to offer to cover anything under say, $500. That means, if the house needs a new roof ($$$), the seller is paying for that, but if there’s a broken window ($), you’ll cover it. Offering to waive nominal findings in a home inspection shows the seller that you’re not going to nitpick every issue found, but it still covers you should a major issue like a leaking oil tank be uncovered.
- A personal note. This is the only one we actually ended up doing. It was my mom’s idea, and we figured it couldn’t hurt, so I wrote our seller’s a short email (and had our realtor forward it to them) thanking them for showing us the home and considering our offer. I told them a little about us (that we’re getting married, that we graduated from the seller’s alma mater too) and asked them to consider our offer. I don’t know that it actually did anything, but it made me feel more confident.
So, there you have it. I know more about buying a home than I ever wanted too. Next, up… What exactly happens in those 60 days between “We’ll take it!” and “It’s ours!”?