By June Fletcher (Special to Freddie Mac)
You found the house you want. You prequalified for a mortgage you can afford. Now it's time to make your first offer on the most expensive purchase you'll probably ever make. Sound nerve-wracking? It doesn't have to be if you follow these tips for putting together a first offer on your first house.
List what's important to you. Tradeoffs are likely, especially when buying a first home. So make a list of must-haves (i.e. a minimum number of bedrooms and baths, good schools, proximity to work); want-to-haves, (hardwood floors), and nice-to-haves, (three-car garage). Then prioritize. Be ruthless and practical. Remember it's always easier to install hardwood floors than overhaul a school system.
Get virtual. Visit lots of websites like Realtor, Zillow, Trulia, Homesnap, Redfin and individual broker websites. Most show comparable homes and recent sales. Some give suggested bid prices, school ratings, crime statistics, feedback from agents who have visited the home, recent list-to-sale price ratios, and other helpful information.
Remember what you learned house hunting so you can factor in the value of intangibles like sidewalks, community landscaping, noise levels, rush hour traffic patterns, and so on. Pay close attention when visiting many neighborhoods and houses during your home shopping phase so you know which intangibles sparkle and deserve premium prices.
Bid early. You'll have the best chance of winning your favorite home in a hot market if you're the first to see it—preferably well before any open houses--and make an offer that expires within a short deadline, like 24 hours. Your goal is to create a sense of urgency with the seller, and avoid getting into bidding wars.
Bid often. Most states allow buyers to bid on multiple houses at once. But if one is accepted, immediately rescind the offers on the places you don't want.
Prepare for counteroffers. It's good to make your first bid well below your top limit, so you'll be able to negotiate if a seller makes a counteroffer. If you get caught in a bidding war, and your limit is topped, walk away.
Always remember to add contingencies. Most buyers add contingencies for a mortgage approval and home inspection so they can cancel the contract if they can't get a loan or the inspector finds problems they don't want to pay for. Resist the temptation to waive inspections especially in a hot market or if the home is being sold "as-is", which means the seller won't pay for repairs. Without an inspection contingency, you could be stuck with a contract on a house you can't afford to fix.
Never fall in love. The worst thing you can do is to fall so deeply in love with a house that you overpay for it. It may take you many years for the home to appreciate to the point where its market value matches what you paid.
Follow this series just in time for the spring homebuying season.
June Fletcher, a veteran real estate reporter with The Wall Street Journal, BUILDER magazine, Yahoo!, Homes Today and other publications, is the author of House Poor: Pumped Up Prices, Rising Rates and Mortgages on Steroids (Harper Collins: 2005).