What Happens After Making an Offer on a House?

Making an offer on a house feels like a reason to celebrate. You’ve applied for financing, worked with your agent to search for available listings, put in time attending open houses, and have found the place you’re ready to call home. However, celebrating at this stage in the buying process could leave you heartbroken if your offer isn’t accepted.

So, what happens after you make an offer on a house? Revealing what goes on behind the curtain in this critical stage of the buying process will help you understand what to expect next. First, let’s take a look at the three ways a seller can respond to your offer.

What Happens After Making an Offer on a House?

The seller rejects your offer:

If a seller rejects your offer, your agent may be able to relay information from the listing agent as to why it was insufficient. This can serve as a learning opportunity for the next time you prepare an offer.

The seller makes a counteroffer:

Counteroffers can make buying a home feel like a chess match. This is an indication that your offer has piqued the seller’s interest. Once you receive a counteroffer, it’s a matter of ironing out the finer details to reach a deal. Sellers will typically request alterations like a higher price, a modification to your contingencies, or an adjustment of closing dates.

You can accept or reject the counteroffer or come back with a counteroffer of your own, which may continue for multiple rounds until the two parties reach an agreement. Prepare for counteroffers ahead of time with your agent by discussing your price limit, how much you’re willing to budge on your contingencies, your flexibility around closing dates, etc.

The seller accepts your offer:

The smoothest result after submitting your offer is the seller accepting it, but that doesn’t mean you’ve crossed the finish line yet. Once the seller formally accepts your offer, you’ll be “under contract,” meaning both parties have agreed to move forward with the deal. Before closing, any contingencies attached to the offer must be met.

This explains why you’ll occasionally see properties listed as “under contract.” It means the seller has accepted an offer and there’s a good chance the deal will go through, but because the sale is not yet final, the property is technically not off the table. Other interested buyers will make backup offers in case the first offer falls through.

 

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After your offer has been accepted, you’re officially in the homestretch of the buying process. Once the purchase agreement is signed, it becomes legally binding. Backing out of a real estate transaction has varying consequences, depending on the timing of the withdrawal and its level of compliance with the attached contingencies. Learn more here:

If you intend to move forward with your purchase, finalizing the deal is a matter of completing the following steps before you can claim your new home:

The Home Buying Process: Closing

  • Next, you’ll deposit your earnest money in an escrow account. This deposit of funds lets the seller know you’re serious about closing on the home. In return, the seller agrees to take the home off the market. When the sale closes, the money goes toward the down payment or closing costs.
  • The timeline for inspections during the closing process vary state to state. Getting the home inspected allows you to ask the seller that certain repairs be made, request seller concessions, and renegotiate your offer. If you included an inspection contingency in your contract, you could walk away from the deal with your earnest money if you decide the property’s issues are too much to handle.
  • Contact your mortgage lender to relay the final details of the purchase so you can go about securing financing. Getting pre-approved early on helps to streamline this part of the closing process.
  • A title search will generate a report for you and your lender detailing the history of the home you’re buying to ensure there are no legal barriers against purchasing it.
  • Now you’re ready to close! Several legal documents are prepared, leading to the transfer of ownership from seller to buyer. You’ll also pay closing costs at this time. Once closing is finalized and the funds in escrow have been distributed, the home is yours!

For helpful information on the buying process from start to finish, tips on working with an agent, moving checklists, and more, visit our home buying guide:

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Managing Expectations as a First-Time Home Buyer

There’s a first time for everything. As a first-time home buyer, navigating the uncharted territory of the home buying process can be challenging to say the least. Although every home purchase is unique, there are certain knowns that can help you manage your expectations. Once you’re ready to buy, knowing a bit more about how to approach the market will have you well on your way to getting the keys to your first home.

Managing Expectations as a First-Time Home Buyer

Local Market Conditions

Your local housing market conditions will loom large in the buying process. In a competitive market (i.e. a seller’s market), prices are being driven up by demand, sellers have the leverage during negotiations, and it may take a long time to find the right home. In such a market, you can expect to compete against multiple buyers where everyone is trying to sweeten their offer to make it stand out. This usually takes the form of waived contingencies, escalation clauses, and all-cash offers. Buying in a competitive market is challenging for any buyer, let alone a first-time home buyer. Having greater buying power and getting pre-approved for a mortgage are two key paths to bolstering your financial standing and improving your chances of submitting a winning offer.

Though finding the right home is never a cakewalk, the conditions of a buyer’s market will be in your favor. In such market conditions, sellers are competing for the attention of a limited pool of buyers and are more flexible during negotiations. With less competition around you, you can afford to be more patient and selective when pursuing available listings.

7 Signs You’re Ready to Buy a Home

Which homes can you afford?

It’s easy to fall in love with a home based on its listing photos, but one look at the price tag can break the spell. By knowing which homes are in your budget, you’ll be able to focus your time and effort on listings that are financially feasible. And remember, there are a myriad of costs to buying a home beyond the listing price to include in your budget.

To get an idea of what you can afford, use our free Home Monthly Payment Calculator by clicking the button below. With current rates based on national averages and customizable mortgage terms, you can experiment with different values to get an estimate of your monthly payment for any home price. By using the Home Monthly Payment Calculator, you can make a well-informed estimation of whether it’s the right time to buy.

 

A young woman does paperwork on the floor of her living room.

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Working with Your Agent

Fortunately, you don’t have to take on the home buying process on your own. A buyer’s agent will help to manage your expectations from start to finish by helping you look for homes, make an offer, negotiate with the seller and their agent on your behalf, and provide clarity on the closing process. Beyond their ability to get down to brass tacks and help you purchase a home, your agent will be there to answer your questions, validate your emotions, and connect you to their network of helpful resources.

To begin the process of buying your first home, connect with an experienced, local Windermere agent today:

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The Different Types of Home Loans for Buyers

Financing terms are the nuts and bolts of a successful home purchase. Once you’ve decided you’re ready to buy a house, it’s a matter of making the numbers work. So, which home loan is the right one for you? Knowing the different types of mortgage loans available to you will allow you to pinpoint the one that best fits your needs and is financially viable.

The Different Types of Home Loans for Buyers

Conventional Loans

Conventional loans are the most popular type of home loan issued to borrowers. Offered by private lenders, they are not backed by the government. Conventional mortgages divide into two subsets: conforming loans; which adhere to Federal Housing Financing Agency (FHFA) guidelines, and non-conforming loans; which do not. Due to the added risk taken on by the lender, non-conforming loans typically have higher rates. A jumbo loan is an example of a non-conforming loan, due to its loan amounts being higher than the amount limits laid out in the underwriting guidelines. The two most common conventional loans are 30-year and 15-year fixed-rate mortgages.

15-Year and 30-Year Fixed-Rate Mortgages

The terms of your loan will drastically impact all aspects of your mortgage. With a 30-year mortgage, you’ll have lower monthly payments and a higher interest rate than you’d have with a 15-year mortgage, meaning you’ll pay more in interest over the life of the loan. With a 15-year mortgage, you’ll pay less interest, but you’ll have a higher monthly payment. Compared to a 30-year mortgage, a 15-year mortgage can save you money over the life of the loan, simply because you’re in debt for half the time; however, the higher monthly payments may be unaffordable for some.

 

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Government-Backed Loans

Whereas conventional loans are not backed by a federal entity, there are several unconventional loans that are backed by the U.S. government. These unconventional loans can often provide a path to homeownership for borrowers who don’t have the credentials to qualify for a conventional loan.

FHA and USDA mortgages are two common types of government-backed loans. Instead of having to make a 20% down payment on a conventional loan to avoid private mortgage insurance (PMI), an FHA loan allows buyers to qualify for a mortgage with a down payment as little as 3.5%. USDA loans enable buyers to purchase a home with reduced interest rates. VA loans offer several benefits for active service personnel and veterans looking to buy a home, including not having to purchase mortgage insurance.

Fixed-Rate vs. Adjustable-Rate Mortgages

Fixed-rate mortgages allow you to lock in a specified interest rate for the life of the loan. With an unchanging monthly mortgage payment, a fixed-rate mortgage makes financial planning easier. Adjustable-rate mortgages’ interest rates will go up and down based on market conditions. Many ARMs will start with a fixed-interest rate period followed by a variable interest rate until the loan amount is paid off. Keep in mind that a sudden change in your financial situation could make your monthly ARM payments unaffordable, which could result in a loan default.

Other Home Loans

There are other more niche financing options available for prospective home buyers. For example, a construction loan can be useful if you’re planning on building a home. Balloon mortgages and sub-prime mortgages can make homeownership feasible for those who aren’t financially prepared for the typical repayment structure of a mortgage. These loans, however, come with greater risks. Talk to a mortgage broker to understand the terms of these agreements before making a final decision.

 

For more information on financing your next home purchase, read our blog post on bridge loans:

What is a Bridge Loan?

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7 Signs You’re Ready to Buy a Home

Making the leap from renter to homeowner doesn’t happen overnight; it requires steady planning to put yourself in a good position to buy your first home. Prospective first-time home buyers can often feel like they’re waiting for a sign to indicate they’re ready to start making offers, when really, it’s a combination of factors. Here are seven signs that you’re ready to buy a home.

7 Signs You’re Ready to Buy a Home

1. You Know Which Homes You Can Afford

To know whether you’re ready to buy, you need to identify your price range. If you’re unhappy with your pre-approval, or need more money for your desired location, there are ways you can increase your buying power. Once you know which homes you can afford, you can work with your agent to find the right home and prepare an offer.

2. You Understand Your Local Market Conditions

The dynamics of the market in which you’re buying will play a role in determining whether you’re ready to buy. The local market conditions will dictate what kinds of offers you can expect to compete against, what tactics other buyers may employ, and whether the buyer or seller will have the leverage during negotiations. Therefore, it’s important to understand the difference between a buyer’s market and a seller’s market so you and your agent can strategize accordingly.

3. You’re Comfortable with the Responsibilities of Being a Homeowner

Having a mortgage instead of paying rent isn’t the only difference between owning a home and renting. You’ll be responsible for maintaining the property, making repairs, and completing remodeling projects. That doesn’t always mean you can’t predict a future need. The best way to prepare for unexpected projects on any home is to get a home inspection before you buy so that you know every inch of the property and can start to save for larger expenses that might come down the road.

4. You Have Funds Available for Home Buying Costs

The costs of buying a home are more than just your down payment and monthly mortgage. Before you move into your new home, you’ll have to pay closing costs, moving expenses, and appraisal and inspection fees, to name a few. Property taxes can sometimes be part of the mortgage and depending on the time of year may need to be paid before you move in. Once you’re settled, homeowners insurance will enter the fold. If you can afford these costs, it’s a sign that you are ready to buy.

5. You’re Making Progress on Your Debt

Having zero debt is not a realistic expectation for every first-time home buyer. But, if you have a plan in place for paying off your outstanding debt and can show evidence of the progress you’re making, it will strengthen your buying credibility. Lenders will factor this into their assessment of your financial health during the pre-approval process.

6. You Have a Strategy for the Down Payment

It is true that lenders view a twenty percent down payment as favorable and won’t require you to purchase private mortgage insurance (PMI), but it’s not game over if you can’t make a lump sum payment of that size. With a lower-than-twenty percent down payment, you may incur higher interest and fees over the life of the loan, which could put a greater strain on your finances long-term than waiting until you can pay more principal down. Whichever route you choose, make sure you have a solid plan in place to repay your loan.

7. Your Life Aligns with Buying a Home

Buying a home means you’ll be putting down roots, so it’s important that you and your household are ready to establish yourselves in one area before you buy. There’s financial logic behind this line of thinking, as well; in general, the longer you stay in one home, the more equity you’ll build. Career and income stability also play a role in determining whether you’re ready to buy. Landing a job with long-term prospects may be just the thing you need to green-light your decision to buy your first home.

To learn more about buying your first home, connect with an experienced Windermere Real Estate agent today by clicking on the button below.

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Must-Haves and Nice-To-Haves Lists

Finding your dream home may not be easy, but there are things you can do to make it easier, like creating a “Must-Haves” list and a “Nice-To-Haves” list. These lists allow serious homebuyers to save time, energy, and ultimately, money as they prepare to buy a home.

A Must-Have List is exactly what it sounds like, a checklist of the details that are non-negotiable for your new home. It’s essential to sit down and think about the things you need in order to feel comfortable there for the next 7-13 years.

Your “Nice-To-Haves” list is a checklist of details that you’d like to have, but you can live without. This list is great for those things that you’ve always dreamed of but may be out of reach for reasons such as your budget or location. This list may include things like fireplaces or gas appliances, a pool, or other non-essential items.

Your “Must-Haves” list focuses your search and helps your agent narrow down which homes are worth your time. Your “Nice-to-Haves” list will help you determine what you’re willing to sacrifice, which will ultimately solidify your must-haves.

These lists can also help manage your expectations regarding price. Take your lists to your real estate agent, along with your pre-approval from a lender, and you’ll be able to work together to determine what is a reasonable ask within your budget and your desired location.

Creating Your “Must-Haves” List

The first step is to think about the essentials. If things like location and number of bedrooms and bathrooms are a priority, then you’ll want to include them in your must-haves. Consider where you live now and use that as a starting point; what do you love and what are you missing? You may need more storage space, or an extra room to work remote, or a larger backyard for the newest member of the family.

Here are some questions to ask yourself as you build your “Must-Haves” list:

  • Where do you want to live? (Be as specific as you can.)
  • What do you have now that you can’t live without?
  • What are you missing now that you may need for the next several years?

If you’re struggling to determine what it is you need to have, you can start working on your “Nice-To-Haves” list. This can also help you determine what is essential. For example, it may be nice to have five bedrooms when in reality, a three-bedroom house with a flex space that works for an office or guest room would do the trick.

Creating your “Nice-To-Haves” List

While you’re working on your “Nice-To-Haves” list, you’ll be thinking about the parts of a home that would be great to have but aren’t as important for you. You might also want to take into consideration what is reasonable in your area and if it’s a common amenity.

Here are some questions to ask yourself as you build your “Nice-To-Haves” list:

  • What home upgrades are you willing to make?
  • What is something you’d like to do in your house more often?
  • What do you have in your current home that you love, but don’t need?

Searching for Your Next Home

These lists will help guide you and your real estate agent as you search for your next home. During this process you might realize some aspects aren’t as important to you as you thought, and vice versa. Keep your agent in the loop as you update your lists so they can continue to search for the perfect home for you.

Looking for a real estate agent who can help guide you through the home buying process? Connect with an Agent:

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10 Mistakes to Avoid When Buying a Home

Whether you’re a first-time homebuyer or have purchased a home before, the same mistakes can rear their head at any point in the buying process. By working closely with your agent, you can identify these pitfalls ahead of time and adjust accordingly. Mistakes in the buying process can lead to higher costs, added stress, and even terminated contracts. Here are ten common mistakes to avoid when buying a home.

10 Mistakes to Avoid When Buying a Home

1. Not getting pre-approved

Getting pre-approved is a key component of the early stages of the buying process and will help to maximize your chances of getting your offer accepted. Getting pre-approved will give you a concrete idea of how much you can borrow, how much house you can afford, the estimated monthly costs of your mortgage and its corresponding interest rates. It also communicates to sellers that you are a serious buyer.

2. Not identifying your price range

Pursuing listings you can’t afford is a surefire way to start your home buying process off on the wrong foot. Buying a home that’s outside your budget will put added pressure on your finances and increases your chances of foreclosing, should your financial situation take a turn for the worse. Use the general rule that your house payment should never be more than 25-30% of your take-home pay, and as you prepare for talks with your lender be sure to account for all the expenses you will incur, including private mortgage insurance (PMI) if applicable.

3. Taking on new credit

Opening new lines of credit at any point in the home buying process will slow things down and can affect your chances of getting a home loan. Adding another credit card to your collection or taking out a loan will change your credit score, causing a ripple effect that can bring the buying process to a halt. Because new credit changes your debt-to-income ratio, lenders will likely want to review your mortgage approval and your risk of non-payment. This forces sellers to wait around for your application while competing buyers speed ahead of you in line.

4. Not purchasing adequate homeowner’s insurance

It’s understood that a home is a valuable asset that needs to be protected, but it is still all too common for homeowners to be under-insured. A homeowner’s insurance policy covers your home, your belongings, living expenses and injury or damage to others that occur on the property in the event of a disaster. Work closely with your insurance broker to make sure you have adequate coverage for the most common risks in your area like flood, earthquake, and more.

5. Not looking for other loans

With a little resourcefulness, you can tap into new sources of financial support that will help to ease the burden of making a home purchase. VA Loans can be a lifesaver for active service and veteran personnel, offering zero down payment and lower-than-average mortgage rates. Other government loan programs such as USDA and FHA loans can greatly aid homebuyers with favorable loan terms. Be sure to thoroughly review the qualifications of these loans before applying.

6. Misunderstanding the down payment

When it comes to down payments, it’s not twenty percent or bust. Granted, with a twenty percent down payment your lender won’t require you to purchase mortgage insurance; but even if you’re short, there are a number of alternatives to private mortgage insurance (PMI) available to you, such as Lender-Paid Mortgage Insurance and a piggyback loans strategy. Work with your agent to identify trusted lenders in their network that can help you secure the right loan.

7. Not working with a buyer’s agent

A buyer’s agent will help you to identify which homes you can afford, work with you on formulating a competitive offer and preparing for negotiations with sellers and listing agents. Buyer’s agents will also handle the paperwork when it comes time to close the deal. A home purchase is an intricate transaction with many moving parts and having an experienced professional by your side who can navigate each step is invaluable. Typically, the buyer’s agent splits the commission of the sale with the listing agent, which is paid by the seller, so generally their services come at no additional cost to you.

8. Underestimating repair and remodeling costs

Regardless of whether you’re buying a fixer-upper or a home that needs a few simple upgrades, you can usually expect some repair and remodeling expenses once the home is yours. Before you start swinging hammers or tearing up drywall, take time to assess the scope of the projects and whether you can do them yourself or need a professional. Talk with your agent about which remodeling projects have the highest resale value for comparable homes in your area.

9. Buying a home without an inspection

Buying a home without having it inspected opens the buyer up to added risk. Without a home inspection, you forego the ability to negotiate repairs and concessions with the seller. Getting a home inspection is a small investment and alerts you of any potential home disasters that may be on the horizon. However, this mistake comes with an aside. In a seller’s market where a high number of buyers are competing for a limited number of available listings, waiving the inspection contingency is a common tactic for buyers looking to make their offer stand out. Work with your agent to figure out what’s best for you and your situation.

10. Forgetting about moving costs

It’s easy to get so focused on the purchase of the home that you forget about what it will cost to move there. Moving expenses can add up quickly, especially if you’ll be traveling across state lines or across the country. If you’re buying and selling a home at the same time, there’s also the question of where you’ll live in between closing on your current home and closing on your new one. If these costs aren’t accounted for, you can quickly be over budget before you set foot in your new home.

 

For more information on how to make the buying process smoother, read about how you can Increase Your Buying Power.

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National Homeownership Month – First-Time Buyers

In recognition of National Homeownership Month, we’re shining a spotlight on the home buying process. Each home buying journey is unique, as are the challenges that people face en route to becoming a homeowner. These three stories of first-time homebuyers showcase the importance of working closely with an agent to navigate the buying process and find the perfect home.

 

Maria and Alvaro – Windermere Agent Team: The Brazens

Being first-time homebuyers, Maria and Alvaro knew they would have to adjust to the changes in the market. They were among a large influx of buyers buying during the pandemic, so they were aware that sellers had high expectations when it came to accepting an offer. A confluence of factors, including the pandemic, low interest rates, and many buyers’ desire for homes with more space, were igniting bidding wars left and right, with houses often going well above asking price. This also drove up listing prices on comparable homes in the area. These factors forced Maria and Alvaro to be flexible when it came to location and what they had previously considered “must-haves” for their ideal home at the beginning of their search.

They worked closely with their agents Taylor Brazen Tagge and Randi Brazen of The Brazens—a family-led real estate team based in Bellevue, Washington—to find the right competitive balance in what they were able to offer before hitting the market. This meant, in some cases, adjusting their expectations about what the “perfect” home was for them and having the patience to wait until they found it. They knew that when they time came; they would have to be aggressive in their approach.

Maria and Alvaro relied on Taylor and Randi throughout the buying process. The Brazen team’s knowledge of the Bellevue area provided the guidance and advice they were looking for to help them make informed decisions. The Brazens met with them at several showings, walked them through neighborhoods, and made themselves available to answer any and all questions they had along the way. The trust they formed in the early stages of working together laid a foundation for a friendship that translated to a successful experience navigating the market. They eventually found the home of their dreams, and although Maria and Alvaro miss working with the Brazens, they are grateful for the ultimate success of their home buying journey.

For Maria and Alvaro, homeownership is not just a financial investment; it is the start of a new chapter that will eventually provide the means for them to grow their family. They encourage buyers to be patient in finding their perfect home. It may be challenging at times, but the reward is so worth it.

 

Jocelyn – Windermere Agent: Nick Odermann

During her yearlong home search, Jocelyn’s expectations were quickly replaced with the reality of the hot housing market amid the pandemic. While touring homes, she realized that many listings were in worse condition than the photos implied, so she adjusted her expectations to remain levelheaded through the process. She experienced the pandemic buying frenzy first-hand when she was outbid multiple times and saw several homes sell for significantly higher prices than what they were listed for.

Luckily, Jocelyn had a trustworthy agent at her side by the name of Nick Odermann, who is one half of the Odermann Brothers team in Lake Oswego, Oregon. Together with his brother Steve, Nick helped Jocelyn navigate the challenges of finding a home in a seller’s market. Jocelyn was living in Southern California at the time, so she relied heavily on Nick’s judgement as he toured homes on her behalf. She had a specific vision of her dream home and Nick stayed true to it, quickly pointing out which homes would not suffice. When Jocelyn began to lose hope, Nick stayed positive. He was sure the perfect home was out there—and he was right.

For Jocelyn, homeownership is her path to adulthood. Now that she has a home, she looks forward to growing her pet care business. Becoming a homeowner was a major life goal of hers, and now that she’s achieved it with the help of her Windermere agent, she couldn’t be happier.

 

Jake – Windermere Agent: Taylor Hinds

It’s common for first-time homebuyers to learn as they go through the process, and Jake quickly discovered that information was the key to overcoming challenges. For example, he had no idea what earnest money was or that it was something he had to factor in on top of his mortgage. Learning that helped him work with his Seattle-area agent, Taylor Hinds, to form a strategy for making an offer.

Like the buyers above, Jake was buying in a hot seller’s market during the pandemic. He was surprised by how cash-ready sellers expected buyers to be. Luckily, he had a team behind him who were communicative and transparent throughout the whole process. When it came time to write a competitive offer, he leaned on Taylor’s expertise and advice to make the offer as attractive as possible, which eventually made all the difference in securing a home.

To Jake, homeownership means having a place to call your own, a place to be proud of. He looks forward to creating memories in his new home and building equity over time.

 

To begin your own home buying journey, connect with an experienced Windermere Real Estate agent today:

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