How to Write a Fannie Mae Offer

In a healthy seller’s market, newly listed homes that are priced to sell often generate multiple offers. If you have your heart set on a particular home and you’re sure that other offers will be made, there are several ways to improve your chances of getting your dream home:

• Find out the seller’s needs before making your offer. Sellers most often select the offer that gives them the best combination of price, terms and contingencies of sale.
• Get pre-approved for a loan. If you’re pre-approved for a loan, you should prevail over buyers whose financial status is still undetermined, assuming all other things are equal.
• Set your limits as high as you can. Use comparable sales data to predetermine the maximum that you can afford to pay.
• Make your best offer initially. You may never get a second chance to make your best offer.
• Sweeten the deal as much as you can. Besides a high purchase price, there are other ways to make your offer more appealing. If you have the money, make an extra-large down payment so the seller knows that your loan will be approved. Or offer to let the seller rent back their house for a month or two after the closing or give them an extra-long closing to accommodate their home search. You could also offer to buy the home “as is” so the sellers won’t have to pay for any corrective work. If you do this, however, make your offer contingent upon your approval of inspection reports so you can get out of the deal if the house needs too much work.
• Don’t make your offer subject to the sale of another house. If you truly must sell in order to buy, put your old home on the market before seriously looking for a new home. Stipulate a later date for closing on the old house and the right to rent it back for several months after the sale so that you’ll have adequate lead time to find and buy your new home.

Making an Offer

After you find your dream home, you can make an offer to purchase. Since no standard real estate purchase contract is used universally, purchase contracts may vary in length and terms within California from one area to another. Make sure your agent or lawyer uses the most current version of a given contract.

A good offer should:

• Be based on the prices of other houses comparable to the seller’s house in age, size, condition and location that have sold within the past six months.
• Have realistic financing terms, including your mortgage interest rate, loan-origination fee and time allowed to obtain financing, based upon current lending conditions. If you’ve been prequalified or even better, preapproved for a loan, you or your agent should stress that advantage in your offer. This proves to the seller that you’re a creditworthy buyer who’s ready, willing and financially able to purchase their house.
• Use property inspection clauses that enable you to reopen negotiations should the house require any corrective work. When the offer is initially submitted, you won’t know the amount of corrective work is needed.

Remember that negotiation is an ongoing process. Even after having your offer accepted, your property inspectors go to work. From there, they determine what, if any, corrective work is required, and the seller can renew your negotiations armed with facts.

If the seller agrees with the price and terms contained in your offer, they’ll sign it, and the seller’s agent should immediately provide you with a signed copy, which becomes your ratified (or accepted) offer. This doesn’t mean that you then own the house or that it has been sold, but it does mean that a sale is pending.

Getting a Counter Offer

The seller may present you with a counter offer to adjust the price, terms and conditions of your offer. A counter offer states that the seller is willing to accept all the terms and conditions of your offer, only if you agree to their stipulations, such as a higher price than you originally offered, for example.

From there, you might decide that you still want the house, and you’re willing to raise the purchase price of your offer, but not as high as they requested. So you’ll give the seller a counter-counter offer. The seller may then come back to you with a firm price. You respond with a number that is still below their counter and ask your agent to make it clear to the sellers that you won’t go any higher.

If you really want the home, this phase of the game can be nerve-racking. There may be another buyer making a better offer and stealing the house away while you’re trying to whittle that last $3,000 off the price. Similarly, the seller may be equally concerned that they’ll lose you as a buyer by pushing too hard for the final $3,000.

Since you and the seller are close to agreement on price. Your offering price and the seller’s asking price are both factually based upon recent sales of comparable houses in the neighborhood. Therefore, an equitable way to resolve this would be to split the difference 50-50. However, splitting the difference won’t work in all situations. It is, however, a fair way to quickly resolve relatively small differences in asking price versus offer price so that you can make a deal and get on with the transaction.

Negotiating Credits

In a buyer’s market, sellers often find that they have to make financial concessions in order to close the deal. The two most common concessions are for nonrecurring closing costs and corrective work.

Nonrecurring closing costs are one-time charges for such things as your appraisal, loan points, credit report, title insurance and property inspections. And these costs can amount to anywhere from three to five percent of the purchase price. A seller may tell you that they’ll pay your nonrecurring closing costs if doing so will help to secure the transaction. Even if the sellers don’t offer to pay your nonrecurring closing costs, asking for this concession as one of the terms in your offer usually won’t hurt. The general exceptions to this rule are when it’s a seller’s market or when you’re in a multiple-offer situation.

When it comes to corrective work, neither you nor the seller typically knows how much, if any, is needed when your offer is submitted. Therefore, purchase contracts have provisions for additional negotiations regarding corrective work credits after all the necessary inspections have been completed. It is strongly recommended that you and the seller’s agent be present during property inspections. Provide the seller with copies of the inspection reports before you meet with them to negotiate a corrective work credit. The sellers may question the impartiality or validity of your inspection reports and order their own inspections to verify or refute yours. Lenders may also participate in corrective work problems. They get copies of inspection reports when borrowers tell them that a serious repair problem exists, when their appraisal indicates a property obviously needs major repairs, or when the purchase contract contains a credit for extensive repairs.

If corrective work on a home is required, there are a couple of ways to resolve the situation:

• The seller may give a credit for corrective work directly to buyers at the closing. However, lenders may or may not approve of this approach, because it raises uncertainties about whether the corrective work will actually be completed and therefore weakens the security of the loan.
• You can make the seller feel better by offering to get competitive bids on the work from several reputable, licensed contractors.