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Making an Offer on a Home

I have the found home I want and I want to make an offer, what do I do now?

The Step-by-step Process for Making an Offer on a Home

This is when it is critical to listen to your agent on the strategy for negotiating the best price for the home. Your agent will know which price is a good starting point for negotiations. The offer is formally made in writing, never verbal because a contract for the sale real estate must be in writing to be legally binding.

Your agent will have a standard preprinted offer form to fill out with the key terms, it is extremely important to carefully consider each point in the form because once the offer is accepted by both parties then it becomes binding and it is very difficult to change those terms later when the purchase and sale agreement is negotiated. While every attorney would love to review the offer before it is submitted, realistically because time is at a premium the offer is done before an attorney has had a chance to review it. Since an attorney has not reviewed the offer it is important to think carefully about the key terms of the offer.

Offer Part 1

The first part of the offer form lists the property address and the items to be included in the sale. You will want to be clear on what appliances are to be included or excluded, you will not have to worry about fixtures those are presumed to be included. 

Next on the offer you will list the price you are offering and it will break down how much you are putting down with the offer and how much you will put down as a deposit with the signing of the purchase and sale agreement. The amount you give with the offer is usually a small amount, around a thousand dollars, and it is to show the seller that you are serious about the offer you are making.

Many buyers get confused with the amount of the deposit to put down with the signing of the purchase and sale agreement. The amount of the deposit is supposed to represent the amount of damages the seller would suffer if you did not perform the contract, so the deposit is what you could lose if you breach the terms of the purchase and sale agreement. Factors to consider are the purchase price, the length of time before the closing date and obviously how much you can afford to put down at that time.

Too many times the deposit is just put as a certain percentage of the purchase price without much thought of those factors, that being said it is normal to see five percent to ten percent of the purchase price to be put as the deposit. It is very important to remember that the deposit has nothing to do with what you are getting for a loan, so if you are getting a loan for 80% of the purchase price it does not mean you have to put a 20% deposit with the purchase and sale agreement. A seller is obviously very happy to get a large deposit but it certainly is not required. Whatever you give as a deposit will be credited to you at the closing.

Offer Part 2

The next part of the offer form you will fill in a number of dates. You will put a date that the offer will expire if not accepted by the seller. Then there is the date for signing the purchase and sale agreement, you will want to put a date that allows enough time to get your home inspection done and have you and your attorney review the purchase and sale agreement. Usually it is ten to fourteen days from the signing of the offer. 

The date for the closing is extremely important. Be sure you have carefully considered when you will be able to close, considering your financing, your current living situation such as notice requirements for a landlord etc. Some cultures and religions have “auspicious” dates and bad dates, you will want to know those dates before filling in the offer form. Again, it is difficult to change this important date after it has been accepted.

Offer Part 3

Next for the offer is to put any contingencies for purchasing the home. This is where you would put that it is subject to you selling your current home if that is the case. Or that it is subject to the property appraising at or above the purchase price. There can be several different types of contingencies. There is usually a separate page for putting in the inspection contingency, mortgage contingency, radon contingency and if there is a septic system then a title V contingency. With the mortgage contingency you will want to know from your loan officer what the loan amount you will be applying for and how much time they will need to issue a commitment letter, this date is put in the purchase and sale agreement and protects your deposit in case you do not qualify for the loan.

When the offer is completed the agent will present it to the listing agent or the seller directly and the seller may accept, reject or counteroffer your terms and then it just becomes a negotiation of what you are comfortable with. Once all the terms of the offer are accepted by both parties you are ready to move to the next step of the home buying process: purchase and sale agreement.

 

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