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How does
one make an offer on a property for sale?
In Writing
Oral
promises are not legally enforceable when it comes to the sale of real
estate. Therefore, you need to enter into a written contract, which
starts with your written proposal. This proposal not only specifies
price, but all the terms and conditions of the purchase. When you use a
REALTOR® a variety of standard forms (including Residential Purchase
Agreements) forms will be available to you. In addition, REALTORS® offer
protection for all parties and cover the questions that need to be
answered during the process. In many states certain disclosure laws must
be complied with by the seller, and the REALTOR® will ensure that this
takes place. After the offer is drawn up and signed, it will usually be
presented to the seller by your REALTOR®, by the sellers' REALTOR® if
that's a different agent, or often by the two together.
What the Offer Contains
The
purchase offer you submit, if accepted as it stands, will become a
binding sales contract (known in some areas as a purchase agreement,
earnest money agreement, or deposit receipt). It's important, therefore,
that it contains all the items that will serve as a "blueprint for the
final sale." These purchase offer items include such things as: Address
(sometimes legal description) of the property; Sale price; Terms (all
cash or subject to your obtaining a mortgage for a given amount);
Seller's promise to provide clear title (ownership); Target date for
closing (the actual sale); Amount of earnest money deposit accompanying
the offer, and whether it's a check, cash or promissory note (and how
it's to be returned to you if the offer is rejected, or kept as damages
if you later back out for no good reason); Method by which real estate
taxes, rents, fuel, water bills, and utilities are to be adjusted
(prorated) between buyer and seller; Provisions about who will pay for
title insurance, survey, termite inspections and the like; Type of deed
to be given; Other requirements specific to your state, which might
include a chance for attorney review of the contract, disclosure of
specific environmental hazards, or other state-specific clauses; A
provision that the buyer may make a last-minute walk-through inspection
of the property just before the closing; A time limit (preferably short)
after which the offer will expire; and Contingencies, which are an
extremely important matter.
Contingencies
If
your offer says "this offer is contingent upon (or subject to) a certain
event," you're saying that you will only go through with the purchase if
that event occurs. The following are some common contingencies contained
in a purchase order: The buyer obtaining specific financing from a
lending institution. If the loan can't be found, the buyer won't be
bound by the contract. A satisfactory report by a home inspector "within
10 days (for example) after acceptance of the offer." The seller must
wait 10 days to see if the inspector submits a report that satisfies
you. If not, the contract would become void. Getting the job you just
interviewed for. Again, make sure that all the details are nailed down
in the written contract.
Negotiating Strategy
You're
in a strong bargaining position (meaning, you look particularly welcome
to a seller) if: You're an all-cash buyer; or You're already
pre-approved for a mortgage; and You don't have a present house that has
to be sold before you can afford to buy. In those circumstances, you may
be able to negotiate some discount from the listed price. On the other
hand, in a "hot" seller's market, if the perfect house comes on the
market, you may want to offer the list price (or more) to beat out other
early offers. It's very helpful to find out why the house is being sold
and whether the seller is under pressure. Keep these considerations in
mind: Every month a vacant house remains unsold represents considerable
extra expense for the seller, and Estate sales often yield a bargain in
return for a prompt deal.
A deposit that you give when making an offer
on a house is called Earnest Money. A seller is understandably
suspicious of a written offer that is not accompanied by a cash deposit
to show "good faith." A REALTOR® or an attorney usually holds the
deposit, the amount of which varies form community to community. This
will become part of your down payment.
The Seller's Response to Your Offer
You
will have a binding contract if the seller, upon receiving your written
offer, signs an acceptance, just as it stands, unconditionally. The
offer becomes a firm contract as soon as you are notified of acceptance.
If the offer is rejected, that's that, and the sellers could not later
change their minds and hold you to it. If the seller likes everything
except the sale price, or the proposed closing date, or the basement
pool table you want left with the property, you may receive a written
counter-offer, with the changes the seller prefers. You are then free to
accept or reject it or to even make your own counter-offer. Each time
either party makes any change in the terms, the other side is free to
accept or reject it, or counter again. The document becomes a binding
contract only when one party finally signs an unconditional acceptance
of the other side's proposal.
Withdrawing an Offer
An
offer can be withdrawn right up until the moment it is accepted, or
even, in some cases, if you haven't yet been notified of acceptance. If
you don't want to lose your earnest money deposit, or find yourself
being sued for damages the seller may have suffered by relying on your
actions, your offer must be withdrawn timeously.
Counteroffers
When
you receive a purchase offer from a would-be buyer, remember that unless
you accept it exactly as it stands, unconditionally, the buyer will be
free to walk away. Any change you make in a counter-offer puts you at
risk of losing that chance to sell. Who pays for what items is often
determined by local custom. You can, however, arrive at any agreement
you and the buyers want about who pays for: Termite inspection, Survey,
Buyer's closing costs, Points to the buyer's lender, Buyer's broker,
Repairs required by the lender, and Home Protection Policy.
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