Making an offer
Because an oral offer isn’t legally binding when it comes to buying and selling real estate, it is essential that the prospective buyer and seller enter into a written contract. The contract begins with a written proposal, which includes the price and the terms and conditions of the purchase.
Real estate agents generally have a variety of standard forms, including residential purchase agreements that are kept up to date and made available to those who use the services of an agent. Agents also can answer questions that come up during the process. Finally, in many states there are disclosure laws a seller must comply with, and real estate agents can make sure that happens as well.
Once the offer is signed, it is presented to the seller. A purchase offer, if accepted as it stands, will become a binding sales contract (also known as a purchase agreement, an earnest money agreement or a deposit receipt). Because of that, it’s important that it contain such things as:
- Address and (sometimes) a legal description of the property.
- Sale price.
- Terms (for example, all cash or subject to obtaining a mortgage for a given amount).
- 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 if the offer is rejected or kept as damages if buyer backs out for what is termed not to be a good reason.
- Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted between buyer and seller.
- Provisions about who will pay for title insurance, survey, termite inspections and similar matters.
- Type of deed to be given.
- Other requirements specific to a state, which could include a chance for an attorney to review the contract.
- Provision for buyer to make last-minute walk-through inspection of property just prior to closing.
- A time limit after which the offer will expire. This is generally a short period of time.
Contingencies explain that an offer will take place only if other actions happen. For example, a typical contingency in a purchase order says the offer is contingent on the buyer getting specific financing from a lending institution or there being no problems during a home inspection.
The important thing to remember is to make sure all details are nailed down in writing in the purchase offer.
Buyers who are all-cash, pre-approved for a mortgage or who don’t have a present home to be sold are in the strongest buying position. In any of those situations, a buyer might be able to negotiate some discount below the list price. However, in the "hot" seller’s market, it is recommended that the offer be the list price (or more) to top other early offers.
It is also recommended that a buyer find out why a home is being sold and whether or not a seller is under pressure. Remember that each month a vacant house remains unsold means extra expense for the seller.
Earnest money should accompany your offer. This indicates good faith to the seller. Earnest money will become part of your down payment. Generally, earnest money is held by a real estate agent or an attorney. The earnest money amount varies from town to town. Your agent should be able to recommend an amount to you.
The offer becomes a binding contract once the seller signs an acceptance and you are notified of that. If the offer is rejected, that’s it, and the seller cannot change his mind later.
If the seller likes everything except certain aspects of the offer, you may get a written counter-offer with the seller’s preferred changes. The buyer can accept or reject the offer, or make another counter-offer. The document becomes a binding contract only when one party signs an unconditional acceptance of the other side’s proposal.
ChecklistThings to do:
- Start with a fair price and a fair offer
- Respect the other side’s priorities
- Be prepared to compromise
- Ask for advice
- Don’t push too hard on sensitive issues
- Don’t let emotions overrule judgment
- Don’t forget to get everything in writing
- Don’t approach negotiations as adversarial