A written proposal is the foundation of a
real estate transaction. 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 also all the
terms and conditions of the purchase. For
example, if the seller offered to help with
$2,000 toward your closing costs, make sure
that's included in your written offer and in
the final completed contract, or you won't
have grounds for collecting it later.
REALTORS® have standard purchase agreements
and will help you put together a written,
legally binding offer that reflects the
price as well as terms and conditions that
are right for you. Your REALTOR® will guide
you through the offer, counteroffer,
negotiating and closing processes. In many
states certain disclosure laws must be
complied with by the seller, and the
REALTOR® will ensure that this takes place.
If you are not working with a real estate
agent, keep in mind that you must draw up a
purchase offer or contract that conforms to
state and local laws and that incorporates
all of the key items. State laws vary, and
certain provisions may be required in your
area.
After the offer is drawn up and signed, it
is usually presented to the seller by your
real estate agent, by the seller's real
estate agent, if that's a different agent,
or often by the two together. In a few
areas, sales contracts are drawn up by the
parties' lawyers.
What is in an Offer?
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). So it's important that the
purchase offer contains all the items that
will serve as a "blueprint for the final
sale." The purchase offer includes items
such as:
address and the legal description of the
property
sale price
terms: for example, all cash or subject
to you 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, 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
payments are to be adjusted (prorated)
between buyer and seller
provisions about who will pay for title
insurance, survey, termite inspections,
etc.
type of deed to be given
other requirements specific to your
state, which might include a chance for
an attorney to review the contract,
disclosure of specific environmental
hazards or other state-specific clauses
a provision that the buyer may make a
last-minute walkthrough inspection of
the property just before the closing
a time limit (preferably short) after
which the offer will expire
contingencies, which are an extremely
important matter and that are discussed
in detail below
Contingencies - “Subject to” Clauses
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. Here
are two common contingencies contained in a
purchase offer:
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: for example, "within 10 days after acceptance
of the offer." The seller must wait 10
days to see if the inspector submits a
report that satisfies the buyer. If not,
the contract would become void. Again,
make sure that all the details are
explicitly stated in the written
contract.
Negotiating Tips
You're in a strong bargaining position, that
is, you look particularly welcome to a
seller, if:
you're an all-cash buyer
you're already have a preapproved
mortgage and you don't have a present
house that has to be sold before you can
afford to buy
you’re able to close and take possession
at a time that is especially convenient
for the seller
In
these 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 the following
considerations in mind:
every month a vacant house remains
unsold represents considerable extra
expense for the seller
if the sellers are divorcing, they may
want to sell quickly
estate sales often yield a bargain in
return for a prompt deal
Earnest Money
This is a deposit that you give when making
an offer on a house. A seller is
understandably suspicious of a written offer
that is not accompanied by a cash deposit to
show "good faith." A real estate agent or an
attorney usually holds the deposit, the
amount of which varies from community to
community. This will become part of your
down payment.
Buyers: 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 - 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
counteroffer including the changes the
seller prefers. You are then free to accept
it, reject it or even make your own
counteroffer. For example, "We accept the
counteroffer with the higher price, except
that we still insist on having the pool
table."
Each time either party makes any change in
the terms, the other side is free to accept,
reject or counter again. The document
becomes a binding contract only when one
party finally signs an unconditional
acceptance of the other side's proposal.
Buyers: Withdrawing an Offer
Can you take back an offer? In most cases
the answer is yes, right up until the moment
it is accepted, or even in some cases, if
you haven't yet been notified of acceptance.
If you do want to revoke your offer, be sure
to do so only after consulting a lawyer who
is experienced in real estate matters. 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.
Sellers: Calculating Your Net Proceeds
When an offer comes in, you can accept it
exactly as it stands, refuse it (seldom a
useful response) or make a counteroffer to
the buyers with the changes you want. In
evaluating a purchase offer, you should
estimate the amount of cash you'll walk away
with when the transaction is complete. For
example, when you're presented with two
offers at the same time, you may discover
you're better off accepting the one with the
lower sale price if the other asks you to
pay points to the buyer's lending
institution.
Once you have a specific proposal before
you, calculating net proceeds becomes
simple. From the proposed purchase price you
can subtract the following costs:
payoff amount on present mortgage
any other liens (equity loan, judgments)
broker's commission
legal costs of selling (attorney, escrow
agent)
transfer taxes
unpaid property taxes and water and
other utility bills
if required by the contract: cost of
survey, termite inspection, buyer's
closing costs, repairs, etc.
Your present mortgage lender may maintain an
escrow account into which you deposit money
to be used for property tax bills and
homeowner's insurance. In that case,
remember that you will receive a refund of
money left in that account, which will add
to your proceeds.
Sellers: 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 is free to walk
away. Any change you make in a counteroffer
puts you at risk of losing that chance to
sell.
Who pays for what items is often determined
by local custom. You can, however, negotiate
with the buyer any agreement you want about
who pays for the following costs:
termite inspection
survey
buyer's closing costs
points paid to the buyer's lender
buyer's broker fees
repairs required by the lender
home protection policy
You may feel some of these costs are none of
your business, but many buyers -
particularly first-timer buyers - are short
of cash. Helping them may be the best way to
get your home sold.
