Making An Offer
Once we have found a home you want to purchase it is time to write an offer. We currently have a very active real estate market, in these conditions homes do not remain "for sale" for very long, if you are sure you have found a suitable home you should not delay the offer process, only disappointment will occur when someone else gets an accepted offer before you.
The offer is written as the primary sales contract. It becomes a contract once the seller has accepted the terms of your offer and returned it signed and dated. Your offer is also a negotiating tool, depending upon how your offer is written can make all the difference between the seller accepting, rejecting or making a counter offer.
Although most people believe the offer is just a price, it is actually much more. All the terms of sale are specified in the "Purchase and Sale" contract which is the legal document on which your offer is presented.
The purchase and sale contract includes how you intend to finance the home, your "binder deposit" and down payment, who pays which closing costs, how long each party has to perform various actions such as loan application, approval and inspections etc. The offer should also contain two important dates, firstly how long the seller has to review the offer and secondly your suggested closing date. The closing date is important because usually the sellers will not have made arrangements for their next home. It is not your concern that they may not have a new home on closing day, you just want to guarantee you can move in at a time convenient for you.
How the offer is written is critical, as an experienced Realtor® I know the best ways to ensure an offer is accepted. Sometimes an offer with a lower price will be accepted by the sellers in favor of a higher priced offer, this happens because the sellers can see from the lower priced offer that the buyer is more serious and able to move. They prefer to accept the offer that is most likely to end in a successful transaction over the one that falls apart a few weeks later.
Sellers would like to see that you already have mortgage pre-approval for an amount at least equal to the offer price. Getting Mortgage pre-approval is a simple process, doesn't cost a penny and greatly improves your chances of making a successful offer. Contact me to discuss how you can get pre-approved.
Sellers also prefer offers that are NOT contingent on you selling your existing house. If you have a house to sell, it is best to make sure you have at least a good offer from your prospective buyers before you even start to look for a new home.
Some contingencies that we will put in your offer are there to ensure your safety in the transaction. These will include contingencies on you actually getting mortgage approval (even though you are pre-approved), the home passes an inspection by a certified home inspector (or the sellers offer to repair any reported problems), the home passes the WDO inspection (Wood Destroying Organisms, commonly termites and wood rot).
The size of your binder or "earnest money deposit" will also affect the chances of your offer being successful. If you make a larger binder deposit the sellers know you are serious about buying the home, after all if you back out you would have more to lose.
If you intend to make a 5% or higher cash payment towards the home you may as well make a 3% or more binder deposit. This will illustrate to the sellers you are a very serious purchaser and it also ensures you are not tempted to spend the money in advance of closing the transaction. Your binder deposit sits in an escrow account between the time the offer is accepted and the closing day. If the seller fails to perform based upon the offer we have written you simply get the money back.
Financing method can also affect the success of an offer. VA and FHA loans do not allow certain closing costs to be paid by you. You initially may see this as advantageous, however the sellers maybe looking for a better offer if they have to pay more of the closing costs than traditionally expected.
The contract I will write for you will also demand that the sellers disclose any defects in the home that are not apparently obvious. Sometimes sellers have "patched" up things which were broken, we need to know about any possible defects to the home or appliances as soon as possible.
The other important element of your offer contract is a comprehensive description of what you expect to be included with the home and the condition you expect it to be left in. The sellers may have stated that they will leave the refrigerator, light fixtures and fans etc., however unless they are all stated in the contract you may not find them there on moving day.
Once the offer has been written I will present it to the sellers or their agent. Typically the sellers will only be given a day or two to decide whether they wish to accept your offer. At this stage one of three things can happen. Hopefully your offer will be accepted, then we progress to closing. The sellers may decide to "counter" your offer, in this case you will be given a day or two to agree to their counter offer. Lastly and usually rarely the sellers will reject your offer completely. Sellers typically only take this action if they feel your offer was so low that negotiating would be pointless.
After the offer is accepted, there is a lot to do before the purchase is complete. The next step talks about the things we both have to do to ensure a successful transaction.
