The Basics of Making an Offer
on a House
So, you have found the perfect house and now you're ready to make an offer. What now? Knowing the basics of making an offer on a house will not only help you to make a purchase offer correctly, but smartly as well.
When it comes to the sale of a home verbal agreements are not legally enforceable. Therefore, you need to get everything in writing, starting with your offer. A written offer on a home not only specifies the price you are offering, but also all of the terms and conditions of the purchase. For example, if the seller has agreed to include certain items in the deal, such as appliances, be sure that the agreement is included in your written offer, as well as in the final completed contract. If the agreement isn't in writing, you will have no recourse for collecting it later.
What does a written offer contain?
Since your written offer becomes a binding sales contract once it is accepted, your written offer should contain all the items that will serve as an outline for the final sale of the home. These items include things like:
Price you are offering
Complete legal description of the property - including address
Conditions (for example, subject to independent home appraisal or upon a professional home inspection)
Earnest money deposit accompanying the offer - the amount, the type (check, cash, or promissory note), and how the earnest money deposit is to be returned to you if the offer is rejected
Seller's assurance to provide clear title (ownership)
Provisions about who will pay for survey, title insurance, termite inspection, closing costs, etc.
Requirements that might be specific to your state - such as attorney review of the contract, disclosure of specific environmental hazards, or other state-specific clauses
Proposed closing date (actual sale of the home)
A time limit which the offer is good for - usually less than three days
Contingencies - only going through with the purchase of the home if a certain event occurs (for example, your obtaining a mortgage for a certain amount or upon selling your own home)
What is earnest money?
Earnest money is a deposit, usually $500 or $1000, that you give when making an offer on a house to show that your interest in the house is serious. The earnest money is held in escrow by an independent third party, usually the title company, which is the business that will handle the paperwork for the sale. If the deal goes through, the earnest money is applied towards the purchase price of the home.
If the deal does not go through then you usually get your earnest money back, though this depends on the wording of the contract. For example, if you default on the contract (e.g., by not having the house inspected, surveyed, or an appraisal performed in the timeframe specified in the contract), then you can lose the earnest money.
What are the seller's possible responses to your offer?
If the seller accepts your written offer just as it stands, unconditionally, and signs an acceptance you will have a binding contract. As soon as you are notified of acceptance the offer becomes a firm contract. If, on the other hand, the offer is rejected, then that's it. The offer is dead and the seller can not later change his/her mind and hold you to it.
What if the seller likes everything in your offer except the proposed closing date, or sale price, or something you specifically want left with the property? In this case, the seller may submit a written counteroffer to you stating the changes he/she prefers. You can accept or reject the seller's counteroffer, or even make your own counteroffer.
Any time either party makes a change in the conditions of the offer, the other side is free to accept the change, reject it, or counter again. The document does not become a binding contract until one party finally signs an unconditional acceptance of the other party's proposal.
Can you withdraw an offer on a home?
Can you withdraw an offer on a home once you have submitted it? In most situations the answer is yes. You can withdraw an offer on a home right up until the moment the offer is accepted. In some cases, you can withdraw an offer on a home if you have not yet been notified of acceptance. If you decide that you want to withdraw your offer, be sure to consult a real estate lawyer before doing so. One of the last things you want to have happen is to lose your earnest money deposit. Even worse is to find yourself being sued by the seller for damages he/she may have suffered by relying on your actions.
The basics of making an offer on a house - some negotiating tips
You will look very appealing to a seller if you are an all-cash buyer, or if you are already pre-approved for a mortgage so you don't have to make your offer conditional upon obtaining financing, or if you don't have to sell your own home before you can afford to buy. Looking appealing to a seller may place you in a strong bargaining position. In those instances, it may be possible for you to negotiate a lower sale price from the listed price.
On the other hand, if you are in a hot real estate market where houses are selling fast and the perfect house comes on the market, you may consider offering the list price (or more) to beat out other early offers.
If you can, find out why the house is being sold and whether the seller is under pressure to sell. You can use this information to your advantage. Realize that every month a house goes unsold it likely represents a considerable extra expense for the seller. If the house is being sold because of a divorce, the sellers may want out of the house quickly. Finally, look into estate sales because they often yield bargains in return for prompt deals.
Making an offer on a house is a crucial part of buying a home, and one of the easiest aspects of home buying to do incorrectly. If you know the basics of making an offer on a house you will be able to make a purchase offer correctly, as well as smartly.
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