The Basics of Making an Offer

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.

 

In the Rochester area we have a standard purchase agreement 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. I will guide you through the offer, counteroffer, negotiating and closing processes.

 

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 will be presented to the seller.

What is in an Offer?

The purchase offer you submit, if accepted as it stands, will become a binding sales contract (known as a purchase agreement). 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 several common contingencies contained in a purchase offer:

  • Attorney Approval
  • The buyer obtaining specific financing.
  • Home / Property Inspections
  • Sale Contingencey
  • Other Contingencies

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

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 broker or an attorney usually holds the deposit, the amount of which likely varies on the price of the property. 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, except the pool table shall be included."

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.

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. I will be happy to discuss your sell / closing costs.