What Kinds of Things Should I Consider When Making an Offer on a Home?

Making an Offer

Once you find the home you want to buy, the next step is to write an offer. The offer is the first step in negotiating a sales contract with the seller. The offer is much more complicated than simply coming up with a price and offering it to the seller. Because of the large dollar amounts involved, both you and the seller want to build in protections and contingencies to protect your investment and limit your risk. In an offer to purchase real estate, you include not only the price you are willing to pay, but other details of the purchase as well. This includes how you intend to finance the home, your down payment, who pays what closing costs, what inspections are to be performed, timetables, whether personal property is included in the purchase, terms of cancellation, any repairs you want performed, which professional services will be used, when you get physical possession of the property, and how to settle disputes should they occur. If you already own a home you should make closing your own sale a condition of your offer. If you do not include this as a contingency, you may find yourself making two mortgage payments instead of one. There are other common contingencies you should include in your offer as well. Since you probably need a mortgage to buy the home, a condition of your offer should be that you successfully obtain financing. Other conditions should be that the property appraises for at least what you agreed to pay for it and that the property passes the inspections you require during the escrow period. After you come up with an offer price, the next step is to determine the deposit amount you want to make with your offer. This deposit is known as the earnest money deposit. You want the deposit to be large enough to show the seller you are serious, but not so large that you are putting significant funds at risk. Generally, the earnest money deposit should be between 1-5% of the offered price, but this amount varies with local customs and conditions so it is a good idea to consult with your real estate agent on the amount that you should put down. You should be prepared for your closing to be delayed unexpectedly. Have back-up plans in place in case this happens. It is absolutely essential that you include a closing date as part of your offer so that both you and the seller can make plans for moving. Though most transactions actually do close on the right date, do not be so inflexible that a delay creates insurmountable problems. For example, if you are renting and need to give the landlord notice that you are moving out, you may want to tell the landlord that you are purchasing a home and ask how flexible they can be with your move-out date. Otherwise, if your purchase closes a few days late you could find yourself staying in a motel with your belongings packed in a moving van. You are considered the owner of the home once the deeds have been recorded. However, it is not always possible for you to occupy the home immediately. This can happen for several reasons, but the most common is that the seller is also purchasing a home. It is usually scheduled to close simultaneously with your purchase of their home but since this doesn�t always happen, it has become customary to allow the seller up to a maximum of three days to turn over actual possession and keys to the home. The date of the actual transfer of possession should be clearly laid out in your offer to prevent confusion. Since the seller has lived in the home, they have knowledge of certain information that you will not know simply by walking through the home. For this reason, you will require certain disclosures as part of your offer. Basically, you want the seller to disclose any adverse conditions that may have a substantial impact on your decision to purchase the home. This would include any problems with the house, such as whether the property is in a flood zone, a noise zone, or any other kind of hazardous area. If you have an agent representing you, this is almost automatic, but many states do not require individuals selling their own home to provide you with this information. Banks selling foreclosed property are often not required to provide these disclosures either. Obtaining these types of disclosures should always be part of your written offer. Certain disclosures about the home may also be required by law. Some of the other requirements you might want to include in your offer are that the roof does not leak, the appliances work, the plumbing does not leak, that there are no broken or cracked windows, the yard has been kept up, and any debris has been cleared away. Before closing, you will want to revisit the property to ensure it is in the condition you have required in your offer, and to inspect any required repairs to ensure they have been performed. You should do this no sooner than 1-3 days before you intend to close. Make sure the right to do a final inspection is also included in your offer to purchase the home.