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How to Make an Offer on a House – Tips & Strategies to Win

Looking at homes is an exhilarating experience for many. It’s fun to walk through each house, whether at an open house or private showing, and imagine yourself and your family working, playing, relaxing, and living in its rooms.

But the dreaming phase of your new home search must eventually end. Once you find a house that fits your needs, it’s time to buckle down and actually buy it before someone else does.

You can’t buy a house without first making an offer on it. A purchase offer, also known as a purchase agreement or letter of intent to purchase, is a legal document that outlines the price you’re willing to pay for the home, how you intend to pay for it, and other key terms of the transaction.

Purchase offers generally become legally binding once the seller accepts the terms. The laws governing their execution and nullification vary by state though, and it’s extremely common to amend them prior to closing or make their execution conditional on certain favorable outcomes, such as a passing termite inspection or other inspections.

If you’re working with a real estate agent, he or she will likely modify a pre-written template with terms specific to your transaction. In some states, such as New York, a licensed attorney is actually required to draft or sign off on any formal purchase agreement, regardless of whether the buyer is working with an agent.

Still, given the size and long-term implications of any residential real estate transaction, it’s in your best interest to fully understand the following:

  • The components of your purchase offer
  • Common contingencies that could affect its execution
  • How to craft a strong offer within the constraints of your local real estate market and personal situation
  • How to respond to any counteroffers by the seller

Key Components of a Purchase Offer

Many residential real estate purchase offers are drawn up using state-specific templates, so the wording and order of a given offer’s clauses is likely to vary by location. But the vast majority of purchase offers made in the U.S. contain these key components:

  • Consideration Window. This clause specifies how long the offer’s terms remain valid – in other words, how long the seller has to consider it. If the seller doesn’t respond by the end of the window, the buyer is free to make another offer.
  • Earnest Money Deposit. The earnest money deposit shows that the buyer is serious about purchasing the house. The amount, usually about 1% of the total offer price, is spelled out in the offer and in a personal or cashier’s check accompanying the document. If the transaction closes successfully, the earnest money is credited at closing (reducing total closing costs). If the transaction falls through, the earnest money may or may not be refundable, depending on state law and whether the offer includes specific language about when the deposit must be refunded.
  • Legal Description of Property. This is the legal description of the physical property as written on the original title. Depending on local custom, it includes some combination of the subdivision name, block and lot numbers, the property’s numerical measurements, and descriptions of its physical boundaries. For newly subdivided properties, the seller must warrant that all boundaries are final and have the necessary government approvals.
  • Description of Included Fixtures and Appliances. This section describes any and all fixtures, appliances, mechanical items, personal property, and other “appurtenances” to be included in the property’s sale at no additional cost. Common examples include kitchen appliances, HVAC equipment, outbuildings, garden plants, smoke detectors, and cable jacks.
  • Total Purchase Price and Financing. This outlines the total price the buyer is willing to pay for the property, the down payment (cash at closing) amount, the amount to be financed, and the financing method (such as a conventional or FHA mortgage).
  • Deed. This describes the type of deed, such as a warranty deed or trustee deed, involved in the transaction. It also describes what (if any) restrictions the deed is subject to, such as reservation of mineral rights and utility easements.
  • Prorated Taxes and Utilities. This spells out the buyer’s and seller’s respective responsibilities for property tax and utility payments before and after closing. For simplicity, the seller often pays utilities (water, sewer, refuse, electricity, and so on) through the end of the billing period that includes the closing date. Property taxes are usually paid in advance of 6- or 12-month assessment periods, so it’s customary for the buyer to reimburse the seller for taxes already paid on the interval between closing and the end of the current assessment period.
  • Special Assessments. This provision assigns responsibility for payment of special assessments. Special assessments are one-off tax assessments levied by local government units for public infrastructure projects, such as new water lines or street lighting. They’re more likely to occur in newly built subdivisions and recently annexed municipalities. Typically, the seller pays any special assessments levied prior to the closing date, while the buyer pays any after closing, regardless of when the actual infrastructure project is completed.
  • Closing and Delivery Dates. This section stipulates the closing date, or the day the transaction is finalized. It also stipulates when the home is to be delivered by the seller to the buyer – in other words, when the buyer can move in. Most often, the closing and delivery dates are identical, but sellers sometimes allow buyers to move in early. Both dates can be pushed back if loan approval, property modifications, or other transaction components take longer than expected.
  • Sewage and Water. This section describes the property’s water and sewage services, spelling out whether it’s connected to municipal water and sewage lines, a potable water well, a subsurface sewage treatment system (such as a septic tank), and other relevant improvements. Properties with wells and subsurface sewage treatment often require additional inspection and verification prior to closing.
  • Dual Agency Representation. In some states, it’s legal for the same agent to represent the buyer and the seller, a condition known as “dual agency,” or “dual agency representation.” If the transaction involves dual agency, this section outlines the buyer’s and seller’s respective rights and requires affirmative consent from both parties.
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