About to Make an Offer On a House? Congratulations! Here’s What You Need to Know Before Proceeding
Are you about to make an offer on a house? Congratulations! Buying a home is a very, very exciting time. When you make an offer, you should be sure that you are offering what you can afford. Also, you should be very clear about your contingencies in the offer, as you can’t come up with things that you want later on, after the seller accepts the offer. See: How to Negotiate Counteroffers. Once accepted, the offer becomes 100% binding. So you can’t back out! Be sure you want the house. Here is what your offer should include:
•A description of the property
•Seller’s promise to provide a clear title on the house
•Expected closing date
•Amount of earned money deposit accompanying the offer
•How the taxes, fuel, water bills and utilities are to be prorated between the buyer and seller
•Specifics of who will pay for title insurance and termite inspections
•Offer expiration date
Contingencies: Contingencies mean the offer will go through with the purchase only if that event occurs. Two common contingencies are: financing, and the home inspection. As the buyer, you must get specific financing from a lender. If you can’t secure the loan, you will not be bound by the contract. The property must get a satisfactory report by a home inspector within a certain timeframe, and if it is not completed during that timeframe, the contract is voided.
Negotiating the price: You’re in a strong bargaining position if you are an all cash buyer, have been pre-approved for a mortgage, and don’t need to have a house that must be sold before you can purchase another. When negotiating, keep these considerations in mind:
•Estate sales often yield a bargain in return for a prompt deal.
•If the sellers are divorcing, they may just want out quickly.
•Every month a vacant house remains unsold, the seller still pays for all the upkeep and bills.
Earnest money: Earnest money is a deposit you put down with your offer on a house. A seller is understandably suspicious of a written offer not accompanied by a cash deposit to show good faith, as this is your down payment. If you can’t come up with a down payment, how does anyone expect to believe your word that you can and will buy the house?
The seller’s response to your offer: You will have a binding contract if the seller accepts it as-is. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, you are not liable; the seller is able to make a counteroffer, but you are no longer bound to any conditions or terms.
Withdrawing an offer: Most of the time, you can reject an offer right up until the moment it is accepted. Be sure to speak with a real estate attorney about this, as you don’t want to lose your earnest money deposit. Read: A Sellers Guide to Negotiations and Counteroffers.
Calculating net proceeds: Once a seller has a specific proposal, net proceeds are calculated. This number is calculated by subtracting the payoff amount on present mortgage, any other liens, the legal costs of selling, transfer taxes, unpaid property taxes and water bills, and the cost of survey, termite inspection, as well as the buyer’s closing costs and repairs.
Counteroffers: Unless the seller accepts the offer as-is, the buyer is free to walk away. If they have conditions, or want to come back at a different price, they can counteroffer. For further reading, see: How to Handle a Sellers Counteroffer.