Are you prepared to make a home purchase offer? This can be an exciting time, but if you’re not a lawyer, realtor or professional negotiator by trade, you might worry about making a serious mistake. Here’s how to do it the right way.
Making a Offer to Purchase a Home.
The home buying process can be an emotional roller coaster. It’s hard not to get a sentimental attachment to a certain property. It’s easy to forget how much you can truly afford in all the excitement.
Of course, you need to find a house within your price range, but how can you make a bid that is satisfactory to the seller, but within your budget? Here are guidelines on what to include in an offer to purchase, along with common mistakes to avoid.
What does the Home Purchase Offer do?
The Home Purchase Offer fulfills a number of functions.
First, it tells the seller, you are interested in purchasing his property.
Second, it provides a written bid for said property.
And third, it provides the outline for how the transaction should proceed.
Things to Include:
- Your name
- Seller name
- Property description
- Closing date
- Possession date
- Time limits
List the two parties. Define exactly what you are purchasing – home#, lot#, fronting, easements and so forth. Chattel is movable property (i.e. drapes, carpet and refrigerator.) Include essential rental items, such as a hot water tank.
How much should you bid?
It’s okay if you are not an expert in negotiations. The listing price is your guideline. Review what other homes – of a similar condition – are selling for in the neighborhood. Is it a buyer’s market? How long has the house been on the market? Are there other buyers?
Make them an offer they can’t refuse.
What is the maximum amount that you would pay? Your starting bid should be below this amount. Identify why the seller might accept a bid below the listing price.
With competition, you will need to bid higher to stand out. Make a competitive, respectful bid that takes into account the seller’s emotional connection to his home.
What If? Escape Clauses
The home purchase process can be quite long and something might happen that is a complete game changer. By writing conditions, subjects and escape clauses into your contract, you protect yourself against disaster.
Won’t escape clauses irritate the seller?
Actually, conditions are a natural part of every single real estate conveyance – applicable to either party. Financing, appraisal and inspections are the most common.
If you have not been pre-approved by your lender, then you will want to include “Conditional on Financing” into this contract.
You probably want the home to be inspected; thus, the “Conditional on Home Inspection” should be included. Serious foundation damage or plumbing issues could require “Conditional on Repairs.” Are there any time limits on these actions?
What are Time Limits?
Thankfully, there is a section for Time Limits on the Home Purchase Offer. You don’t have to wait forever to get answers. The real estate industry considers 24 to 72 hours to be a reasonable expiry time for your offer.
Financing should take a week or less. A home inspector could finish within one to two weeks. The title search should be completed two weeks prior to closing. The closing date of home sale is usually 30 to 90 days from the date of the agreement.
If you want to add the “personal touch,” you or your realtor could “hand deliver” the Home Purchase Offer. Upon receipt, the seller has the following three options:
Rejection ends the process.
Acceptance means that you are on the home stretch.
Counteroffer shows that the seller wants to negotiate. Read the counteroffer; then you can accept, reject or counteroffer.
A common mistake can occur when you pay the Deposit (Earnest Money), which is typically 1% to 5% of the total home purchase cost. The best way to handle this is to make the payment to a trust controlled by the seller’s lawyer (to prevent the seller from spending the money before closing.)
Repairs are best completed before real estate conveyance. You will have already invested plenty of money into the down payment, you might not want to pay for replacing the foundation too. Also, make sure you identify easements and parking stalls (for condominiums.)
The good news is that you are one step closer to realizing your dream of home ownership. You can write the legal forms yourself, but a lawyer should review the document. Protect yourself with conditional requirements and hope that the seller accepts your Home Purchase Offer. Soon you could be holding the keys to your home sweet home.
Here are a few templates with all the legal documents and support needed to finalize a sale. Check them out here
Happy house shopping!