WHAT IS IN AN OFFER?

The purchase offer you receive, if accepted as it stands, will become a binding sales contract, so it’s important that it contains all the items necessary. The purchase offer includes items such as:

• property/ legal description of the property

• purchase price

• terms: for example, all cash or subject to you obtaining a mortgage for a given amount

• seller’s promise to provide clear title

• closing date

• amount of due diligence money accompanying the offer

• amount of earnest money deposit accompanying the offer and disposition upon default

• information about any Home owners Association

• provisions about who will pay for title insurance, survey, termite inspections, etc.

• type of deed to be given

• disclosure of specific environmental hazards

• 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 the offer says “this offer is contingent upon (or subject to) a certain event,” the buyer is saying that they will only go through with the purchase if that event occurs. Here are two common contingencies contained in a purchase offer:

• The buyer obtaining specific financing from a lending institution: If the loan can’t be found, the buyer won’t be bound by the contract.

• A satisfactory report by a home inspector: for example, “within 10 days after acceptance of the offer.” The seller must wait 10 days to see if the inspector submits a report that satisfies the buyer. If not, the contract would become void. Again, make sure that all the details are explicitly stated in the written contract.

 

NEGOTIATING TIPS

A good buyer

• is an all-cash buyer

• already has a preapproved mortgage and does not have a current house that has to be sold before purchasing

• is able to close and take possession at a time that is especially convenient for the seller.

In most circumstances, the buyer will try and negotiate some discount from the listed price.

On the other hand, in a “hot” seller’s market, you may receive an offer at the list price (or more) or multiple offers, if more than one party is interested.

​

Keep the following considerations in mind:

• every month a vacant house remains unsold represents considerable extra expense to you, the seller

• the first offer you receive is usually the best offer

• In a multiple offer, the higher price offer received may not be the best offer.  It is important to look at all the items in the offer and determine which has the highest probability of closing.

 

EARNEST MONEY

This is a deposit that the buyers give when making an offer on a house. A seller should not take seriously, an offer that is not accompanied by a cash deposit to show “good faith.” A real estate agent or an attorney usually holds the deposit, the amount of which varies. This will become part of the buyer's down payment. There is an exception to this for those buyers obtaining 100% financing when closing costs are incorporated into the offer.

 

BUYERS: THE SELLER’S RESPONSE TO YOUR OFFER

You will have a binding contract if, upon receiving the written offer, you sign an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as the buyers are notified of acceptance. If you reject the offer you cannot later change your mind and hold the buyer to it.

If you like everything except the sale price, or the proposed closing date, or the basement pool table you won't leave with the property, you may respond with a counteroffer with the changes you prefer.  The buyers are then free to accept it, reject it or even make their own counteroffer. For example, “We accept the counteroffer with the higher price, except that we still insist on having the pool table.”

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.

 

WITHDRAWING AN OFFER

Can the buyers take back an offer? The answer is yes, right up until the moment it is accepted, or even in some cases, if they haven’t yet been notified of acceptance. Even if the contract has been accepted and they have been notified, if they are in a due diligence period they can back out any time prior to the expiration of the due diligence period without loosing their earnest money deposit.

​

DUE DILIGENCE PERIOD

A period of time, commencing on the effective date of the contract, and ending at 5:00 pm on the date inserted in the contract.  The process of a buyer investigating a property being purchased in a diligent manner, within a period of time specified in the purchase contract, to determine if the buyer is satisfied with the property and wished to proceed with the purchase.  The due diligence period is also used to secure financing for the property.  If a mortgage comittment has not been received prior to the end of the due diligence period, the buyer may ask for an extension.

 

SELLERS: CALCULATING YOUR NET PROCEEDS

When an offer comes in, you can accept it exactly as it stands, refuse it (seldom a useful response) or make a counteroffer to the buyers with the changes you want. In evaluating a purchase offer, you should estimate the amount of cash you’ll walk away with when the transaction is complete. For example, when you’re presented with two offers at the same time, you may discover you’re better off accepting the one with the lower sale price if the other asks you to pay points to the buyer’s lending institution.

Once you have a specific proposal before you, calculating net proceeds becomes simple. From the proposed purchase price you can subtract the following costs:

• payoff amount on present mortgage

• any other liens (equity loan, judgments)

• broker’s commission

• legal costs of selling (attorney)

• transfer taxes

• unpaid property taxes and water and other utility bills

• if required by the contract: cost of survey, termite inspection, buyer’s closing costs, repairs, etc.

Your present mortgage lender may have maintained an escrow account into which you deposited money to be used for property tax bills and homeowner’s insurance. In that case, remember that you will receive a refund of money left in that account, which will add to your proceeds.

 

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 buyer.

Who pays for what items is often determined by local custom. You can, however, negotiate with the buyer any agreement you want about who pays for the following costs:

• termite inspection

• survey

• buyer’s closing costs

• points paid to the buyer’s lender

• repairs

• home warranty

You may feel some of these costs are none of your business, but many buyers – particularly first-timer buyers – are short of cash. Helping them may be the best way to get your home sold.