Making an Offer

The Basics of Making an Offer

A written proposal is the foundation of a real estate transaction. Oral promises are not legally enforceable when it comes to the sale of real estate. Therefore, you need to enter into a written contract, which starts with your written proposal. This proposal not only specifies price, but also all the terms and conditions of the purchase.

REALTORS® have standard purchase agreements and will help you put together a written, legally binding offer that reflects the price as well as terms and conditions that are right for you. Your REALTOR® will guide you through the offer, counteroffer, negotiating and closing processes.

After the offer is drawn up and signed, it is usually presented to the seller by your real estate agent, by the seller's real estate agent, if that's a different agent, or often by the two together.

What is in an Offer?

The purchase offer you submit, if accepted as it stands, will become a binding sales contract. So it's important that the purchase offer contains all the items that will serve as a "blueprint for the final sale." The purchase offer includes items such as:

• Sale price
• Address and the legal description of the property
• Terms: for example, all cash or subject to you obtaining a mortgage for a given amount
• Seller's promise to provide clear title (ownership)
• Target date for closing (the actual sale)
• Amount of earnest money deposit accompanying the offer
• Method by which real estate taxes, rents, fuel, water bills and utilities payments are to be adjusted (prorated) between buyer and seller
• Provisions about who will pay for title insurance, survey, inspections, etc.
• Type of deed to be given
• Contingencies (discussed below)
• A time limit after which the offer will expire
• A provision that the buyer may make a last-minute walkthrough inspection of the property just before the closing

Contingencies - "Subject to" Clauses

If your offer says "this offer is contingent upon (or subject to) a certain event," you're saying that you will only go through with the purchase if that event occurs. Here are two common contingencies contained in a purchase offer:

• Financing contingency: 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.
• Home inspection contingency: A satisfactory report by a home inspector within a specified timeframe. If the inspector submits a report that doesn't satisfy the buyer, the contract would become void.

Negotiating Tips

You're in a strong bargaining position, that is, you look particularly welcome to a seller, if:

• You're an all-cash buyer
• You already have a preapproved mortgage and you don't have a present house that has to be sold before you can afford to buy
• You're able to close and take possession at a time that is especially convenient for the seller

In these circumstances, you may be able to negotiate some discount from the listed price.

On the other hand, in a "hot" seller's market, if the perfect house comes on the market, you may want to offer the list price (or more) to beat out other early offers.

It's very helpful to find out why the house is being sold and whether the seller is under pressure:

• If the sellers are divorcing, they may want to sell quickly
• Estate sales often yield a bargain in return for a prompt deal
• Every month a vacant house remains unsold represents considerable extra expense for the seller

Earnest Money

This is a deposit that you give when making an offer on a house. A seller is understandably suspicious of a written 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 from community to community. This will become part of your down payment.

The Seller's Response to Your Offer

You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that's that - the sellers could not later change their minds and hold you to it.

If the seller likes everything except the sale price, or the proposed closing date, or something else, you may receive a written counteroffer including the changes the seller prefers. You are then free to accept it, reject it or even make your own counteroffer.

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 you take back an offer? In most cases the answer is yes, right up until the moment it is accepted, or even in some cases, if you haven't yet been notified of acceptance. If you do want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don't want to lose your earnest money deposit or find yourself being sued for damages.