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 all the terms and conditions of the purchase. We, at Coldwell Banker have the most up to date and revised standard real estate contract used by Realtors and attorneys in the State of Florida. Because of my ongoing training, I am able to address your questions and put your mind at ease.
After the offer is written and signed, it will usually be presented to the seller by me or by the seller's REALTOR®.
What the offer contains:
The purchase offer you submit, if accepted as it stands, will become a binding sales contract It's important, therefore, that it contains all the items that will serve as a "blueprint for the final sale." The purchase offer items includes, but not limited to, the following items:
- Address and a legal description of the property
- Sale price
- Terms -- for example, all cash or subject to your 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 are to be adjusted (prorated) between buyer and seller
- Provisions about who will pay for title insurance, survey, termite inspections and the like
- Type of deed to be given
- Inspection provision
- buyer may make a last-minute walk-through 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 discussed in detail below
Contingencies
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. The following are two common contingencies contained in a purchase order:
- 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 "within 10 days (for example) after acceptance of the offer." The seller must wait 10 days to see if the inspector submits a report that satisfies you. If not, the contract would become void. Again, make sure that all the details are nailed down in the written contract.
Negotiating tips
You're in a strong bargaining position -- meaning, you look particularly welcome to a seller -- if:
- You're an all-cash buyer; or
- You're already pre-approved for a mortgage; and
- You don't have a present house that has to be sold before you can afford to buy.
In those 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 know why the house is being sold and whether the seller is under pressure. Keep these considerations in mind:
- Every month a vacant house remains unsold represents considerable extra expense for the seller;
- If the sellers are divorcing, they may just want out quickly; and
- Estate sales often yield a bargain in return for a prompt deal.
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 REALTOR® or an attorney usually holds the deposit. This will become part of your down payment.
Offer becoming a contract…
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, and 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 the basement pool table you want left with the property, you may receive a written counteroffer, with the changes the seller prefers. You are then free to accept or reject it or to even make your 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 or reject it, or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side's proposal.
