If you’re a new real estate buyer, the thought of making an offer on a house might be scary. The amount of money alone can be shocking and the process, at first appears to be a complicated dance with unnecessarily complicated steps. The offer is a contract to protect both you, the buyer and the seller. On both ends of the deal, education is important.
The most common parts of the offer include:
- The money: the amount you’re offering, your down payment, and the amount of earnest money you’re depositing.
- Contingencies: inspection happens after you make an offer; the contract usually allows you wiggle room if you find anything about the home that warrants renegotiation or even potentially walking away from the deal.
- Conveyances: What do you want to go with the home? Furnishings? Appliances?
- An expiration date: for the seller’s response, if the seller does not meet the deadline, your offer expires.
- Any concessions: you want to ask the seller to make, such as helping with closing costs.
You demonstrate to the seller that you are a serious buyer when you make an offer on a home. You show this by including a check for “earnest money.” with your written and signed contract. Earnest money, the amount of which varies from house to house and location to location, is generally a few thousand
You demonstrate to the seller that you are a serious buyer when you make an offer on a home. You show this by including a check for “earnest money.” with your written and signed contract. Earnest money, the amount of which varies from house to house and location to location, is generally a few thousand dollars, and represents a deposit, one that—if your offer is accepted—holds you and the seller in contract with one another.
Just like paying for home inspections before owning the home, putting up a check for thousands of dollars on a home before buying it can be hard for new buyers. Is there a chance we could lose this money?
The short answer is “probably not,” at least, not if your real estate agent has thoroughly prepared the offer with needed legal contingencies that allow you to walk away if the deal breaks down. You will, for example, get your earnest money returned to you, after your home inspection and due diligence, if you find something about the house that changes your mind about buying it: a hole in the sewer; a lien on the home’s title; a faulty foundation. If the seller can’t or won’t fix these issues, you have the legal right to break the contract, and will be fully refunded your earnest money (though not, unfortunately, your home inspection fee).
The contract serves the seller as well. If you breach it in some way, you could lose your earnest money; this is another reason why understanding the offer process benefits you are the buyer so tremendously.
There’s no negotiation if all offers submitted are accepted. Most sellers will counter your offer unless you offer a lot more than the asking price. You should think about your offer as an invitation to start negations, so you aren’t discouraged or offended when the seller counters. Keep in mind: you can counter back with a revised offer. Neither of you has to stop the negotiation until you both feel you are getting a fair deal.
Using the Offer to Gather Information
Mot times Realtors ® share information with each other and with their clients that can help with the offer process. For example, the agent knows the seller of the home you want to buy. The agent finds out the seller needs to sell the house by a particular date because of financial issues and the agent also found out the owners needs to clear a certain amount of money on the sale. With that information, the agent can make a very intelligent offer the buyer and seller can agree on. But sometimes sellers won’t be so so up-front, so the offer can provide some insight you can’t get otherwise. For example, if the seller refuses to come down in price, then you could assume the seller isn’t overly motivated to sell/move. Alternatively, if sellers respond quickly with a counter that isn’t far off from your original, you may feel confident that their motivation works in your favor when deciding whether to accept, reject, or counter-offer.
The window of time you make legally available to the seller to reply to your offer is important. You and your agent will want the seller to believe you are serious, qualified, and ready to buy the home. You also don’t want to lose the home to someone who sneaks in at the last minute and offers more. You’re in a better position with a fairly tight deadline for the seller to respond to your offer.
Once the seller agrees to your offer, you begin your discovery period: home inspections and gathering title information, home appraisal and if needed, renegotiation based on what you discover during this process. The seller cannot, during this time, entertain other offers, so use the time well.
No Need to Panic
If the worst happens and the whole thing breaks down, you do have options. Contact me and I’ll personally ensure that I get you into your dream home.