Make an Offer on a Home
So, you think you have found the one. The perfect house, dream home, the one you want to make an offer on. Now what?
By now, you've probably seen several homes and done some comparison, weighed out the pros and cons and you have a buyers agent that's been helping you along the way. So, how do you make an offer?
The real estate offer, also known as the purchase and sale contract, is specific to the state in which you are buying, however, there are some basics that are the same on every offer including who's buying, who's selling, the agents involved, the escrow company, the address of the property, the offer price, any contingencies, and the earnest money deposit. Let's break it down.
Clearly, you have to state how much you're willing to pay for the property. In today's unique market, above asking price is not unusual but you don't have to offer the asking price. It is solely up to the buyer how much they are willing to offer on the home but should get some advice from their buyer's agent.
The offer will also state the property address and legal description, which might be different than the address. This would be from the deed recorded at the County. You are buying real property and you need to know the legal description of the property before buying.
All party's information
The offer will also include who is buying the property including everyone that will be on the title, who is selling the property according to the listing agent, the agents involved in the transaction, escrow company, and a financing company if applicable.
The purchase and sale contract should include how the buyer is willing to pay for the property. Is it a conventional loan and are they pre-approved for a home loan? Is it an FHA loan or VA loan? You must be preapproved before submitting an offer otherwise a lot of sellers may not think you are serious about buying the property. You should already have your financing in place before making an offer.
Earnest money deposit
This is a good faith deposit stating you're willing to put money down to hold the property so that the seller can't sell it to anyone else. Although it's not legally required with an offer, most people do not accept an offer without one. A typical earnest money deposit can be around 1% of the purchase price of the home and this will be held in escrow until closing where it will be credited to the buyer towards the purchase of the house.
The purchase and sale contract will also state when the buyer wants to close on the home. This is usually between 30 and 45 days out but can be adjusted depending on when the seller needs to be out.
Contingencies can vary depending on the type of offer. Finance contingencies mean that financing needs to be approved before the final sale. The home selling contingency means that the buyer needs to sell their own home before they can financially afford the home there making an offer on. A home inspection contingency means that unless the inspection is approved and finalized, the buyer can back out of the deal. And a home appraisal contingency meaning that a mortgage lender will appraise the home to make sure they're loaning the right amount for the property and not letting the buyer borrow more than the home is worth.
An addendum is an addition to the existing paperwork and every deal may include one or two depending on the type of property, the city or county in which the home is located, or certain stipulations with the buyer or seller.
Unless the offer is accepted right away, there may be some counter offering going back and forth. Perhaps there is the date that the seller wants to change or price negotiation or contingencies. The earnest money deposit does not get deposited into an account until mutual acceptance occurs. Both buyer and seller have to agree upon all of the details in the offer for the transaction to proceed.
For more answers to your questions about real estate offers or buying a home in Palm Beach County, contact my office at any time.