Making an Offer
In real estate, oral contracts are not legally
binding. If you wish to bid on a property, you must make a formal,
written offer or proposal.
Your Real Estate sales professional is
experienced with the offer/counter-offer process, and will know which
of a variety of standard proposal forms are suitable for your area.
Once written, your Sales Professional will present your offer to the
seller. (In some cases, this is all handled by the respective parties’
lawyers.) We have provided the basic information needed during this
critical phase here.
What the Offer Contains
Your written proposal may include, but is not limited
to, the property’s address and legal description, sale price, terms,
earnest money, expiration date of the offer, prorating (adjustments)
of utility bills, real estate taxes, insurance, contingencies, repairs
and any other terms that you deem important.
Earnest money
Earnest money is a deposit given when making an offer. It demonstrates
sincerity—“earnestness”—on the buyer’s part. If the offer is accepted,
it becomes part of the down payment. If not, it is usually returned.
Contingencies
A contingency means that the purchase is subject to certain events
occurring, such as the buyer’s loan being approved, or the property
passing the termite inspection. If the contingencies aren’t met, the
offer is void.
Response
If the seller accepts the offer, and signs an acceptance, you have a
deal. If not, you are free to walk away, and cannot be held liable for
the contract. The seller may make you a counter-offer, and you are
free to accept it or not, or make your own counter-offer. Only when an
offer is accepted and signed by both parties is the contract binding.
Withdrawing an offer
In most cases you can withdraw your offer up to the point when it is
accepted. If you do wish to cancel the offer, it’s a good idea to
consult with a real estate lawyer. You don’t want to lose your
deposit, or be sued for damages perceived by the seller.
Negotiating
Negotiating tips
You may be in a strong bargaining position to make an offer below
asking price if, for example, you are paying cash, or have been
pre-approved for a loan. Conversely, in a “hot” seller’s market, you
may have to offer above the asking price to beat other bids.
Your bargaining position is affected by the reason the
house is being sold. For example, the seller is moving for job-related
reasons or is divorcing and is in a hurry to sell, or is in no hurry
and can wait for the right offer.
Counter-offers
Your Real Estate sales professional will negotiate the often
emotional, sometimes maddening details of offers and counter-offers.
These may include whether the buyer or seller pays points, who pays
for the any repairs to the property, or the buyer wanting to keep the
rec room pool table.
Calculating Net Proceeds (for sellers)
In considering an offer, your Real Estate sales
professional will give you an estimate of net proceeds showing how
much cash you’ll receive at settlement. An offer that looks good on
its face may have hidden costs. For example, when you're presented
with two offers at once, 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.
Some of the expenses to anticipate are:
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Payoff amount on present mortgage
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Any other liens (equity loan, judgments)
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Broker's commission
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Legal costs of selling (attorney, escrow agent)
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Transfer taxes
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Unpaid property taxes and water bills
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If required by the contract: cost of survey, termite
inspection, buyer's closing costs, repairs, etc.
Your present mortgage lender may maintain an escrow
account into which you deposit money to be used for property tax bills
and homeowner’s insurance premiums. In that case, remember that you
will receive a refund of money left in that account, which will add to
your proceeds.
Closing the Deal
Closing is the culmination of the offering/buying
process. If you haven’t yet met the seller, you are likely to at
closing. If you wish, hire a real estate lawyer to represent you at
closing. The attorney fee will be paid separately by you. Now is
the last time you will be able to review all the documents before
signing and assuming ownership of your new home.
What Closing Entails
Closing is the formal meeting where ownership of the
property is transferred from the seller to the buyer.
Also at this time, the buyer’s loan is finalized, so
technically there are two closings. The meeting is usually attended by
the buyer and seller, their respective Real Estate Professionals, the
lender’s agent, and the closing agent (if different from the lending
agent).
Before closing
In the days prior to closing, be sure you understand all of the
conditions of the sale and loan, and confirm that they have been met.
Confirm the closing date.
Closing meeting
The closing agent will review the settlement with you and the seller,
along with evidence that any legal requirements, such as insurance and
inspections, have been met. Once everyone agrees that everything is in
order, and the closing costs are paid by the buyer and, if necessary,
the seller, the papers are signed and the keys turned over to you.
Once the deed is recorded with your county clerk, you officially
become the owner of the property.
Closing costs
Typically, closing costs are three to six percent of the sales price.
There are fees such as insurance on the title to your home, taxes,
transfer costs, attorney fees (if necessary) and hazard insurance. You
may also be required to prepay an up-front reserve account of tax and
insurance payments to ensure that there are sufficient funds in your
account to meet these obligations when they are due. In some cases,
the seller will agree to pay closing costs — that is one of those
negotiable details.
Closing Documents
At closing you will get:
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A HUD-1 Settlement Statement, listing all the
services and charges to you and the seller. You may review this form
on the business day before closing.
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A Truth-in-Lending (TIL) statement. You will receive
this within three days of applying for the loan. It details the
actual cost of the mortgage.
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The mortgage note itself. This is your promise to
repay the loan, as agreed.
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The deed. Signed only by the seller at closing, it
transfers ownership of the property. At first, you may only get a
copy; when the actual deed is recorded with the county listing you
as the new owner, it will be mailed to you.
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Any other affidavits. For example, an affidavit may
state that you will use the property as your principal residence.
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2006 All Rights Reserved Gaslight Real Estate
Listing broker does not guarantee the information describing these
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Parties are advised to verify the information through personal
inspection.