You’ve spent months viewing and researching homes and finally found ‘the one’ you want to buy. Now comes the scary but exciting part - making an offer on a home. If you’ve never put in an offer on a home before then, you may be worried about what to expect, but in reality, it’s quite a straightforward process.
Keep reading to find out how to make an offer on a home.
What is an offer?
An offer is a written or typed purchase agreement document, that specifies your offer price and all the terms and conditions of the purchase. It also contains a list of the chattels, if any, that are being included with the property.
A purchase agreement is a legally binding document once both parties agree on a price and sign it. Therefore it’s in your best interests, and your real estate agent will probably advise this, to have the agreement looked over by a property lawyer or real estate agent before your offer is presented to the seller.
The seller, in turn, will have their property lawyer look over the document before they sign anything.
What items should I include in my offer?
Every buyer’s situation is different, so your agreement will contain all the items that are particular to your sale. Here’s a list of typical things that are included in an offer:
- Your name, and the seller’s name
- The address and legal description of the property
- The price you’re proposing
- The amount of earnest money deposit
- The proposed closing date
- Responsibility for paying closing costs
- Provision for a property inspection before closing
- Clause to amend or modify the purchase agreement after its completion.
This offer is contingent on….
Arguably the most critical section of the purchase agreement is where the contingencies or ‘subject to’ clauses are inserted. Contingencies only allow the purchase to go through if specific terms are met.
Two common contingencies you’ll find in a purchase agreement are:
1. The buyer is obtaining financing from a lender of their choice and having it approved by a specific date. If funding is not approved the buyer is not legally bound by the contract
2. A property inspection is undertaken at the buyer expense within a certain amount of time after acceptance of the offer, usually ten working days. If the report is not satisfactory, the buyer can legally withdraw their offer.
What if my first offer isn’t accepted?
It’s quite common for your first offer not to be accepted by the seller. This is because it’s usual practice to offer below the asking price or the market price if it doesn’t have a listing price. The market price is something you can research by asking your agent for comparable sales in the area for the last three months.
Going in with a lower offer price will (hopefully) entice the seller to make a counteroffer to encourage a subsequent higher offer on your part.
This is where you will have to employ some negotiation tactics as the agreement can go backward and forwards a few times before a price is finally settled on, if at all. If the seller isn’t willing to come down, and the buyer isn’t ready to go up, then there’s no agreement.
The seller also has to agree to your terms, which may not be favorable to them. For instance, you may have to sell another house, you may not have finance approved yet, or you may have indicated a closing date that isn’t convenient for the seller.
Remember, until the seller signs their acceptance of your offer, the agreement can be rejected, countered or have changes made to the terms. If you want to revoke your offer consult your agent or real estate lawyer before you do so, you don’t want to lose your earnest money deposit.
How do I make a firm offer?
For an offer to look attractive to a seller, then it’s essential to have an acceptable price and as few contingencies as possible. Having a pre-approved mortgage so you’re not waiting on finance, or have already sold a house, can put you in a strong bargaining position to negotiate a lower price.
Even if you do have terms that need to be satisfied, if the house has been on the market for a while, the seller may be desperate, and be willing to accept a lower price if it means a sale. So it pays to go in with a lower offer in this case and see how the seller counters.
Alternatively, in a hot market, you’ll have competition so you may have to offer closer to the list price to beat out other buyers.
What happens after my offer is accepted?
If the seller signs an acceptance of your offer, congratulations you have a firm contract of sale! That is if their due dates meet all the contingencies.
If you have a property inspection clause, you’ll arrange this now, and if finance needs to be approved, you’ll need to sort this. Otherwise, it’s a matter of waiting until closing day, the signing of the settlement paperwork, and of course looking forward to collecting the keys to your new home.
Please feel free to get in touch with us if you have any further questions about the home offer process.