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 also all the terms and conditions of the purchase. For example, if the seller offered to help with $2,000 toward your closing costs, make sure that's included in your written offer and in the final completed contract, or you won't have grounds for collecting it later.
REALTORS have access to standard purchase agreements, and I will help you put together a written, legally binding offer that reflects the price as well as terms and conditions that are right for you. I will guide you through the offer, counteroffer, negotiating and closing processes. In North Carolina certain disclosure laws must be complied with by the seller, and I will ensure that this takes place.
If you are not working with a real estate agent, keep in mind that you must draw up a purchase offer or contract that conforms to state and local laws and that incorporates all of the key items. State laws vary, and certain provisions may be required in your area.
After the offer is drawn up and signed, it is usually presented to the seller by the seller's real estate agent.
What is in an Offer?
The purchase offer you submit, if accepted as it stands, will become a binding sales contract. So it's important that the purchase offer contains all the items that will serve as a "blueprint for the final sale." The purchase offer includes items such as:
- address and the legal description of the property
- personal property that conveys with the sale, or, afixed property that does not convey
- sale price
- terms: for example, all cash or subject to you obtaining a mortgage for a given amount
- seller's promise to provide clear title (ownership)
- target date for closing (the actual sale)
- length of due diligence period and amount of due diligence fee
- amount of earnest money deposit, typically presented to listing firm at close of due diligence period.
- method by which real estate taxes, rents, fuel, water bills and utilities payments are to be adjusted (prorated) between buyer and seller
- provisions about who will pay for title insurance, survey, termite inspections, etc.
- type of deed to be given a time limit (preferably short) after which the offer will expire
- contingencies, which are an extremely important matter and that are discussed in detail below
Under the NC Offer to Purchase and Contract, a buyer has a negotiated period of time to conduct their due diligence. During this time period, a buyer must do their due diligence on the property and decide whether to move forward. This includes inspections and agreement on repairs, loan application and approval, appraisal, title search, surveys, and any questions or research necessary regarding insurability, HOA issues and zoning issues.
You're in a strong bargaining position, that is, you look particularly welcome to a seller, if:
- you're an all-cash buyer
- you're already have a preapproved mortgage and you don't have a present house that has to be sold before you can afford to buy
- you're able to close and take possession at a time that is especially convenient for the seller
In these circumstances, you may be able to negotiate a greater 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 offers.
It's very helpful to find out why the house is being sold and whether the seller is under pressure. For instance, keep the following considerations in mind:
- every month a vacant house remains unsold represents considerable extra expense for the seller
- if the sellers are divorcing, they may want to sell quickly
- estate sales often yield a bargain in return for a prompt deal
Due Diligence Fee & Earnest Money
The due diligence fee is a negotiated amount that is given to the seller at the time of offer. If you move forward with the purchase at the end of the due diligence period, this fee gets credited toward the purchase price. If you do not move forward, the seller keeps the due diligence fee as compensation for the due diligence period. Earnest money is a deposit most often made at the close of the due diligence period, to show your earnestness and financial capability to complete the transaction.The listing firm or an attorney usually holds the deposit, the amount of which varies from community to community, but is most often 1% to 3% of the contract price. This will become part of your down payment and is credited to you at closing.
Buyers: the Seller's Response to Your Offer
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 - 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 including the changes the seller prefers. You are then free to accept it, reject it or 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, reject or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side's proposal.
Buyers: Withdrawing an Offer
Can you withdraw an offer? In most cases the answer is yes, right up until the moment it is accepted, or even in some cases, if you haven't yet been notified of acceptance.