Offers to Purchase
All the decisions have been made. The house has been prepared like a model. Advertising and marketing has begun. The listing is in the MLS and the showings are in full swing. Now it is time for the reason that all the work has been done: an offer.
An offer in a Real Estate purchase is a good deal different than one in other negotiations in which you many participate. A Real Estate offer can become a legally binding contract: If you offer to buy a house at a certain price and with certain terms, and the seller agrees and notifies you of their acceptance, you have bought a house! Yes, the closing and escrow details may still need to be finalized, but an offer can turn into a contract in a matter of hours, so it is important that you understand the potential consequences of an offer.
Always get it in writing.
Any verbal offers, counteroffers, or acceptances will be virtually impossible to legally enforce, since it would be nothing more than your word against someone else's. Written offers remove almost all doubt because they cannot become contracts (and therefore binding) until seen by, and accepted through signatures of all parties.
Make sure it is specific
A Real Estate offer is a great deal more than simply an offer of price. All details of the eventual sales contract must be addressed in the offer. Generally included (but not limited to) are:
Any concessions made by the seller
The amount of buyer's "earnest money" or deposit that accompanies the offer.
Financing contingencies (subject to you securing an acceptable mortgage)
Inspection contingencies (subject to an inspection report that is acceptable to you)
Selling existing home contingencies (subject to the buyer selling their existing home within a specified time period)
Time and date of settlement and possession
All exclusions and inclusions in the property.
It is much better to be specific here rather than assume that an item will be included, only to have an unhappy surprise on the day of closing.
When does an offer become a contract?
When it has been signed, (ratified) accepted by the seller, and the buyer is notified of its acceptance. Up until that point it remains only an offer or counteroffer, not an enforceable contract.
What: A legal description of the property as well as the street address.
How much: The selling price
Financing contingency: Subject to obtaining a mortgage (if applicable) and the specifics of the mortgage--amount, rate and term. Application to be made in X number of days
Deposit: How much money accompanies the contract and who will hold it.
Closing: When and where
Inclusions and exclusions: What is and is not included in the sale of the property
Home inspection: Contingency for and to be done in X number of days.
Warranties: Any that are included with the house and description of the warranty
Condominium: If the property is a condo, other provisions will apply
Well and Septic: If applicable, they must be tested (and pass).
Termite and Pest inspection: Who will pay and if there is infestation or damage, who will repair.
Possession Date: When the buyers take possession of the house--before, at or after closing.
Acceptance: How long the sellers have to respond to the offer with either acceptance or a counter-offer
Arbitration: Any provisions for arbitration of disputes.
Insurance: Whose insurance covers the property up until the closing date.
Property Disclosures: Notices of any property disclosures concerning the house.
Almost every offer will contain some buyers escape clauses, known as contingencies. A contingency give the buyer the right to back out of the offer, without loosing earnest money.
Typical contingencies are for selling an existing home, Inspections, appraisal or Financing.
If any of the stipulations of a contingency are not met the buyer may cancel the offer, without penalty. Study the contingencies well and understand them before you sign (ratify) the agreement.
A counter offer is a brief offer that adds or changes items in the original offer and becomes the new offer, including all that was acceptable in the original offer.
Counter offers are short and narrative, as an example, the buyer offered to pay $250,000.00 and close escrow in thirty days, but you won't take less that $265,000.00 and you want a 45 day escrow.
You would write a counter offer that essentially says you accept the original offer except you will accept $265,000.00 and a 45 day escrow. Now it's up to the buyer to accept or counter offer, once the buyer and you sign a counter offer it is ratified and is a contract.
If the buyer does not accept your counter offer the original offer is void.
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