Making a Home Offer 101

Making a home offer can be both exciting and terrifying. And anyone who is buying their first house may be at a loss during this process.  

While there is a lot that goes into a home offer it is not as daunting if it is broken down into smaller segments.  Buyers should research how to make an offer before jumping in and attempting to make one. This saves them from having their home offer rejected or getting their offer accepted without the right terms in place.

Everything and the Kitchen Sink

A home offer is not a throwaway document.  It is something that will be a legally binding contract once the seller accepts it.  Everything that goes into the offer needs to be correct and all protections for the buyer should be built in.  

The basics of an offer will have the address of the home, legal description of the property, the sales price and how the buyer is paying for the house included.  The seller must submit that they will have a clear title and they will negotiate when the sale will close.

Any earnest money that is collected will be listed.  This may also include who pays the utilities, taxes, and insurance during the transition to the new homeowner.  Other aspects like inspections, appraisals, the time limit the offer has to be accepted, and other contingencies need to be put into place in this document.

Picking Contingencies

A contingency is the only protection between a buyer and a bad situation.  The offer will go through if there are certain factors that are completed before a certain date.  If these factors are not met, the buyer is able to walk away with their earnest money. Most people use financing, appraisal, and inspection contingencies to make sure they can obtain a loan, have accurate pricing, and ensure that the house is in good condition.

Counteroffers

A homeowner may counteroffer any offer and the buyer can, in turn, make a counteroffer of their own.  Many counteroffers are centered around the price of the home. Buyers want to get a lower price while sellers want the most money possible.  Meeting in the middle can be difficult and one party is likely to need to compromise during price negotiation.

Buyers will have the upper hand if their inspection turned up any problems.  These problems can either be addressed by the seller and fixed before the sale is complete or the buyer may ask for discounts to complete the repairs themselves.  If no agreement can be found the offer may be rejected.

Do Not Lose Earnest Money

The earnest money is a sum of money held by a third party that is used as a deposit.  The buyer has to put this earnest money down which is sometimes considered a good faith deposit to show the seller they are serious about the sale.  Be aware that if there are no contingencies in place this money does not go back to the home buyer if they back out of the sale.

Binding Contract

Once both parties are happy with the offer and they are finished with their counteroffers they can accept the final offer.  This final offer is then used as the legally binding contract that will be used during the sale. It is important to not only review the contingencies and terms of the offer but how the information is written to avoid any spelling or grammatical errors that could cause problems while closing.

The process of buying a house is a long one.  No home buyer will know the process inside and out until they go through it themselves.  But they should learn as much about it as possible beforehand.

Any questions that come up during a sale should be asked immediately.  Waiting for too long and ending up with a legally binding contract with terms that a buyer does not understand is not a good situation for anyone involved.