Nuts and bolts of making an offer to buy a house
Homebuyers often tend to plod along in the home-buying process without fully understanding its nuances.
This article will answer three critical questions:
- What happens when you make the offer?
- How would you know if the seller has accepted it?
- What occurs after the buyer and seller have agreed upon all terms?
Let us imagine you utilized that Homespotter App issued by Northwest Multiple Listing Service (NWMLS). Being a prudent homebuyer, you were patient; you did your research, found the perfect home, chose to act decisively, and are ready to make an offer.
Get ready to drown in a mound of paperwork. There is no getting around the fact that buying a home involves much paperwork. It starts with an offer to purchase. Using the NWMLS helps greatly because lawyers have prepared, reviewed, and scrutinized these standard forms. The broker will fill in the information about the buyer(s) and property. Still, no modification or alterations to the document’s language are permitted.
Making the offer
Crafting and submitting an offer to purchase a house commences the legal interaction between a seller and a buyer. Most often, things move quickly after your broker submits your offer to the listing broker, who must present it to his client immediately. Offers to purchase real estate specify an expiration date and expire at 9 pm on that date. For strategic reasons, prudent buyers give the seller only a few hours to respond.
Specific contract arrangements can be verbal, but the law requires that real estate contracts must be in writing. Verbal communication is not binding in this case. The seller also must respond in writing before the deadline, or the offer will expire.
A counteroffer terminates the original offer
Upon receiving an offer, a seller has three options. Accept it, make a counteroffer or ignore it. A response to the offer to purchase real estate must be in writing, whether acceptance or making a counteroffer. Even the slightest modification in your original offer makes it a counteroffer.
A counteroffer by the seller terminates the initial offer made by the buyer and starts a new contract. The counteroffer acts as an offer by the seller to the buyer. The buyer has the same three response options described above for the seller.
How much to offer
Without valid reasons, offering a significantly lower amount than the listing price is usually not the best way to start negotiations. Be realistic and reasonable. You and your broker have researched the house and have established an estimated value. Use that value when crafting your offer to purchase.
The amount of earnest money included with the offer and the strength of your pre-approval letter from your lender will be the two significant factors that will determine the power of your offer. How much you offer, how hard you negotiate, and how much ground you give in – depends on how much you want that house and how other homes in that specific market have been selling.
In competitive markets where good homes are in short supply, non-monetary considerations can also play a part. These include the time before closing, occupancy dates, and softening or removing certain contingencies by the buyer.
Be rational and logical. You are making a lifestyle and, more importantly, a significant financial decision. The numbers must make sense.
You must also consider your options if you choose not to acquire that specific house. How would it impact your life? What are the possibilities of you finding another home in the same neighborhood – and other similar factors? These decisions tend to be difficult, and only buyers can make those.
After the buyer and seller come to an agreement
After the buyer and the seller agree on all the terms and the offer becomes mutually accepted, various parties have yet to take several crucial steps.
- The buyer still has to carry out inspections.
- The lender has to rerun the loan numbers based on the purchase price and obtain an appraisal.
- The title company must complete its due diligence and verify the ownership of the house.
The Purchase and Sale document, also called The Mutually Accepted Offer, anticipates all this and allocates specific timeframes within which the buyer must complete these activities. The buyer is expected to move expeditiously, and the seller is expected to cooperate fully. Other agencies, such as appraisal companies, title companies, closing agents, and home inspectors, also have specific tasks to perform during this time. These agencies act as specified in the mutually accepted offer.
Having a prudent, seasoned and knowledgeable real estate broker who is well-versed in the nuances of the real estate transaction process can prove invaluable.