Finally after you have found your dream home it is time to sit down with your REALTOR® and begin drafting up your Purchase Agreement or Offer on the property. While much attention is paid to the offering price of a home, a proposal to buy includes both the price, terms and contingencies. Your REALTOR® should also go over any state required Disclosure Statements, possible city required inspections, and they should provide you with a disclosure of how they are getting paid during the transaction.

 Price - How Much?

You sometimes hear that the amount of your offer should be a certain percent below the seller’s asking price or an amount less than you’re really willing to pay. In practice, the offer depends on the basic laws of supply and demand: If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes more. If demand is weak, then offers below the asking price may be in order. So may leave you asking How Much Do I Offer? Don't worry that is why you brought your REALTOR® as your advisor and expert. Your REALTOR® will prepare a comparative market analysis or CMA. This will help you determine an opinion of property value. You will gain strong insights into the current market conditions of the area the property is located in. Together you and your REALTOR® can work together to determine what the best purchase price to offer on the home is. Remember that as the buyer you get to make the final decision on the price. Your REALTOR® is required to obey any price you want to put on the offer. Always keep in mind there is more to offer than just a sales price to make your offer strong.

If also else fails feel free to contact your Mortgage Lender and ask them for an estimate on what your monthly payment be based on the properties taxes, your homeowner insurance, and the purchase price. This is a good way to ensure your budget can handle the cost of owning a home.

 Terms - What makes up your offer?

In some cases, terms can represent thousands of dollars in additional value for buyers or additional costs. Terms are extremely important and should be carefully reviewed. Having too many terms can make your offer look weaker as the more you ask for the more the more the seller has to give to sell their property. Terms can include things like:

• Earnest Money
• Personal Property
• Tax Proration
• How to deal with Tenants
• Closing Date
• Financing & Down Payments
• Closing Costs
• Inspections
• Repairs
• Possession Date
• and much more...

 Contingencies - Protect yourself

When you write your offer you want to make sure that there are several contingencies that allow you, the buyer, the ability to void or cancel the purchase agreement and still retain your earnest money check. Your REALTOR® will guide you through all of the options. Below are a few of the contingencies you should ask your REALTOR® about:

Inspection Contingency - Offer is contingent on Inspection - This allows you to renegotiate based on the results of a private buyers inspection. It is important to always do an inspection. Inspections can also include Lead Based Paint, Radon, or Mold which typically can come at additional cost at the time of the inspection.

A number of inspections are common in residential realty transactions. They include checks for termites, surveys to determine boundaries, appraisals to determine value for lenders, title reviews, and structural inspections (Buyer's Private Inspection, Radon Testing, Lead Base Paint Testing, Mold Inspection, Termite Inspection, etc.) Structural inspections are particularly important. During these examinations, an inspector comes to the property to determine if there are material physical defects and whether expensive repairs and replacements are likely to be required in the next few years. Such inspections for a single-family home often require two or three hours, and buyers should attend. This is an opportunity to examine the property’s mechanics and structure, ask questions and learn far more about the property than is possible with an informal walk-through.

Financing Contingency - If you are not paying with cash then it is important that your team of experts (Realtor® and Mortgage Loan Officer) work together to ensure that they make your offer contingent on your ability to obtain financing. Just getting a Pre-Approval letter is enough. You still need to go through final underwriting. So making sure you have an out if you are not able to obtain financing is very important. 

Appraisal Contingency - It is important that you always make your offer contingent on appraisal. So if the value of the home is not what your offered you have the ability to re-negotiate or cancel the purchase agreement

Association Disclosure Contingency - If your Dream Home is located in a Home Owners Association it is important that your offer reflect this. It will allow you to review the bylaws, budgets, restrictions, and covenants of the Association. Your REALTOR® will help you spot red flags. It is important to have the ability to cancel your PA due to your approval of the Association Disclosures so you do not end up being obligated to buy a home that does not allow pets when you own a dog.

Short Sale - If the Sellers of the property you are looking to buy owes more than what they can sell the home for they need to negotiate a Short Equity Sale with their bank lender. This can be a time consuming process that can take anywhere from 30 to 120 days for the Sellers to negotiate with the Bank. It can also mean that after you have already agreed to terms the bank can make demands for change in the Purchase Agreement. So having the ability to cancel your purchase agreement if the bank and seller take to long or hold off your Inspection during the short sale negotiation process is important when protecting yourself when writing an offer.

 How Do You Make an Offer?

The process of making offers varies around the country. In a typical situation, you will complete a Purchase Agreement and multiple Addendum's which constitute your offer. Consider writing a cover letter to accompany your offer to add that personal touch. You should always include a copy of your Earnest check, Proof of Funds, or Mortgage Pre-Approval Letter. Once you have all this signed and assembled your REALTOR® will present to the owner and the owner’s representative. This negotiation can be done in person or via other forms of remote communication. (e-mail, phone, text) 

The owner, in turn, may accept the offer, reject it or make a counter-offer. Because counter-offers are common (any change in an offer can be considered a counter-offer), it’s important for buyers to remain in close contact with REALTORS® during the negotiation process so that any proposed changes can be quickly reviewed. To keep your offer clean and easy to read your REALTOR® will update the offer with the Counter Offer Addendum.

 When is my offer accepted?

Your Purchase Agreement is not fully executed until it is signed by all parties and delivered to both the buyer and seller.