Ok, you’ve done your homework, looked at countless prospective properties, and finally found the right home for you. Now, it’s time for you to write up an offer to purchase your future home. Where do you start? Well, there are many different elements to a purchase agreement, and each one needs your attention because they will all impact your offer.
Although you could begin with any part of the offer, the logical and most common starting place is the price. To determine your offer price, you first have to decide how much you are willing to pay for the home, that is, the highest price you would consider and can afford. Most of the time, this amount is not what you would initially offer. You just need to keep that figure in your head, so when it’s time to negotiate later, you will know where you have to draw the line. After deciding what your final offer would be, you have to decide on a price for your initial offer. There are many factors to consider when calculating your offer price. The first thing for you to find out is how much have homes in the area comparable to this one sold for recently. Your goal is to determine the fair market value for this home. Next, look at what the competition is asking. If there are any comparable homes in the same area that are currently available, find out how much they are listed for. Then, take a look at the current market conditions, or consult with an expert to determine what kind of a market you will be working with. If it’s a strong seller’s market, you won’t be able to put in a lowball offer; your ability to wheel and deal is severely limited. Chances are this seller is going to receive many offers, if they have not already; you’ll want yours to be strong. On the other hand, if the market currently favors buyers, you have more room to negotiate, and may be able to get a lower price. The last factor to consider when choosing your offer price is the seller’s motivation. The reason for which the seller has listed their home can greatly impact the kind of offers they are willing to entertain. If they have to move quickly, and need the money they will receive from the sale of this home, they are more motivated to sell than if they had enough savings to finance their move. In general, a highly motivated seller will consider more offers than one who has the time to wait for a truly strong offer. After factoring in all these variables, settle on an offer price and move on to the next part, financing.
There is en entire section in the purchase agreement that details what kind of financing you have, or will need to acquire. This can include new loans, cash, seller financing, or any combination of these. You will also decide how much earnest money and down payment you are willing to pay. Obviously a full cash offer is the most attractive to sellers because the offer isn’t contingent upon you being able to qualify for a new loan. However, for the vast majority of home buyers, this is not an option. The more earnest money you deposit into escrow, the more serious you appear about buying this home. Enter whatever financing details you have decided upon; then determine when you would like to move into your new home, assuming your offer is accepted. This will be your close of escrow date. You can request a long or short escrow depending on your preference, and keeping in mind the seller’s motivation.
The next item for you to consider is which inspections will you require, and who will pay for which fees. You can request just about any type of inspection of the home you can imagine. Some of the possibilities include: structural, mechanical, pest, mold/fungal, roof, general professional home inspection, land survey, etc. We recommend a professional home inspection to our clients, and lenders often require a pest inspection. It is your decision to obtain any of these, but they aren’t free, and either you or the seller will have to pay for each one. Conveniently, there are places in the purchase agreement where you can designate which party will be paying for which fee during the transaction. Fees can include anything from property taxes, appraisals and escrow charges to inspection costs and HOA transfer fees. Obviously a seller would love to not pay any of these, but in reality the fees are normally shared, with the seller paying for certain ones, and you paying for others.
Finally, detail any contingencies, additional terms, or personal property items you would like included in the sale. Keep in mind, if your offer is accepted with a contingency, and the seller receives another offer without one, you will have to either remove your contingency, and proceed with the purchase or withdraw your offer. An offer with fewer contingencies and demands of additional terms and personal property is more attractive to a seller, so think carefully about what you decide to include.
These are only a few of the main points you should consider when writing the purchase agreement; there are many other factors to think about in order to construct a strong offer. We highly recommend contracting the services of a quality REALTOR to help you through this process
