Making an Offer

Making an offer on a home

Once you have found a home you want to buy, you must present your offer to the seller. Depending on your specific needs, the offer will consist of a number of different contract pages and addendums.
Since your offer is actually a collection of contractual agreements, it is legal and binding to both parties. You can bet that every line of every page grew out of various lawsuits over the years.
And, since the last thing you want is a lawsuit, or feeling that you must litigate yourself, it is important to understand the contracts and work within the very rigid constraints they contain. You can request copies of point by point contract guides here Below are brief explanations of some of the most commonly used forms. Please understand that I am not a lawyer, and the descriptions below are VERY simplified. To learn more, please call me for a meeting.

The Purchase and Sale Agreement

This is the foundation of every offer and covers the following details:

	Names, marital status, addresses, phone numbers for both parties and their agents
	Address, tax number, legal description of house being sold
	Which appliances will stay with the home
	Offer price, earnest money amount, and dates of closing and possession
	Title insurance company, and escrow company can be specified
	Offer expiration date - generally as short a duration as possible in order to get a quick seller response
	Other contracts (addendums) are identified
	Places for signatures and dates
	Agency disclosure (which agent is working for whom)
	The first page covers the above details, and the last 3 pages contain the legal "boilerplate" which explain or describe the details of the first page.

The Financing Addendum

This is used when the buyer is going to finance the home loan with a mortgage or alternative method of financing. It covers the following:

	Dates, names, etc as above
	Down payment amount
	Deadline date to have made a loan application
	Date by which financing contingency is waived - in other words, when you expect to have your loan underwritten
	FHA an VA discount amounts if the loan is of that type

The Optional Clauses Addendum

This covers some of the most common issues of concern to most buyers:

	The usual dates and names etc.
	Agent disclaimer on any possible encroachments and the accuracy of the stated lot size and house square footage - basically the buyer is asked to acknowledge that the listing agent and buyer's agent don't know for sure if the details on the lot given by the seller are accurate.
	An option to purchase "extended" title insurance which would address a buyer's concern about possible unknown liens etc. This might be warranted in a repo or estate sale.
	An option for the buyer to stipulate that the property is maintained in it's present state and functionality right up to closing. For example, the furnace is working when you make your offer, but is not working when you close - this clause forces the seller to repair the furnace.
	An option for the buyer to get any stuff or fixtures the seller has left in the home at closing for free. This option also states that the seller has to get rid of trash, debris, and rubbish.
	An option where the seller must state whether the home is connected to public water and sewage, or wells and septic systems. For example, say the seller claims the house is connected to the sewer, but is really connected to a septic tank - this gives the buyer legal recourse to either rescind the agreement, or sue.
	A section where insulation type must be identified in new construction
	An option to limit buyer liability in the event of breach of contract to the amount of earnest money that is 5% of the purchase price (all if at 5% or below). This is also known as "The Statutory Safe Harbor" clause. If there is any doubt at all about closing your deal, be sure to check this box.
	An option to specify a commission amount for the buyer's agent (if no amount is specified in a listing).
	An option where the seller must identify any leased items and "roll" the leases over to the buyer with complete release from seller's obligations to the leases. An example would be a water heater leased from the gas company.
	A blank option "Other" where the buyer can identify an issue he would like to make part of the agreement such as "Seller shall convey the lawnmower in the basement to the buyer upon closing"

The Inspection Addendum

This is used to when the buyer's offer is contingent upon getting and reviewing a building inspection. It allows the buyer to terminate the contract for any reason, or to ask the seller to make concessions and / or repairs. With rare exceptions, it is always advisable to get an inspection - even in new construction - you would be amazed at what contractors overlook.

NOTE: In the event of a multiple offer situation, where more than one party is trying to get the same house, the tactic of not making your offer contingent on an inspection might be used - in these cases an inspection is generally made before the offer is written. If you find something bad and decide not to make an offer, you are out the $300+ with nothing to show for it. Still, of you love the house and want to write a bomb-proof offer this is one tactic to employ.

The inspection is one of the most critical phases of the purchase, and is where most offers fall apart. Please be advised that the description below is simplified in the extreme, but gives you the gist of the process.

Here are some the fields to fill in and some of the options available on the inspection contingency:

	Usual names dates etc.
	Neighborhood review - number of days to look around the neighborhood to make sure it is where you want to live - if you don't like it you can disapprove the inspection and terminate the contract
	You can specify how many days you have to make the inspection
	You can specify how many days you have to get additional inspections if you need a specialist for something
	Option 1-A: Buyer's Satisfaction. If you disapprove the results of the inspection, you can choose and direct steps to be taken to correct problems - however, the seller can reject any of your requests and "counter back" to you. You can also terminate the contract for any reason at all without having to give the seller a chance to fix problems. If the buyer does not respond one way or the other (approve or disapprove) the inspection contingency will be considered waived and you will be under binding contract to buy the house. This option gives the buyer more control, and is more likely to be rejected in a multiple offer situation (seller in control) if another party uses the next option:
	Option - Seller's Option to make Repairs. Gives the seller the chance to make repairs to defects that you identify. This option is exercised under time-lines mutually agreed upon in your disapproval of inspection. Seller will respond with a list of remedies to the problems you identify. You may change or amend that response again and again until you either agree how the problems will be addressed, or terminate the contract. If you let a timeline slip by without proper notice, you will be under contract to buy the house or lose your earnest money if you don't.
	You can elect to waive the inspection, or buy the house "as-is". Not a smart thing to do if you have any question at all about the house or land.
	There is an option for the earnest money to be held by the broker, and not deposited to escrow until the inspection is approved. This makes it easy to move on to another deal without having to get your money back from escrow, which can take some time.

There are plenty more contracts that you may use, but many are specific to certain situations and issues for individual parties.

Although every effort has been made to give a simple explanations of the contracts above, I cannot guarantee full accuracy and you are advised to seek legal council, or have your contracts prepared by a professional agent or broker.

Jim Hunt Realtor^® ABR^® -Accredited Buyer Representative

C-CREC^® Consumer Certified Real Estate Consultant

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