The Purchase Offer
You’ve finally found the perfect house and now it’s time to make a purchase offer. The offer is a legal document, so it’s imperative that the contract is well planned and thoroughly protects your interests. At this point in the real estate transaction, your Realtor is an invaluable advocate and resource.There are many items listed in a typical purchase offer including the buyer’s and seller’s names, the property’s address, offered purchase price, the closing date, the amount of the down payment, mortgage and good faith deposit, financing terms, and the date the offer expires. The purchase offer will also include an itemized list of items that will be included in the purchase price, e.g., furniture and appliances, as well as any certain conditions or contingencies that must be met before the contract is finalized.
Common contingencies include secured mortgage financing, a satisfactory home inspection report, a satisfactory appraisal or the sale of another property. Determining the offered purchase price is perhaps the most tricky and stressful purchase offer task. Your Realtor can help you come up with a fair and reasonable offer and will guide you through a number of considerations including the final sale price for comparable properties in the same area. Your Realtor can provide you with a comparative market analysis (CMA), which compares the list price and final sale price of like properties in the neighborhood.
The conditions specific to your local real estate market also will factor into your offered purchase price. Is the market in the throes of a red-hot bidding frenzy? Or is the market slow enough to warrant a under the asking price offer? In either situation, the information in the CMA can help you determine a reasonable offer. For example, if comparable properties have been selling for 5 percent below or above list price you can reasonably consider presenting a similar offer.
How motivated is the seller? Several factors can help you determine the seller’s motivation: how long the home been on the market, whether its list price has been reduced, why the seller is selling, how much equity the seller has in the home, and when the seller bought the property and for how much. A motivated seller is more likely to seriously consider a fair but lower-than-list-price offer.
It’s typical to enter into a state of negotiations following your initial purchase offer. The home seller may decline your initial offer and present a counter-offer. It is not uncommon that after the initial acceptance that the buyer may ask for a credit back, if unfavorable items have been found in the home inspection report.