Writing an Offer
When submitting an offer to purchase a property, gathering as much information as possible about the home and the local real estate market trends is essential. Your agent will conduct thorough research on the property and assess its worth. However, it's also helpful to know how long the home has been for sale, the seller's motivation for selling, and whether there are, or have been, any other offers made.
An offer includes several key components, such as:
• Purchase price
• Closing date
• Amount of earnest money (recommended 1% of purchase price)
• Inspections buyer is requesting
• Personal property items such as appliances that the buyer is asking for
• Type of buyer's financing
• Whether the buyer is asking for a home warranty
• Whether the contract is subject to the buyer selling or closing on another property
Once the offer is received, the seller can either accept, reject or counter-offer your offer. If there are multiple offers, the seller will only work with one offer at a time. A seller cannot counter-offer two offers, or there is a risk the seller may sell the house to two different parties.
A common closing date is 30 days from the date of offer acceptance. If the buyer is paying cash and the home is vacant, closings can happen within one week.
How to make your offer more attractive to a seller when there are multiple offers
When submitting an offer to purchase a home, sellers typically prioritize two key factors: maximizing their net profit and ensuring a smooth and secure transaction process. To increase the appeal of your offer, consider including some of the following terms that sellers commonly find attractive. It's important to note that not all of these terms will be suitable or feasible for every buyer, so be sure to consult with your real estate agent and carefully evaluate your options before making an offer.
• Before writing the offer, try to find out what is most important to the seller to tailor your proposal accordingly.
• Offer more than the asking price. When there are multiple offers, the selling price is usually more than the asking price.
• Unless mandated by the lender, skip the inspections to expedite the process.
• Increase the amount of earnest money to demonstrate your commitment to the purchase.
• The less money financed, the more attractive the offer is. Buy with cash instead of a loan if possible.
• If getting a loan, a Conventional loan is most attractive to a seller.
• Allow the seller to choose the closing date to accommodate their needs.
• Consider including an escalation clause in your offer, offering to beat any other bid by a specific amount up to a certain price.
• Obtain financing through a local lender instead of an online lender.
• If you desire a home warranty, purchase it yourself instead of requesting the seller to buy it.
• Only request appliances or personal property that are already included on the listing sheet.
• Include a statement in your offer stating that you are willing to pay the difference if the home does not appraise for at least the purchase price, demonstrating your financial commitment.
It's important to remember that in a situation with multiple offers, you should present your best offer right from the beginning. This is because sellers are only able to accept or counter-offer one offer at a time. If the seller counters two offers simultaneously, there's a chance that the home could end up being sold to two different buyers, which can lead to confusion and legal issues. So, to ensure that you have the best chance of securing the property you desire, it's crucial to put forward your strongest offer right from the start.
What is earnest money?
Earnest money is money that a buyer puts down as a deposit when making an offer to purchase real estate. The purpose of earnest money is to show the seller that the buyer is serious about buying the property and assure the seller that the transaction will proceed as planned.
If the deal never reaches Closing and is the buyer's fault, the buyer will usually lose their earnest money unless the buyer’s financing is denied as long as the contract is subject to financing.
One percent is the recommended amount of earnest money per our contract. The earnest money is deposited in an escrow account set up by the listing or title company. At Closing, the earnest money will be applied as a credit to the buyer and applied to any down payment.
How do home warranties work?
As part of the purchase agreement, the buyer can ask the seller to purchase a home warranty for the buyer.
A home warranty is a service contract that covers the cost of repairs or replacement of certain home appliances and systems in the event of a breakdown or failure. Home warranties typically cover items such as heating and cooling systems, electrical and plumbing systems, appliances such as refrigerators and ovens, and some structural components of the home.
When a homeowner purchases a home warranty, they pay a yearly premium to the warranty company. If an appliance or system covered under the warranty breaks down or fails, the homeowner can file a claim with the warranty company. The warranty company will then send a service technician to diagnose the problem and repair or replace the covered item if necessary. The homeowner is responsible for paying a service fee or deductible for each claim.
It is important to note that home warranties do not cover everything in the home, and there may be exclusions or limitations on coverage. It is important to carefully read the terms and conditions of the home warranty contract to understand what is covered and what is not.
What happens when an offer is accepted?
Within seven days of the acceptance of the offer, the buyer is required to submit a formal loan application to a financial institution of their choice. Once the application is processed, the lender will furnish the buyer with a Good Faith Estimate, detailing the total amount required to be paid at closing. Additionally, lenders charge a loan application fee to cover the appraisal cost of the property. This appraisal is a safeguard for both parties, ensuring that the property's value aligns with the loan amount being offered. Some lenders require this to be paid upfront, whereas other lenders will allow it to be rolled into the loan.
Your agent will send the fully executed purchase agreement to the lender.