Home Buying 101 - Step 9: Make An Offer
March 25th, 2007 categories: Home Buyers
This is the ninth post in a series of twelve on buying a home. Click here for the other posts in this series.
Helping buyers make and negotiate an offer is one of the most important tasks of the real estate buyer’s agent. Before I get into the strategies of making an offer and negotiating, which I’ll have to cover in a second post because of length, buyers should completely understand the terms that go into an offer. It is wise to review the real estate contract with an attorney either before making an offer or making the offer contingent upon an attorney’s review, so buyers understand their rights and responsibilities fully.
**Please note that in most of Connecticut, a real estate agent will fill out a “Purchase and Sales Agreement” with the buyers in order to make the offer and the seller can sign it directly(or negotiate or reject it). In Fairfield County, a binder is submitted as an offer by the buyer and his/her agent and an attorney actually writes the Purchases and Sales Agreement once the price and terms have been agreed to.
What Goes Into the Offer?
In most of Connecticut, the offer a buyer submits becomes the actual contract (or, Purchase and Sales Agreement) if the terms are agreed to by the seller. The offer includes:
- –Names and addresses of the two parties - buyer and seller
- –Address and sometimes a legal description of the property
- –Fixtures and personal property - many agencies include a separate document with a list of what’s included/excluded and it becomes part of the contract once the buyer and seller sign it
- –Sale price
- –Deposit amounts and dates - Amount of earnest money deposit accompanying the offer and how it’s to be returned to you if the offer is rejected — or kept as damages if you later back out for no good reason
- –Mortgage type, amount and mortgage contingency-the date by which a buyer must obtain mortgage commitment from lender
- –Closing date - when the sale will occur
- –Seller’s promise to provide clear title
- –Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller - in CT, it’s according to the custom of the Bar Association in that County
- –Provisions about who will pay inspections including home, well, septic and pest and dates by which inspections must be completed and notice of unsatisfactory inspections given to seller
- –A provision that the buyer may make a last-minute walk-through inspection of the property just before the closing and that the property be in “broom clean condition”
- –Property disclosures - buyers must be provided with and sign a copy of the seller’s property disclosure report, including mold and lead paint forms
Your offer may also include:
- –A period of time in which the seller has to accept or reject the offer - for example, 72 hours
- –A period of time in which the buyer may have their attorney review and approve, also 72 hours
- –Riders - condominium, septic, well, sale of buyer’s property (Hubbard Clause)
- –Seller concessions such as buyer’s closing costs
Major Contingencies
A contingency is an event that must take place in order for a buyer to purchase a property. The most important ones are:
Mortgage - a buyer must obtain financing (in the form of a mortgage commitment) in order to purchase property
Home Inspection - a buyer must provide the seller notice of an unsatisfactory home inspection by a certain date in order for buyer to terminate contract with seller
Other Items That Accompany the Offer
Earnest Money
Your offer must also include earnest money or a deposit. This can be made with a check which goes to the listing broker who holds the money in escrow. Generally, the check is only deposited once the seller has accepted the offer. A second deposit in CT is customary but this deposit is made by a cashier’s or certified check within 7-10 days of contract acceptance.
Pre-Approval Letter
I always include the buyer’s pre-approval letter from the bank with the amount of the offer - never the full amount the buyer is approved for.
Personal Letter
In a strong seller’s market, a personal letter from the buyer can make one buyer stand out from a crowd of other buyers. In a buyer’s market, this letter is generally not neccessary.
[…] Original post by berealct […]
How binding is a binder?
I’m actually not sure - I have never used one instead of a contract. They’re used primarily in Fairfield County, a part of the state I rarely work in. Check with an attorney.
If a contract does not specify a mortgage contingency provision, what happens to the down payment if the buyer has a commitment letter from lenders but all lenders back out and do not provide the lending before closing. In Connecticut, does the buyer lose the entire 10% he has put down in the event that he cannot secure financing?
I believe so, unless there is some other protection in the contract or your sellers are generous. If you can’t get financing for the mortgage amount, you might want to try borrowing money from family, asking the seller to take back some of the mortgage or asking them to reduce the purchase price to the amount you can get financing for. My biggest question is, why would you not put in the mortgage contingency clause? And are you sure you had committment letters?
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