If you’ve priced and marketed your home correctly, you may soon be receiving offers to buy. These offers are generally communicated through real estate agents, though there are times that buyers and sellers may discuss the basic terms of a deal without their agents. This is a rare event however, and agents loathe the thought of buyers and sellers communicating without them in the picture (you may just find that neither of you need a real estate agent!). By law, however, all formal offers must be in writing and agents or their brokers are usually adept at handling this part of the home-buying process.
The typical components of a real estate offer
An offer almost always contains more than just the price the buyer is willing to pay. Though the exact terms may vary from market to market, most offers to buy real property have the following six elements:
The offer price
This is simply the amount the buyer is offering to pay to purchase your home. Even if the amount is painfully low, don’t dismiss it out of hand. Ask your agent to dig into why the offer was low. Is there something you don’t know about the area or the buyer (other than being a cheapskate)?
The buyer’s source of financing
Where is the buyer getting the money for the purchase? (usually from a bank or mortgage company). In some cases, a seller might hold the financing, allowing the buyer to make payments plus interest to the seller rather than to a mortgage company. This arrangement is commonly called seller financing. Other arrangements could include a “cash offer” where the buyer has a source of funding that isn’t subject to the typical mortgage process.
These are the requirements that must be met in order for the transaction to close and may include items such as the sale of the buyer’s current home, the buyer’s ability to secure a mortgage, and the outcome of the home inspection.
Inclusions and exclusions
A list of removable items in the home, such as window treatments and appliances, that the deal includes. Be careful. Sometimes buyers will give you a head fake and demand that you include your restored ‘67 Corvette that’s in the garage in an attempt to get you to agree instead to install new flooring.
This is the “hey dude, this is a serious offer” money. It’s essentially a cash deposit that the buyer makes to solidify his or her commitment to the deal. The offer will detail how large the deposit is, when it will be made, how the money will be held until the deal closes, and what will happen in the event that the deal falls through. Earnest money is usually equal to 1% of the sale price, but amounts can vary widely.
When will all this take place? The offer should include deadlines for the remaining steps in the transaction, such as the date of closing and the buyer’s move-in date. There should also be a drop dead date for the offer as well (date the offer expires).
Getting an offer to buy is exciting … and scary
For me, selling my first home and getting my first real offer was both exciting and scary at the same time. Exciting because it meant the process was about to get started and scary because I had never been through the sales process before. If you’re selling your first home or your 15th, getting that first offer in a weak economy may mean that the negotiating is about to begin. I’ll cover the Do’s and Don’ts of Handling An Offer in tomorrow’s article.