Most people believe that writing an offer consists of deciding a price……………..
Yeah, there’s a little more to it than that.
Our purchase contract is 10 pages long. It is filled with information on what will be included in the sale, how the sale will work, the timelines, what happens when something goes wrong, the contact info for everyone involved, and all the responsibilities of everyone.
Most all of it is boiler plate, however, unless you have read it 75 times, you should look through it carefully. Most of the questions that we get asked after going under contract is covered in the contract. Unfortunately, there are often times a potential breach, because someone didn’t know what was supposed to happen and when… and it’s covered in the contract. Other times, someone will jump on that phrase, “they’re in breach!”, not even realizing that there is NO breach, without a cure notice. What’s a cure notice?
In writing an offer, you should consider many things.
- Price. Looking over the comparitive homes, what do you believe a fair market value would be? This is not something an agent can tell you, only give you supportive evidence for you.
- Timeframes.
- When do you want to close on your home? This is not the day you sign documents, it’s just the day that the home records at county, and you take over.
- When do you want the seller to respond? This is an “Acceptance” time. This means that this is how long you will wait till you move on to see what else is out there. If they accept your offer after that time, you may still move forward, but you are not legally obligated.
- How long do you need for discovery? A typical inspection (and is in boiler plate) is 10 days long. If the home is unique, troublesome, or you’re unavailable to do much during that first week, you may consider extending that time. If the home is HOT, and you want to move quickly and make an offer ‘strong’, you may shorten that time.
- Misc. Due Diligence. There are several lines in the contract that naturally give you 3-10 days to review and cancel. If any of those items, HOA, Title, Disclosures, Insurance etc don’t sit well, you need to address that in your offer.
- Earnest Money. This is your ‘deposit’, which is held with Escrow (a neutral third party). It’s your money, but it’s there to ensure to the seller that you have skin in the game. You promise to do everything in your power to move forward, following the terms of the contract. If you discover something that changes your feeling about the home, you would be able to cancel, within the terms of the contract, and get that back. If you are not approved for the loan, you would get that back. However, if you have simply wasted the sellers time, and taken the home off the market just to have a change of heart… your earnest money may be owed to the seller. Your agent will ensure you are protected, as long as you follow the guide of the contract.
- Closing costs. While no one can tell you an exact figure for closing costs, you can count on between $4k-$6k, (on a financed transaction) depending on loan costs, and price of the home. Depending on the market, and what is currently being seen, this may be a cost that you can ask the seller to contribute to. Talk with your agent before assuming the seller will pay your costs to close, this is very volatile and market specific
- Personal Items. You will want to consider whether you want items such as a fridge, washer and dryer or even an above ground jacuzzi. These are not automatically included in a sale, despite what the listing says. If it’s not attached, it can go. If there are items that helped you decide on the home, please be sure to specify those items in your contract, no matter what.
- Warranties. Most people assume I just mean a home warranty… while, that is a factor, and you need to consider whether you want one, and who you want to pay for it. But the other ‘warranties’ are things that are promised before you write the offer. If the listing says that the home has a beautiful water feature, you should include that in the sellers warranted items. Anything that the seller has stated to be working or in a certain condition, specify that, or it’s not guaranteed.
- Escrow/Title. These ARE two separate things, however in Arizona, it’s typical to see it all handled from the same company. Escrow is a negotiable thing, and you should take direction from your agent to ensure you end up in the right hands, IF you don’t already have an escrow agent that you prefer. Title is always BUYER’S choice, however, keep in mind that if the seller counters you on Escrow, there’s probably a reason. Find out and then you can make the decision on who to go with. If you decide to separate these costs, keep in mind that you will pay a much higher fee, as a bundled title/escrow fee will be much lower. Also, keep in mind that your title insurance is likely underwritten by the same company, no matter who you go with. (buyers responsible to verify)
- Disclosures – this will include things like the Sellers Disclosures (SPDS), Lead based paint (LBD), claims loss history (insurance), HOA, Title, and any other material fact. While there are forms to help guide the seller to disclose anything that might be material, keep 2 things in mind.
- Arizona is a disclosure state, the seller must disclose everything, even if those forms are not used. However, if something is not disclosed, please keep in mind that you would have to prove that it was maliciously withheld. If it’s important to you, ASK.
- The seller does NOT have to disclose certain things, LIKE… if there was a death, if it’s haunted, if it was the site of a felony, or if there is a sex offender in the area. Again, if it’s important to you, you MUST inspect it.
- Additional Terms. In most cases, it’s best to leave that whole section alone. When altering the contract, you risk weakening it. However, this section should be altered if you need to ensure that the seller understand something specific. Your agent can help guide you in this area to make sure that everything is clear and in writing. You never want to leave anything to ‘But they said’ Ie.
- Changing any terms
- Removing terms
- Adding terms
- Further specifying any terms
- Ensuring everyone is on the same page.
When your offer is completed, it will be submitted to the sellers agent, and then reviewed by the seller. Remember, everyone’s situation is different. Your agent can do due diligence to find out what terms may be most important to the seller, to put your offer in it’s most acceptable position. Sometimes, this is price, plain and simple. Investors want bottom dollars. However, some times, price may be the least of their concerns, because they just want to make sure that the buyer will love their amazing home, the same as they did. In these cases, consider writing the seller a personal letter to explain why you want them to take your offer. This will help put your best foot forward and can help, not only get your offer accepted, but also help when negotiating repairs down the line, and how they leave the home when they move out.