When you find the right home, your REALTOR® should take you through a step-by-step process to make the purchase. You know the seller’s asking price, now it’s your turn to make some important decisions.
Preparing to Offer, Preparing to Negotiate
You may be in a strong bargaining position to make an offer below asking price if, for example, you are paying cash, or have been pre-approved for a loan. Conversely, in a “hot” seller’s market, you may have to offer above the asking price to beat other bids.
Your bargaining position is affected by the reason the house is being sold. For example, the seller is moving for job-related reasons or is divorcing and is in a hurry to sell, or is in no hurry and can wait for the right offer. Your Agent should help you understand your negotiating position, and the following offer factors:
- Decide how much you should offer. Consider factors such as the home’s length of time on the market, reasonableness of price, availability of financing and other costs.
- Know what happens to your earnest money. The earnest money deposit shows that you’re serious about buying the home. This deposit is held by a third party such as your REALTOR®’s company, a title company, or escrow agent until the sale is closed or contract is broken. If you buy the house, it is applied to the down payment or closing costs. If you fail to buy the house after the seller has accepted your offer, he or she may have the right to keep this deposit.
- Require the seller to do a title search to prove the title is clear. The title should show no substantial claims or liens against the property. The type of proof varies by area, and your REALTOR® can tell you which kind is used in your area of interest.
- Decide what type of deed you want. You’ll most likely specify that the seller convey the property to you with a general warranty deed that transfers ownership rights (or title) to you.
- Decide what conditions (also known as contingencies) you want to place on buying the house. Your purchase may be made contingent on obtaining financing, a building inspector’s satisfactory report or selling your present home. Real estate contracts today already include many of these standard real estate contingencies.
- Spell out what you’re buying in the contract. Common items to be specified include appliances, light fixtures, shades and drapes, storm windows, and flowers, shrubs and trees.
- Determine what special provisions should be included, such as for property taxes, insurance costs and utility bills. Read all the small print carefully.
- Determine the closing date and possession date you want. Allow yourself plenty of time for financing and all the paperwork in the transaction.
The Seller’s Response
Your REALTOR® will take the offer to the seller or seller’s agent. The seller will either accept, reject, or counter your offer with changes in some of the terms. You may either sign or counteroffer at this point.
Your REALTOR® should negotiate the often emotional, sometimes maddening details of offers and counter-offers. These can include whether the buyer or seller pays points, who pays for any repairs to the property, or the buyer wanting to include the pool table in the living room. During this phase, your REALTOR® should be a steadying, objective presence, helping both buyer and seller look beyond the emotions that often drive negotiating tactics.
Withdrawing an offer
In most cases, you can withdraw your offer up to the point when it is accepted. If you do wish to cancel the offer, it’s a good idea to consult with a real estate lawyer. You don’t want to lose your deposit, or be sued for damages perceived by the seller.
Coming to terms
When you both agree to the terms, you should sign the document; it then becomes a valid contract. (In some areas, a binder agreement is required before the final contract is drafted; ask your REALTOR® if this applies to you.)
If not, you are free to walk away, and cannot be held liable for the contract. Only when an offer is accepted and signed by both parties is the contract binding.
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DISCLAIMER: This information is provided for general awareness only and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind. Please consult with a professional in their respective expertise for complete details.