Receiving an Offer
Accepting the offer
Once you and the buyer agree on terms and sign the contract, the buyer will generally have to find a lender and apply for a loan. Remember that oral promises are not legally enforceable when it comes to the sale of real estate. Therefore, all offers should be in writing and signed by both parties.
REALTORS® have a variety of standard forms (including Residential Purchase Agreements) that have been utilized thousands of times and are kept up to date with the changing laws. When you use a REALTOR® these forms will be available to you.
If you are not working with a REALTOR®, keep in mind that you must draw up a purchase offer or contract that conforms to state and local laws and that incorporates all of the key items. After the offer is drawn up and signed, it will usually be presented to you by your REALTOR®, or both your REALTOR®, and the REALTOR®, that prepared the contract.
What the Offer Contains
The submitted purchase offer, if accepted as it stands, will become a binding sales contract (known as a sale and purchase agreement, earnest money agreement, or deposit receipt). It's important, therefore, that it contains all the items that will serve as a "blueprint for the final sale." These purchase offer items include such things as:
- Address (sometimes legal description) of the property: Sale price
- Terms (all cash or subject to your obtaining a mortgage for a given amount)
- Seller's promise to provide clear title (ownership)
- Date for closing (the actual sale)
- Amount of earnest money deposit accompanying the offer, and whether it's a check, cash or promissory note (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)
- Method by which real estate taxes, rents, fuel, water bills, and utilities are to be adjusted (prorated) between buyer and seller
- Provisions about who will pay for title insurance, survey, termite inspections and the like
- Type of deed to be given
- Disclosure of specific environmental hazards, or other state-specific clauses (for example lead paint disclosure if home was built prior to 1978)
- A provision that affords the buyer a last-minute walk-through of the property just before the closing
- A time limit (preferably short) after which the offer will expire
- Contingencies, which are an extremely important matter (and discussed in detail below)
Lead-Based Paint Disclosure
If your property was built before 1978, federal law requires that before a buyer is obligated under a contract to buy the property, the seller shall:
- Provide the buyer with a lead hazard information pamphlet (as prescribed by EPA)
- Disclose the presence of any known lead-based paint or hazard
- Provide the buyer with a lead hazard evaluation report or records available to the seller
- Permit the buyer to conduct a risk assessment or inspection for the presence of lead-based paint or hazards.
- A contract for the sale of property built before 1978 must contain a statutorily prescribed Lead Warning Statement to the buyer.
Your REALTOR® will provide you with the forms necessary to comply with their law and will suggest procedures to follow in order to comply.
If your offer says "this offer is contingent upon (or subject to) a certain event," it is saying that the buyer will only go through with the purchase if:
- The buyer obtaining specific financing from a lending institution. If financing is unattainable then the buyer won't be bound by the contract.
- A satisfactory report by a home inspector "within 10 days (for example) after acceptance of the offer." You must wait 10 days to see if the inspector submits a report that is acceptable to the buyers. If not, then the contract would become void.
Again, make sure that all the details are defined in the written contract.
When you receive a purchase offer from a would-be buyer, remember that unless you accept it exactly as it stands, unconditionally, the buyer will be free to walk away. Any change you make in a counter-offer puts you at risk of losing that chance to sell.
If you reject the offer, that's that. If you accept everything except the sale price, or the proposed closing date, or the dining room chandelier the buyers want left with the property, you may make a written counter-offer, with the changes you prefer. The buyers are then free to accept or reject your counteroffer or to even make their own counter-offer. The buyers may say, "We accept your counter-offer with the higher price, except that we still insist on keeping the dining room chandelier."
Each time either party makes any change in the terms, the other side is free to accept or reject it, or counter again. The sales and purchase agreement becomes a binding contract only when one party finally signs an unconditional acceptance of the other side's proposal. Remember, the contract is a legal binding instrument so you may want to seek advice from an attorney
This is a deposit that the buyer gives when making an offer on a property as a sign of "good faith." A REALTOR®
or an attorney usually holds the deposit. This earnest money deposit will be applied to the buyer's down payment or closing costs.
Withdrawing an Offer
Can you take back an offer? In most cases the answer is yes, right up until the moment it is accepted, or even, in some cases, if you haven't yet been notified of acceptance.
Calculating Your Net Proceeds
In evaluating a purchase offer, your REALTOR® will be able to estimate the amount of cash you will walk away with when the transaction is closes. For example, If you're presented with two offers at once, you may discover you're better off accepting the one with the lower sale price, if the other asks you to pay points to the buyer's lending institution.
Inspection and repairs
If the buyer requires inspections of your home, your REALTOR® may coordinate the scheduling of inspectors. A buyer may hire an inspector to review many items in the property such as the structural components, mechanical items, electrical systems and plumbing systems. The inspector will report to the buyer the items that the inspector finds to be in need of repair. Most likely the buyer will provide a copy of the inspection report to you and may ask you to complete certain repairs.
Do not be surprised when the inspection notes some items in need of repair. An inspector is trained to see items and defects that are not obvious to you and your REALTOR®. No matter how new or well maintained a home is, an inspector may very well find some items in need of repair.