The fruit of the searching and showing steps is – of course – to find a home that meets your needs, and that, hopefully, you love! When we have found that home, it will be time to make an offer. This is when the expertise, knowledge, training, and negotiating skill of your Realtor will really matter. A great Realtor cannot insure that you get this house you love under contract, but it sure will help. That’s why we made that Step #1!
What are the Essential Variables in my Offer?
Some terms of an offer are pretty standard based on the geographical area and the normal operating processes in place. Some examples of this would be that in Central Indiana, the Seller is generally asked to pay for the Owner’s Title Insurance policy and the Buyer will pay for the Lender’s Title Policy (the Lender’s policy costs substantially less, FYI), and the cost of a survey, if one is done, usually falls to the buyer. But there are many items that we must discuss and negotiate. Here are a few of the major decisions we will need to make:
- The purchase price you will offer for the house
- The date you want to close and when you want possession of the house
- Whether you will ask for the Seller to contribute any funds toward your closing costs
- Whether you want to ask for additional items not offered on the BLC sheet
- Whether you will ask the Seller to pay for a home warranty
- Any additional conditions that must be confirmed for you to purchase the home
These areas are all, in some ways, related. For example, if you offer a lower purchase price but do not ask the Seller to contribute to your closing costs your offer may be more attractive than one that does ask for this. Or, if you offer a quick close and are able to make a cash offer you may leap ahead of another prospective buyer who has more challenging financing and who can’t close for 45 days. These are areas where we negotiate. Let’s talk more about that!
When you are ready to make an offer, I like to call the Seller’s agent and let them know we are writing up an offer. I like to ask the agent if there are variables that are particularly important to the Seller. This is where we may learn that they don’t want to move until after Christmas, or that they really prefer a conventional loan, or that a fast close is worth a lot to them … and we take this info into our plans as we write.
I negotiate hard on your behalf, but I also bring a “win-win” mentality to this phase of our process. We remember, as we write, that this is not the END of our negotiation process because the big hurdle of inspection looms in the future. We want to be sure we win on some aspects of the contract, and we absolutely want to be sure we do not LOSE on any items that are truly important to us. At the same time, we want the Seller to get a few “wins” too as we will sit across from them again as we consider the inspection items. Getting an offer accepted is the first major hurdle of negotiation but we need to keep in mind that if we take all the wins now we will face a Seller at Inspection Response that feels they got burned in Round 1.
Keeping this principle in mind, we try to give the Seller something that we have learned matters to THEM while we also ask for things which matter to us. As an example, let’s imagine that you can’t close for 45 days because you need that time to terminate your lease and collect the funds you need for the downpayment, but we know the Seller really wanted to close quickly. It may be that, as we talk through this, you see that you might want to offer a bit more money as means to get the Seller to accept your longer time to close requirement. As you may see from this example, the dance is to find what is most important to each party and to allow some compromise on other items … “win-win.”
Other Important Parts of the Purchase Agreement
This is our one chance to lay down the map for our transaction – any changes after the PA will have to meet with mutual consent. So, here we agree to how many days we have to complete and respond to the inspection, how many days you have to start – and finish – your loan application, how many days you have to make application for homeowners insurance, and how many days you have to receive, evaluate, and agree to the terms of any condo or homeowner’s association. All of these deadlines are very important, and if we miss one we lose the chance to contest any of these areas. I will also have the “transaction calendar” and I will help keep you on track in meeting all these deadlines.
Dates certainly may change after the PA, but only for a reason and with agreement. An example would be that, if repairs can’t be completed by the agreed upon closing date, the closing can be delayed. The original dates are really important though because they keep the transaction on course toward closing. Missing one can sometimes provide one or the other party with an opportunity to no longer have to buy or sell the home – they are that important so we track them closely.
Finally, we will add to the standard contract any items that you want that weren’t initially included in the sale on the BLC sheet (an example might be that you want the chandelier in the dining room but they said they weren’t including it) or if you want something removed that they wanted to leave (an example might be that you want the old shed in the backyard removed before you take possession). One final thing we would add to our Purchase Agreement might relate to your intended uses for the property. As an example, if you only want the property if you can keep a horse on your back acre, we will make that a condition so that you are not required to buy if that turns out to be against rules we do not yet know about at the time we write the contract. We ask now so that these items are clear going forward.
Other Documents we Need to Make an Offer:
At the time write an offer, we will also review the State required Seller’s Disclosure document and you will sign off on it. On this form the Seller is telling you if they already know something isn’t working (i.e. here they could tell you that the dishwasher in the kitchen doesn’t work right now). It is crucial to review this document because if they disclosed it, you can’t ask later for them to fix it because you already knew the dishwasher was broken when you wrote the offer. We will also review the required Lead Based Paint Disclosure if the home is old enough to require one – this form simply informs you of any issues the Seller knows of or has been informed of related to LBP. You still have the right to inspect if they say they have no knowledge of issues here. We will also confirm that your Preapproval letter and attach it to our offer. Sometimes we will also attach a personal message to the Seller – this may be helpful if your offer is low but you would like to tell the Seller something personal that might help them consider you regardless.
Timeline with an Offer:
When we submit an offer, we ask for a response from the Seller within a certain window of time. While the market is brisk, it remains most professional to give Sellers a minimum of 24 hours to respond. We must remember that they may also be at work or out of town and it may take some time for them to consider fully all aspects of your proposal.
If we find we are in a multiple offer situation (when the Seller receives more than one active offer at a time) we may receive a request for “highest and best” offers. At that point you can leave your offer as is, raise it, change other terms, or withdraw. We will have no idea of the terms of the other offers as we decide how to respond.
If our offer is accepted, we will have a short period of time (usually 48 hours) to deliver your promised Earnest Money to the Agency representing the Seller – we will talk about that step next.