Making An Offer

There's a lot more involved in making an offer than the money. During this stage of the home buying process, you will have the opportunity to learn a lot more about the property.

You've done your homework, roadwork and legwork. You've found the home you want, and you're ready to make an offer. This is where it gets to be fun. Of course some people don't consider this fun but, we do. It all about what you know.

There are two parts to actually making an offer, preparing it and presenting it. Let's deal with these one at a time.

What's in the offer to purchase and contract?

We will want to carefully consider all the aspects of the home you selected , to put together an offer based on your evaluation of the property and the seller's asking price. We always run the comps and do a complete market analysis of the perspective home to insure that it is fairly priced. You'd be surprised how many we find that are priced too high. Not only do you not want to over pay but if the property doesn't appraise the deal can fall apart. You may end up offering a different price than the seller is asking or including some contingencies.

In any case, all the details of your offer are contained in a document that spells it out - The offer to purchase and contract form. In this document you will include what you are offering, how you expect to pay for it, and other significant details.

When the seller agrees to your terms (often after some negotiation) and signs the document, it becomes the sales contract. It becomes binding for both parties. We will give you a copy of your signed offer to purchase… be certain you understand the offer and you're happy with the terms. You can and should ask us any questions you have about the offer - before it becomes a contract. Once you and the seller both sign it, you're bound by it.

It's important that your contract proposal is complete, so pay attention too things such as:

The Price: If you don't think the home you want to buy is worth the full asking price, don't offer it. If the seller rejects your offer, you can always make another (unless it's so low you've insulted him or her). In a seller's market (i.e. there are few homes available and a lot of buyers) you may end up paying more than the asking price. We can guide you in making your offer.

When determining your offer, take into consideration the cost of any improvements or repairs you want to make.

Earnest Money (Deposit): You will usually be expected to deposit some money in an escrow account when your offer is accepted, and that amount will be spelled out in the contract. This money will be credited to you at closing. If the contract is voided you may possibly get your deposit back, though both the seller and you will have to agree in writing that the money can be returned to you.

We get asked all the time, how much earnest money do I need to put down? The answer is usually at least 1% of the purchase price. If you want to make your offer appear stronger, then 1.5 % to 2% can be very helpful in getting your offer accepted.

Another point to consider concerning earnest money is if you change your mind about the purchase without an acceptable reason, you will forfeit your earnest money check, at the very least.

Down Payment: The type of financing determines the amount of the down payment you expect to make. It is now possible to finance 100% of the purchase price for some homes. Here again, the mortgage brokers recommended in our referral section can answer all your questions about financing. They are great and the money is not our area of expertise. Ask the right question of the right person.

Contingencies: Contingencies are protection devices in the sales contract that allow either you or the seller declare the sale null and void under certain circumstances.

One of these is the Financing contingency. Simply put, if you can't get the financing to purchase the house, you are not obligated to buy it.

The Appraisal contingency states that the home must appraise for the sale price or you are not obligated to buy it.

The Repair contingency is one where you fill in the amount. For example if the inspection reveals that the house needs $5,000.00 worth of repairs and you had $2,500 filled in as a repair contingency, then you would not be obligated to buy the house even if the sellers agreed to complete all of the repairs. Most agents prefer that this number be high so a buyer can not back out of a contract easily. You can expect that the older the home, the higher the acceptable repair contingency fee will be. Typically an older home has more potential to need repairs than a new home.

Another contingency that a seller may accept (although not in a seller's market) is having the contract contingent on you selling your current home. Unless you want the possibility of owning two homes and paying two mortgages, you had better try for this one. Just be aware that this greatly affects your negotiating ability. It is difficult to ask for a lower price when you are asking the sellers to take a chance on your home selling. It may not sell when the sellers need to move and they will end up making additional mortgage payments. For just this reason, we always recommend that you have your house listed and preferably under contract before submitting an offer on a new home.

Don't get carried away. Frivolous contingencies, or too many contingencies, can kill the sale.

What Conveys? Convey is a term that means accompany or go with. In the case of any personal property that you want to include in the sale of the home must be written into the contract. This will help eliminate any misunderstandings. When in doubt, include the item in the contract.

Presenting the Contract: We will take your offer to the seller or the seller's agent for you. As your agents, we will discuss your offer and be able to get a feeling for what the seller may accept and/or negotiate. Once we have presented the offer, the following could happen:

• The seller may accept your offer as presented.
• The seller may totally reject your offer.
• IF the seller rejects your offer, the seller may then make you an offer (called a counteroffer).
• You then can accept or reject the seller's offer, and if you reject it, you can make another offer.

Remember we have been through a numerous successful contract negotiations and will usually be able to suggest strategies to make it work.

A repeated word of caution – Patience. Don't be rushed into anything by anybody, not even yourself. As we said at the beginning of this guide, buying a home is a really big deal. Take your time and do it right.

Once your offer is accepted, you have a binding contract for the purchase of your new home. The house cannot be sold to anyone else unless your contract is invalidated.

Now is the time to schedule the inspections, get your Mortgage Broker into action and schedule the closing with an attorney of your choice. We will assist you in scheduling the inspections and attorney, but you need to contact your mortgage broker right away.

The Inspections:

Home Inspection: Whether you are buying a condo, a previously owned home or a new one, you should consider having a professional home inspection. It costs money, but it is worth every penny.

A qualified home inspector (please look in our referral section for excellent home inspectors) will thoroughly examine the property. They are knowledgeable about major systems and can identify problems you may not notice. A home inspector can find problems that could be expensive issues later.

You are encouraged to accompany the inspector when he makes his inspection. He will also provide you with a written report when he is finished. In many cases he can estimate the costs to make the repairs he has suggested. You can assume that an inspection by a qualified home inspector will be a complete one, but don't assume the seller will agree to make all or any repairs your inspector recommends. It is at this point that we step back in and help. Often, repairs are negotiable and the purchase price may be adjusted to reflect the findings of the home inspector. The seller is not obliged to make repairs however, and may be perfectly willing to let you slip away rather than making any repairs or price adjustments.

If the seller refuses to make repairs, you must decide whether to take the house “as is” or move on. Either way, you're ahead of the game with a home inspection. It is money well spent whenever you are making a home purchase.

Termite Inspection: A termite inspection is highly recommended. You will pay for the termite inspection, but can then require the seller to remove any infestation that may be found, and repair any damage the termites may have caused, unless the home is being sold “as is”.

Radon Gas: Radon is an issue many people are confused about. We have spoken with many well known home inspectors that believe that it is not necessary to test for Radon in the Triangle region and do not perform the test. They reason that they have never found any Radon in this area. Our question is, if you never look for radon, how do you know it's not here? We highly recommend a Radon test on every home we help our clients buy. The test cost ranges from $100.00 to $150.00. We consider this a reasonable fee for such an important test. Just to let you know, we have found Radon several times and once it was as high as 28 pCi/L . For more information on Radon, please check this link: http://www.epa.gov/radon/

Do you need a Survey? We also highly recommend a survey. You would be surprised how many home owners don't know that the fence they built is really on their neighbor's property. One time we had to move a 12' X 14' outbuilding 26” to the right in order to get the deal to close. The outbuilding had been in that spot for 9 years and even the neighbor, whose property it was on didn't know it until the survey. Surveys are a good idea before buying your home. It makes good neighbors!!

Homeowner's Insurance Provider: You need to decide who will provide your homeowner's insurance at this time and we then deliver the information to the closing attorney. We can help you with this decision if you do not have a preferred company and have people in our referral section that provide outstanding service with homeowner's insurance. The attorney must provide this information to the mortgage company, who will require you to carry hazard insurance. You will be required to pay for one year of insurance at the time of closing.