So you've found the right home, the next step is to write an offer. Your offer when written in the form of a contract, begins the negotiating process with the seller. It helps to thing of the sellers potential reaction to everything you put into your offer because, your goal is to get what you want and considering the seller’s reactions will likely help you get to that goal. There is more to making an offer than just saying what you'll pay. When such large large dollar amounts are involved, both you and the seller want to make sure there are protections and contingencies in it to protect you and minimize risk. So you not only include the price, but other details as well. Including financing terms, who pays closing costs, inspection details and timelines, any personal property included in the offer, repairs, possession, cancelation terms and in case of a dispute – mediation details. You can see it is definitely not like buying a car and much more important. It's a big deal, for both parties. It affects your finances more than any other purchase or investment you make. Its more than money, though its where and how you live for a long time. That may be overkill, but it is true.
Contingencies in a Purchase Offer
Most of the time purchase contract go smoothly with a small encounter or two. You do want to expect possible issues that might arise, that way if you need to cancel the transaction, you can do so without penalty. This protection is called a contingency and it is necessary to include them in your purchase contract. You may find a home you like before your current home sells. In this case you would write the offer with the condition that your home sells and closes first. Some other common contingencies are getting financing completed, the purchase price meeting the appraisal price or that it passes inspection. The important thing is to include them because contingencies protect you. If you cancel a contract without having them, at minimum you could lose your earnest money,or worse.
Earnest Money Deposit
Earnest money is a deposit you place on the property and shows the seller how serious you are. You can expect to at least place 1% of your offer price down as a deposit. You want it to let them know you are serious but not be so much that you have a lot to lose if the transaction fails. There are exceptions to every rule but the thing to consider is the amount of it is important to the seller and indicates how strong of a buyer you are, this could sway them to accept your offer over even another that might be lower.
The Closing Date
You must place a closing date in your offer. This helps both parties plan for the move, and helps the seller also make plans for buying their next home. Consider being flexible that it creates problems, most transactions do close on time, but inflexibility can make things hard if it happens not to. Having back up plans is wise should your closing be delayed.
You do not actually own the home until the transaction is "closed and funded", this happens when both parties have signed all documents pertaining to the sale and the buyers funds have been received by the title company. Sometimes this does not happen on the same day. Because of this it is smart to allow the seller up to three days to move out and give you actual possession of the property. This should be clearly stated in your offer and is typically done through what is called a Sellers Temporary Residential Lease Back.