Offers Are More Than Price!

Making an offer on a house (or receiving one) is much detailed than you might think! You see, an offer on a property contains so much more than just a price. First time home buyers might be surprised at all these negotiable items you must decide to include in your offer on a home. Experienced home buyers may realize that the devil is in the details.  While purchase price will always be the focal point of an offer, there are plenty of other details you should be aware of .

First off, understand that an offer is also a contract.  When you submit an offer, you are drafting a contract to purchase the home.  By signing, you agree to the terms as long as the seller also agrees. So for terminology sake, before the seller accepts the document, it’s an offer.  Once they accept it, it’s now a contract for purchase, got it?

When you make an offer, one condition you get to select is your desired Close of Escrow (closing date – the day the home becomes officially yours) While not a direct monetary condition of the offer, sellers may need time to pack, find a place of their own, or need to close by a certain date for a myriad of reasons.  Typically, you will select a day 30-45 days from your offer, but it can commonly change with the circumstances of the transaction, so be ready in case it does!

Earnest Money/Earnest Deposit is an amount of money submitted with an offer in order to show in good faith you have every intention of purchasing the property.  This money will be applied towards your down payment which will be due later on.  This money is refundable most commonly if A) you back out during your inspection period, or B) your financing falls through.  The amount of the earnest deposit is typically around 1% of the purchase price.  However, this can often be used as leverage.  Increasing the deposit shows the buyer is serious and capable of purchasing the property. If you decide to back out of the transaction due to a change or heart, this money will be forfeited to the seller!

Appliances can be included in a purchase contract.  By default, all built in appliances are included with the property on the standard purchase contract. Also included are all items permanently affixed to the wall (see list below)  Additionally, the seller may be offering the refrigerator, washer, dryer, soft water system or other “personal property” with the sale.  If these items are important to you, make sure they are on the contract, never assume they come with the property!

 

HOA Fees are mostly negotiable.  The seller is required to pay for the HOA disclosure fee by state law. However, transfer fees, and capital improvement fees may be required to be paid to the HOA. A separate HOA addendum is used to identify the fees and select in your offer if you plan to pay them, or you are asking the seller to pay for them.

Seller Concessions are funds from the proceeds of the sellers applied towards your closing costs.  Closing costs consist mainly of loan fees and title/escrow fees. It is relatively common practice to ask for anywhere from 1%-3% for seller concessions. This doesn’t mean every transaction will have seller concessions by any stretch.  It completely depends on how the home is priced, the type of home, the price range, the market conditions, etc. Keep this in mind when making an offer: In the SELLERS views an offer of $500,000 on a home with 3% seller concessions as the same as offering $485,000 with no seller concessions.  At the end of the day, the seller cares about how much they will NET profit from the sale, not the actual purchase price. As a buyer, if you lack up front capital, you may need these concessions to help pay for your closing costs.

Home Warranty Home warranties have become commonplace in a home purchase. What happens when you move into a home, and 2 weeks later the A/C goes out?  Who do you blame? The inspector? The seller? The agent?  Unfortunately, none of them can take the fall for you.  For this reason, it is always recommended to get a home warranty in place to cover any major system failures.  Home warranties are ordered during escrow, and charged to either the buyer or the seller depending on the contract.  Although completely negotiable, often sellers are willing to pay for this in good faith to their buyers.  If a seller won’t pay for it, you should still buy it!  Home warranties range from $300 upwards of $1,000 a year depending on the size, year, and coverage level you select.

Addendum’s can be used in conjunction with an offer for various reasons. They can play a strategic role in your offer and how the seller views it.  For example, a home buyer that may be planning a total renovation does not want to pay top dollar for a home, since they will be redoing it anyways. In this case, it would be wise to use an “As-Is Addendum”.  This means the buyer will not require the seller to make any changes or costly repairs to the property.  If a seller knows some repairs are needed, they may be willing to take less on their purchase price if the buyer agrees to not demand any repairs by using an “As Is Addendum”

The moral of the story here is there is so much more than the purchase price of a contract.  There are many faucets of the transaction that should be evaluated to make a winning deal. In reality, there are many more options that can go into a contract, but these are the biggies! Make sure your Real Estate Agent knows the contract well and fights for not only the best purchase price, but the best terms to boot!

 

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