Buying your first home – Step 5: the offer
Now that you have found the ideal home, it is time to make an offer and close the deal.
How much do you offer? – First you need to determine if the home is overpriced, priced right, or under-priced for the market. You should have a general idea of how the home’s pricing and value compares to the other homes on the real estate market you have viewed.
Next, you will want to sit down with your real estate agent and review the comps. The comps are comparable homes that have sold preferably within the last six months. If possible you want to compare homes with the same quantity of stories, sized 300 sqft larger or smaller, built 5 years later or 5 years earlier, and located in the same subdivision as the home you want to purchase. The comps will provide you with an idea of what similar priced homes have sold for.
The main thing you don’t want to do with your offer is to insult the sellers. Many a times I have been on the opposite end of the transaction representing the sellers and I can tell you from experience sellers do not take kindly to low ball offers.
As a buyer, you will ultimately get a better deal from the sellers if you present them with a reasonable offer.
Reviewing the Sellers Disclosure – In Texas all sellers are required by state law to provide a disclosure to the buyer. The disclosure identifies items known by the sellers about the home. After you review the sellers disclosure, you will be expected to sign the sellers disclosure acknowledging your receipt and review of it.
Items included in the purchase offer will be:
- Names of the two parties, buyers and sellers
- The physical address and legal description of the property
- Any fixtures to be excluded from the sale
- Sales Price
- Financing – type of financing buyer will be securing and whether the purchase is contingent upon the buyer securing financing.
- Earnest Money
- Name of title company who will be providing the title policy and which party buyer or seller will be paying for the title policy.
- Survey – whether the seller has an existing survey available or which party buyer or seller will be paying to provide the buyer’s lender with a survey.
- Sellers Disclosure – whether the buyer has already received the seller’s disclosure or if the buyer has not how many days the seller has to get the seller’s disclosure to the buyer.
- Residential service contract – amount of service contract buyer is requesting seller to provide.
- Closing date – date the closing will occur
- Possession – whether the buyer’s possession of the home will occur at the time of closing and funding or according to a temporary residential lease
- Special provisions – any details of the sale not covered in another section of the offer
- Amount of buyer’s closing costs to be paid by seller
- Addenda which are a part of the offer including the Third Party Financing Condition Addendum, Notice to Purchaser of Real Property in a Water District, and Mandatory Membership in a Property Owners’ Association. If you are concerned about the subdivision’s deed restrictions make sure you check box 1 which requires the sellers to provide you with the deed restrictions before closing.
- Option Period – amount of time seller grants buyer the unrestricted right to terminate the contract.
Items that will be accompanying your offer:
- Earnest Money – typically the amount is 1% to 2% of the sales price. The money will be credited towards your down payment or closing costs when and if you close on the home.
- Option Money – typically $100 – $250 fee made payable to the seller in the form of a check. The Option Money compensates the seller for giving you the unrestricted right to terminate the contract within a defined period of days.Your real estate agent will make a copy of your earnest money and option fee check to provide to the listing agent. Your checks will remain in your real estate agent’s file until or when the offer is negotiated out and becomes a contract.
- Pre-approval Letter – letter you received from your mortgage lender
If the quantity of items included in a purchase offer seems like a lot to you, you are right. There are a lot of terms to be negotiated between you and sellers of Spring Texas homes. After all you are making a major financial decision of deciding to purchase a home.
The Negotiations – Unless you are offering to pay the seller the list price for his home and all of the other terms favor the seller, the seller will counter your offer and the negotiations begin. Negotiating is an art form and some Realtors know how to create masterpieces and others well not so much.
There is no defined time frame for the sellers to respond to your offer. Sometimes the sellers respond within a couple of hours and sometimes a couple of days. Typically you should anticipate receiving a response to your offer within 24 to 36 hours.
The negotiations may go back and forth several times before buyers and sellers come to an agreement on all the terms. But sometimes the negotiations between buyers and sellers break down and come to a screeching halt. Neither party is willing to make any further concessions and eventually you may have to move on to the home that was your second choice.
Closing the Deal – Not until all the terms are in writing, both buyers and sellers have signed, and the agreement has an effective date is the home officially under contract. The fact that the home buyers and sellers have verbally agreed to terms means nothing. The home is not under contract until it is in writing.
In Contract, what’s next? – the first thing your Spring Texas real estate agent will do is deliver your checks. She will deliver the earnest money check to the title company. The title company will then deposit the earnest money check into an escrow account. The option money check will be delivered to the listing agent who in turn will deliver it to the sellers. Next your buyer’s agent will deliver a copy of the contract to your mortgage lender.
If you have missed one of the previous steps in our first time home buyers series, you can find them through the links below:
- Step 1 – Rent or Own? How to determine which one is for you.
- Step 2 – Why you should get Pre-Approved for a loan before you shop for a home.
- Step 3 – Which real estate websites to use in your search for a home.
- Step 4 – Get a Buyer’s Agent to represent you.
- Step 5 – Negotiating an Offer and closing the deal.
- Step 6 – The Option Period – what is it and what you do during it
- Step 7 – The Home Inspection – types of inspections, what they cover, and what they cost
- Step 8 – Getting the home insured
- Step 9 – The Survey and Appraisal – what are they and how much do they cost
- Step 10 – Deed Restrictions and Title Commitment – why you need to review them
- Step 11 – The Home Warranty – what is it, how much does it cost, and what does it cover
- Step 12 – The purpose of the final walk-thru and taking care of last minute items
- Step 13 – Closing Day – what to expect and what to bring with you
- Step 14 – Top 5 things to do after you have closed on your Spring Texas home