Buyers - Putting an Offer on a Home

For some, this is a stressful experience. After all, you and the seller may not be able to come to an agreement and you won't get your dream home. There are eight basic elements to an offer and there are various offer strategies that you may want to use during your negotiations.

When you've found your home, you will make a formal, written offer to purchase. This is a legally binding contract outlining what you will give (a combination of price and terms) in exchange for the home. Your associate will probably use a pre-printed form covering all of the legalities and will modify it to cover what you want to offer.

Remember, everything is negotiable. You should ask for what you want, but keep in mind what you're willing to give up. Your RE/MAX associate will put everything in writing. Of course, the more contingencies in your offer, the less attractive it will be to the vendor. In a buyers' market, that's OK.

The vendor may counter your contingency with an escape clause. For example, the vendor may wish to continue showing the house and if they receive another offer, you'll have the option of backing out or removing your contingency.

The Offer Can be Firm or Conditional
A firm offer means that you are prepared to purchase the home without any conditions. If the offer is accepted, the home is yours. Although a firm offer to purchase is usually preferable to the seller, if you are unable to close you will lose your deposit and may get sued. Take time to confirm your financing and to think twice about the investment.

A conditional offer to purchase means that you have placed one or more conditions on the purchase, such as subject to home inspection, financing or sale of your existing home. The home is not sold until all the conditions have been met.

Acceptance of the Offer
Your offer to purchase will be presented as soon as possible. After the seller has reviewed the offer, it may be accepted as is, rejected, or returned with a counter offer.

The counter-offer may be in reference to the price, the closing date or any number of variables. The offers can go back and forth until both parties have agreed or one ends the negotiations.

It is best to know your absolute upper limit before you begin negotiations, so that in the heat of the moment you don't end up with a home you really can't afford.

1. Basic Details
This includes the address and legal description of the property, and the names of the vendor, purchaser and brokers involved.

2. Price
Depending on the market conditions, your opinion of the value of the home and the information provided by your RE/MAX Associate, the price you offer may be different from the seller's asking price.

3. Chattel - Inclusions and Exclusions
Items within the home that will be included in the purchase price such as appliances, fixtures or decorations such as drapes or mirrors are referred to as chattel. Don't assume that anything will be left behind. If you want it, put it in writing.

4. Deposit
The deposit shows your good faith and will be applied against the purchase of the home when the sale closes. Deposits are usually no more than 3-5% of the purchase price, but a larger deposit can show the vendor that you're serious. Your RE/MAX associate will advise you on the appropriate amount, and you may wish to stipulate that some interest be paid on it in the meantime.

5. Terms
These include the total price of your offer as well as the financing details. You may arrange your own financing or may ask to assume the seller's mortgage, especially if it has an attractive interest rate. There will also be an expiration date and time after which the offer is no longer valid.

6. Conditions
These might make your offer subject to home inspection, to your obtaining financing or to your selling your property.

7. Closing or Possession Date
Generally, the date the title of the property is legally transferred and the transaction of funds is finalized between 30 and 90 days from the date of the offer. This is often a good negotiating point as vendors usually have a fixed date in mind.

8. Request for a Current Survey of the Property
If the vendor does not have one, you may wish to make one obtaining a land survey a condition of the closing. In most cases, the vendor will not pay for a new survey. As discussed earlier, you can ask the vendor to provide a "Declaration of Possession" or you could buy a "Title Insurance" policy instead. If however, you are planning to add to the house or build a garage, the best idea is to request a new survey - you'll likely need it to get your building permits.

When it comes time to determining the dollar amount of your offer, your RE/MAX Associate can provide information on the prices of similar homes that are currently on the market and those that have sold recently in the surrounding area. Then you'll be better prepared to make an informed decision.

Find out how motivated the seller is. The house may have been on the market for quite some time and the vendor may have other obligations. Find out if the asking price has been reduced. It's also good to know when and for how much the vendors purchased the home. Vendors who have accumulated considerable equity will be willing to bargain more than those who may be faced with an overall loss.

You'll probably wish to make an initial offer that is lower that what you would actually be willing to pay.

Once you have decided on the initial price, terms and conditions, your RE/MAX Associate will communicate your offer, sometimes known as an offer to purchase to the seller, or the seller's representative, on your behalf.

If the seller accepts the offer, congratulations, you're the proud owner of a new home! If you don't hear back, the seller has rejected the offer. You may want to make another one, or simply look at other houses that interest you.

Most often, you'll receive a counter to your offer. You can choose to accept it, or respond with another counter offer. This process will continue until one side accepts or quits.

Reminder: The home inspector does not pass or fail the property.

The deposit shows your good faith and will be applied against the purchase of the home when the sale closes. Deposits are usually no more than 3-5% of the purchase price, but a larger deposit can show the vendor that you're serious. Your RE/MAX associate will advise you on the appropriate amount, and you may wish to stipulate that some interest be paid on it in the meantime.

Choose the Strategy That's Best for You!

• The "How Low Can You Go" offer
• The "I've Got to Have This Home" Offer
• The "Poker" offer

The "How Low Can You Go" offer is contingent on you not having an emotional attachment to the property you intend to purchase. In a buyers' market, you may find a few homes that catch your interest and you may want to make a lowball offer. This is usually significantly less than the asking price. Lowballs only succeed if the seller is desperate. You may receive a counter offer, but more often than not, the seller will feel insulted and ignore your offer.

We may advise you against presenting such an offer, but will pass it along to the vendor.

The "I've Got to Have This Home" offer usually happens when buyers fall in love with the home and want to present their best offer first. This offer leaves no negotiating room, but if the market is hot, it's an offer that will attract attention. Your RE/MAX associate will convey to the seller that this is your best offer. Most sellers expect to receive an offer and counter with another, so you may find yourself in a situation where you either accept the counter offer, or walk away from the home.

The "Poker" offer usually arises in a sellers' market where buyers find themselves in a bidding war for the property. If you find yourself in this situation, all of your negotiating strength will be lost. You have the choice to raise the bid, or fold and move on.

The power of waking away is a formidable one, especially when no one else is competing against you to buy the house.