Making Real Estate Offers Explained
Hello readers and followers, back today to talk about what goes into making real estate offers but simplified and thought I'd throw in some other tips and links for home buyers to check out.
Think of making a real estate offer like a relationship. The first step is getting ready to propose and then the proposal itself and hope your offer is accepted.
On that note, getting ready for the proposal requires some due diligence. Here are some handy articles all home buyers should read before making real estate offers:
For making real estate offers, Realtors use a variety of similar forms and they vary from MLS territory to MLS territory and are frequently updated to reflect changes in real estate law and practices. MLS is simply the acronym for Multiple Listing System and by far the most accurate and up-to-date data base of real estate listings. Zillow is a great place to find a buyer's agent with good reviews, but to answer the question are Zestimates accurate? - No.
Along with the basic real estate offer and contract, sellers are to provide a proper property disclosure, however, this is why savvy Realtors advise home buyers to never skip a home inspection even on a newly built property. Just because the seller's property disclosure looks and smells good doesn't mean there aren't issues. A Realtor acting as a buyer's agent will make the real estate offer contingent upon satisfactory inspection and if unsatisfactory the buyer can withdraw, retain their earnest money or begin renegotiating.
For home buyer confidence and consumer safety, real estate offers naturally address legal requirements but should include the terms and conditions, contingencies and anything agreed upon between the seller and buyer. For example, the seller may help cover all or part of the closing costs, include or not include the appliances, provide a carpet or paint allowance or perform any level of repair or updating deemed accepted to meet the buyer part way on the transaction.
You've heard the real estate maxim "location, location, location" but equally important in real estate is "get it in writing, get it in writing, get it in writing" and then get it signed by all parties involved as provided on the real estate offer forms.
What is Included in a Real Estate Offer
If you're basic offer is accepted, you now have a binding purchase agreement, a contract. It's critical that a real estate offer to purchase include all the necessary and protective elements for the buyer and the seller's agent is likewise going to check and protect their client too.
Here's a list of what is typically included in most real estate offers for residential property:
- Sales price and earnest money. Earnest money is simply a good faith sum to demonstrate to the seller your "earnestness" about purchasing the property. Here in the Midwest a typical amount is $500 but can range higher, even much higher for multi-million dollar luxury homes. If your offer is accepted, the earnest funds are deposited into the buyer's agent brokerage's escrow account for safe-keeping. It's returned to at closing, but you can lose if if you back out of the contract for no good justifiable reason. Justifiable is subjective and must be demonstrated by the way.
- Terms of purchase. The real estate offer should clearly show if the offer is financed with a mortgage, the down payment and type of home loan or if the real estate offer is for cash.
- A time limit for which the real estate offer will expire.
- The seller's promise to provide clear title. This one is very important too, but also brings up the subject of title insurance. As with home inspections, wise Realtors always advise buyer clients to purchase a good, reputable title insurance policy. You could lose part or all of your property without it.
- The type of deed that will be granted at closing. There are many different types of deeds and most commonly used is the general warranty deed. This provides the greatest conveyance and protection to the buyer for including warranties or covenants that sellers convey with title. Laws regarding general warranty deeds differ on deed creation but typically the specific language used dictates the type of warranty particularly the words "convey and warrant" and "warrant' generally.
- Provisions including property taxes, rents, utilities, fuel and water bills and how they will be adjusted, prorated and who will pay for what between the buyer and seller. The provisions can also and often should include who pays for title insurance, surveys if needed, termite, radon and whole house inspections. A final walk-through is also a very important provision as buyers are sometimes "left holding the bag".
- Contingencies are one of the more crucial things that make or break a real estate offer. A real estate offer may be contingent on the sale of the buyer's current home before closing on the new property for instance. One of the most protective contingencies are real estate offers that include satisfactory home inspections. There should also be a clear and reasonable time limit for home inspections if you want to keep the seller's interest. Keep in mind, the type and number of contingencies can protect a buyer, but also hurt a buyer's chances of getting an offer accepted
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