Home Buying Offers and Contracts: Part 1
Offers & Contracts on Home Buying
by George Bogosian
Making an offer on a house is one of the most exciting aspects of this journey you will go on. Your heart starts to beat a little faster. Stress levels will increase in intensity!! Usually your Realtor who has the necessary contracts, but not necessarily, implements this process. Your can also do this on your own with the use of a ready made contracts and knowledge and experience. Stationery and office supply stores offer various contracts ready made for your use. Many people who are engaging in some form of creative buying or financing with the buyer will have various contracts to use depending on the arrangements. This arena is for the experienced with a good grasp of financial variables. Some basic arrangements might call for the seller to receive the down payment over an extended period of time.....or taking on the entire mortgage. These are financial arrangements that go beyond our scope of our coverage on the topic. Robert Allen has some interesting things to say about Real Estate in his books, Nothing Down and another called Creating Wealth. Allen’s books deal mostly with investing in Real estate, but that is really what you are doing.
Most sellers do not get their full asking price. So, how much should you offer?
If you’re serious about a house don’t low-ball a price at the seller. It damages your credibility as a buyer and may hurt you later in the negotiating process. The existing market condition determines what is likely to be accepted by the seller. If a house has been on the market for more than six months and the owner is feeling the pressure to sell, you are probably in a better negotiating position. A home new to the market in a desirable area, well, your bargaining power may be minimal. You can’t ask you Realtor what to offer or what the seller might take, because they are working for the seller. Remember, realtors are obligated to inform the seller of your intentions. You could ask you Realtor for a recent list of comparable sales which also includes the asking price. That will give you an idea of sale activities and prices in your buying area.
The national average is for buyers to offer around 5% to 15% less than the asking price. But various financial cycles can change this number and whether or not you are buying in a hot or a depressed market can greatly affect this number. If the seller accepts your offer you’re on your way to a making a deal. But, usually the seller will come back with a counter offer that you can either accept or reject. You could return a counter offer to that offer. Be careful in this game of offers and counter offers because you could lose the house that you really would like to purchase. The seller can walk away from this bargaining table at any time and deal with a new buyer and a new offer....if there is one. This is the ultimate game of cat and mouse because both parties have much to win or lose. Remember, deals that close are deals that work for both parties. The old win, win adage should be at work in this situation. If you really want the house be reasonable in your bargaining.
If there are difficult and confusing arrangements, foreclosures, domino sales, etc., then using a lawyer to complete this purchase and sales agreement is prudent advice.
Many people will use a lawyer knowing that their best interest is looked after. Using a lawyer is an option and varies around the country so take the advice of your agent and yourself. If a lawyer is used be sure that the legalese is not written in such a way that no seller would sign the contract. This has happened many times, so be sure that you are not so protected that no seller would agree to the terms. Many folks feel that the lender lawyer used in preparing the deed has worked to protect them. The lender also has a title search done to be sure you are buying the property from the rightful owner. Do what you are comfortable with doing in this case. We’ll leave the lawyer jokes out, but using a good real estate lawyer or competent agent is good advice.