Once you have your finances in order and have received assurances that you can qualify for a mortgage, you can start looking for a home in earnest. Sellers generally put a price on the property that is 5 to 15 percent higher than the amount that they actually expect to receive. Therefore, you may want to make an offer to buy that is somewhat lower than the asking price. Perhaps $10,000 to $30,000 is at stake here
Make an Offer to Buy
Make an Offer to Buy
The written offer to purchase real estate is called a purchase offer (or an offer to purchase). Of course, you will specify a price, but other aspects of the sale may be included in your offer as well. Examples of conditions include successful termite and radon inspections; a home inspection of the plumbing, heating, cooling, and electrical systems; and inclusion of the living room drapes and kitchen and other appliances. When you make an offer, you need to give the seller some earnest money as a deposit; 1 or 2 percent of the purchase price should be sufficient to show your good faith when making an offer to purchase the seller’s property. This money is returned if the seller rejects the offer.
Respond to a Counteroffer
Respond to a Counteroffer
Most home sellers do not accept the first offer from a prospective buyer. Instead, they usually make a counteroffer, which is a legal offer to sell (or buy) a home at a different price and perhaps with different conditions from those outlin] ed in the original offer. You can assume that a seller who is willing to make a counteroffer may also be willing to sell at a slightly lower price. Thus, if you make a counteroffer falling between the two prices, a sale will usually result. Of course, if you push the seller too far, you risk having the seller back out of the negotiations altogether. Plus, while you are negotiating, the seller could be receiving offers from other prospective buyers. In some hot real estate markets, buyers compete with each other by offering sellers morethan the asking price. In such a scenario, the highest bidder wins.
Negotiate and Sign a Purchase Contract
Negotiate and Sign a Purchase Contract
A purchase contract (or sales contract) is the formal legal document that outlines the actual agreement that results from the real estate negotiations. It includes the final negotiated price and a list of conditions that the seller has agreed to accept. When the purchase contract is signed, the seller keeps the earnest money as a deposit. You want to make sure that your earnest money is protected by including one or more contingency clauses in the purchase offer. These clauses specify that certain conditions must be satisfied before a contract is binding. One recommended clause would stipulate that the seller must refund the earnest money if the buyer cannot obtain satisfactory financing within a specified time period, usually 30 days. Other important contingency clauses should allow the buyer to opt out of the deal if the home fails to pass certain aspects of the home inspection (for example, the inspection uncovers a major structural defect). Of course, if at this point you simply change your mind ] \ \ about buying, you will forfeit your earnest money and may be sued for damages.
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