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Offers & Counter Offers

When you receive an offer on your home, it is important that you understand the entire contract and are comfortable with all the terms. While all contracts are different, they often contain standard terms that we will briefly review. Please use this for informational purposes only, consult with your attorney for all legal and contract advice.

Purchase Price

Probably the most important part for you. The offer will state the amount that the seller is offering to pay for your home. 

Earnest Money Deposit

This is a deposit made from the buyer to the seller to indicate that the buyer is serious and willing to purchase the property. Upon acceptance of the offer, the deposit is placed into an escrow or trust account. When the transaction is settled, the deposit is applied toward the buyer's portion of the remaining costs. Laws vary as to what happens to the deposit if either party should fail to perform on the contract, please contact your attorney to advise on your specific situation.

Contingencies

The offer will probably come with several contingencies, which is typical on a real estate transaction.

Mortgage Contingency

The offer will probably be contingent upon the buyer obtaining and accepting a mortgage to finance the property. The offer letter should state the mortgage amount they are looking to obtain, and a date by which they will obtain their mortgage commitment letter. This contingency means that if they fail to obtain the loan, they can back out of the transaction without penalty.

Sale Contingency

Does your buyer have a home that they need to sell in order to purchase yours? If not, they are a very strong buyer! If they do have other property to sell, when they make an offer on your home it will state in the contract that the offer is contingent on the sale of the other property. This means that if you accept the offer, you agree to give them a specific amount of time to get and accept an offer on their property. This is very common however it can cause issues for you if their home will not sell.

Once you accept a contingent offer you can still show your home to other buyers. If someone else makes you an offer and they are not contingent, depending on the terms of your contingent contract, you may be able to bump the contingency and accept the non-contingent offer. To do this you usually need to give the contingent buyer notice and an opportunity to remove their contingency instead. If they do not do this in the time allowed, you may cancel the original contract and proceed with the new buyer. Note that you cannot accept a second contingent offer, even if it is better, once you have accepted a contingent offer.

Attorney Approval

The offer may be contingent on the written approval of attorneys for the buyer and seller. The attorney will review the terms of the offer and approve, or recommend changes prior to approval.

Inspections

The offer may be contingent on the completion of certain property inspections, such as: Engineer's, Radon, Chimney, Pest, HVAC, Electrical, Plumbing, Lead, Pool/Spa, Roof, etc. If one or more inspection contingencies are indicated on the offer, they will be performed after the offer has been accepted. Once accepted, the buyer will work with the seller to schedule these inspections at the home. They will expect the home to be opened so the inspection can be performed. Once the inspections has been performed, the buyer will provide the seller with either an inspection contingency removal, or a list of items that they request the seller addresses before the sale. It is up to the buyer and seller to negotiate any objections that have arose from the inspections.

Timeframes

The offer will contain a few important dates you must pay special attention to.  First, it will contain an expiration date. Offers are usually valid for 24-48 hrs. Second, if the buyer is obtaining a mortgage, it should indicate the date by which the buyer should have secured a mortgage commitment letter. Next, the offer will have a closing date. Note that actual closing dates may vary depending on a variety of factors, but this should give you a good indication of the buyer's intended closing date.

Counter Offers

So what if you receive an offer that you are not happy with? You have every right to modify the existing offer and send it back to the buyer. You can change anything including purchase price, terms, etc.


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