Step 8: MAKING AN OFFER AND GETTING ACCEPTED
Once you’ve found the home, you need to make an offer.
Preparing to Make an Offer
An agent can help you prepare an offer for the house. This usually involves a plan designed by your real estate agent to help negotiate any hinderances that might arise. There is always give and take during a deal. What an agent can do is help you premeditate the obstacles, to help alleviate the unnecessary frustration that can effectuate from negotiations.
As a first time buyer, the experience can be intimidating, and the process can be confusing. A little bit of preparation goes a long way in alleviating the headache.
Your agent should be able to tell you the general market conditions in California (is it a “buyer’s market” or “seller’s market”), and provide specific information about recent sales. Consider the asking price; how long has the property been on the market and whether the price has fluctuated during that time.
Walk through the home. If anything stands out, make sure to take note. Look at the age and condition of the home. Have your agent talk with the seller about repairs.
You should also spend time in the neighborhood. This will be your community for at least a few years, which will affect your overall quality of life. Are the people friendly? How does traffic flow? Do people take care of their yards? It doesn’t hurt to talk to a local police department about crime rates. Don’t hesitate to ask questions.
Before you make the offer, make sure you and your real estate agent are in agreement on your top priorities. After that, figure our the seller’s priorities.
Negotiating the Offer
Negotiating can be the trickiest part of the home buying process. It starts when your agent contacts the seller’s agent, and takes place between the time when the offer is submitted and when it’s accepted.
By researching the market, neighborhood, condition of the property, and the value of the home, you will be able to negotiate the best deal. Having a high caliber real estate agent will help with this as well. Your agent should communicate with the seller’s agent to understand their priorities as much as possible.
Here are some key elements in the purchase agreement that will be part of the negotiating process:
- Purchase price
- Closing and possession dates
- Length of the inspection period
- Amount the buyer asks the seller to pay for closing costs
- Earnest money deposit
- Whether or not the earnest money deposit is refundable (amount and timing of refund is part of the negotiation)
- Fixtures and personal property
- Appraisal
- Title and escrow company
- Home warranty
- HOA-related fees
- Repairs
Making an Offer
When you are ready to make an offer, your agent will prepare the documents. Review these documents tio make sure they properly align with your best interests. Sign the purchase offer and your agent will present it to the seller and their agent, along with your mortgage pre-approval letter. Usually, the seller will have a few days to make their decision.
Here is a sample of the most commonly used residential real estate purchase contract in California.
Once the purchase offer is signed by both parties, it becomes a purchase contract. This is a legally binding agreement. Breaching the contract means you will lose an earnest money deposit, and could lead to a lawsuit if the seller believes the breach has caused him or her to suffer losses. As such, any changes in a buyer’s circumstance must be articulated to the seller.
There are two common contingencies in California residential real estate that buyers can use to back out of a contract:
- Loan Contingency – This allows buyers to cancel the contract and get their earnest money back if the loan is declined up to 3 days prior to the escrow close date.
- Appraisal Contingency – This allows buyers to cancel the contract if the appraised value of the home is lower than the purchase price.
The Seller’s Response to an Offer
After the offer is presented to to the seller, her or she can:
- accept the offer
- make a counteroffer
- reject your offer
Congratulations! The Offer Was Accepted
As stated above, once you and the seller have agreed to all the terms, the signed purchase and sales agreement become a legally binding contract. Follow through with all terms of the transaction.
You will most likely put down an earnest money deposit after making the offer. This shows your commitment to buy, and is essential in a competitive real estate market. The deposit will be held by an escrow/title company until the loan is closed. It can then be applied towards the total cash required to close.
Most homes will close within a month after an offer has been accepted. Use this time to take care of any necessities before you close on the home.
What is a Counteroffer?
A counteroffer is when a seller likes some of the deal but not all of it. It rejects your initial offer and presents you with different parameters. Usually, this is in regards to the purchase price. Other issues include ownership of personal property such as appliances, repairs, and close of escrow date.
Here is a sample of a counteroffer form in California.
Buyers will need to consider the counteroffer and either accept it or respond with a counteroffer of their own. Seek the advice and assistance of your real estate agent.
Dealing with Rejection
The seller might outright decline your offer and accept someone else’s. This is frustrating. Do your best to move on and continue your home search.
Legal Disclaimer
This home buyer series is intended to provide general information regarding the process of how to buy a house in California. It is not intended to provide buyers with legal, accounting or financial advice. You are advised to seek the services of a skilled professional this those fields.
Additionally, this home buyer series does not set forth all qualification criteria for any of the loans described herein; all interested persons must successfully meet qualification criteria and complete the application process to obtain such loans.