Now that you and your agent have found the "perfect fit", it's time to discuss the terms of your offer and put them into writing. There is a strategy to forming these terms in a way that look out for your best interests, as they all impact one another, and ultimately... you!
Before we review some of the major elements of the Offer to Purchase Contract, take a minute to look at its entirety. This the main document that you will complete with your agent to purchase residential property. There will be additional documents to accompany it, depending on both the property, the sellers' situation and your situation, but we will keep it simple for now. After you have reviewed, refer back to these items:
"What is the property worth to me and the market?"
This value is based off of your interpretation of the information provided to you by your realtor - including extensive property research, disclosures and a Comparative Market Analysis which is an estimate of the property's value based on the closed price of similar homes in the area.
DUE DILIGENCE FEE:
"Thank you, seller, for taking the house off the market while I do my inspections, order an appraisal, get quotes, etc."
As a buyer you are risking money and time for the ultimate right to control a property. The seller is risking the opportunity cost of limited market exposure and squandered selling time. There is no standard dollar amount - it is whatever number both parties can agree on. This fee is NOT REFUNDABLE, though it will be credited back to you at closing if you follow through with the transaction.
EARNEST MONEY DEPOSIT:
“Dear Seller, this deposit is to show you that there is no intention of backing out after the Due Diligence Period.”
In essence, you are telling the seller you are serious about buying the home and are willing to risk a deposit to demonstrate your sincerity as you work through the contract-to-closing process. Typically, this deposit is held by the attorney, or sometimes the brokerage firm, in a designated Trust Account until a contract termination or the settlement date
DUE DILIGENCE DATE:
“During this time, I will do everything necessary in order to have peace of mind that I want to move forward with the purchase of this property”.
You need to be able to make an informed decision about your ability and desire to complete the transaction on or before your Due Diligence date. Typically, this date is at least a few weeks after the Effective Date (when the contract has been signed by both parties) so that you have time to get results back from inspections, negotiate repairs, finalize financing, etc. This date should also be at least 7-10 days before the settlement date so that there is time for packing and relocation plans of both parties. Up until this date at 5pm, for whatever reason, if you as the buyer decide to back out of the contract, you will be refunded your Earnest Money Deposit. If you back out on this date at 5:01pm or later, then this deposit will be given to the seller.
"Is it more important to me to have more cash on hand after closing or a lower monthly mortgage payment?"
Closing costs are paid on the day of settlement. This final number is an accumulation of attorney fees, lender fees, homeowner fees, adjusted taxes, etc. plus any unpaid invoices from inspections and services completed during/after the due diligence period. On the Offer to Purchase Contract you have the option to ask the seller to pay for any amount of your closing costs. The reason you may want to ask for this is if you won’t have a few thousand dollars cash available on settlement day to cover that total. Typically sellers don’t mind agreeing to this if the requested amount of closing costs is considered in the offered purchase price. So, you can ask for closing costs in order to have more cash on hand after closing but you’ll most likely have a higher monthly mortgage payment since the purchase price will be higher. The other reason you may ask for seller-paid closing costs in the original offer is to consider the cost of a known necessary repair or maybe a large repair is discovered during due diligence.
CONTINGENCIES / ADDENDUM:
"What events, requirements, etc. would prevent me from following through with the transaction?"
Depending on your situation there may be some things that could prevent you from being able to close on a property. For example, maybe you have to sell your current home in order to have the funds to purchase the new one under contract. It is also possible that your type of loan/program may require specific repairs to be done after the home inspection is reviewed. Maybe you make your offer contingent on the seller making a certain repair that you are already aware of at the time that you make the offer. Depending on your loan/program, there may also be necessary addendum to include - for example, using an FHA or VA loan requires that you include an FHA/VA Addendum, or if the house was built prior to 1978, then a Lead Based Paint Addendum would be required.
"We made it to Closing Day!"
Remember that this date should ideally be 7-10 days after the Due Diligence Date has expired. Today you do a final review of your Closing Disclosure / Settlement Statement, which you will have reviewed with your agent a few days prior. After the seller has signed their documents and once all documentation has been signed by you in regards to your loan and the sale of the home, and you have also paid your closing costs, the property title will be transferred to you and then they keys are yours - welcome home!
* * *
Again, there are of course many other terms and documents to discuss in addition to these. Everyone's transaction is unique - let one of our professionals walk you through your personalized buying journey! GreatNEST buyer’s agents will carefully and confidently guide you to your perfect home - guaranteed. Our agents are full-time professionals who work in, and live in, our market. Whether you are new to the area or a life-long resident, you need help with financing, or have very specific housing needs, our experienced and friendly agents will help. Work with a GreatNEST professional buyer’s agent and buy with confidence. Ask about our LoveYourNEST Guarantee, FirstNEST buyer service, and our NESTAdvantage Power Program.
YOUR NEXT STEP: CONTRACT TERMS & WRITING AN OFFER
Schedule a virtual consultation and get one step closer to making your next real estate purchase a reality with the guidance from one of the triad's top agents!