STEP 3 – MEET WITH YOUR REAL ESTATE AGENT TO WRITE UP A SALES AGREEMENT
So you have found a house and are interested in making an offer on it. Your realtor has provided you with the market data so you have a good idea of its actual worth and how much you should offer. What do you do next? You contact your mortgage specialist right away and provide the property information and how much you are considering offering. You do this to get an up-to-date cost estimate detailing how much your monthly payment will be and how much you will need for closing. NOW you are armed with the information needed to write up your offer. When writing up the offer there is a lot more to decide then just how much you money
Major items to consider when writing up a great sales agreement:
- How much hand money do you want to put down? Hand money is your deposit and it is held in escrow in the real estate broker’s office. It shows how serious you are about your offer. With all other things being equal, an offer with $5000 hand money would be interpreted by the seller as a stronger offer than one that comes in with only $500 hand money.
- Do we need for the seller to pay any of your closing costs (seller’s assist)? It is very common to ask for the seller to pay for some (or all of your closing costs). It comes off of their bottom line. Seller’s assist is a tool where you try to buy your house and finance some or all of the closing costs, allowing you to get into the house for a minimal amount of out-of-pocket cash. If you aren’t sure if you need seller’s assist to qualify for your mortgage, make sure you discuss this with the mortgage specialist before submitting your offer. For example, if you write up your offer at $100,000 and you ask the seller to pay 6% towards your closing costs, you are, in effect, offering the seller $94,000. This however, isn’t the same as offering the seller a “straight” $94,000 (which means $94,000 to the seller with no seller’s assist). The offer with $94,000 and no seller’s assist is a stronger offer because it implies that the buyer is a stronger buyer because the seller isn’t being asked to pay the closing costs. Also stronger because it requires the property to appraise for $94,000. In the offer above, with seller’s assist netting the seller the same $94,000, requires the property to appraise at $100,000.
- When do you want to close? If the house is vacant, a quick close (30 days) will be more appealing to a seller. Keep in mind that you have up until closing to come up with the rest of money needed for closing. Also, buyers often forget that they have a minimum of 30 days, and sometimes as much as 60 days, until the first payment is due on the loan. Due dates depend on the closing date. So, for example, if your closing date is July 2, your first payment on the loan would be due September 1. In this scenario, you have to bring more money to closing to cover the interest for July, but you have an entire 60 days until your first payment. This can be very desirable if your lease is up on August 31 and you don’t want to have to make a rent AND mortgage payment in August. If this consideration is important for you, make certain to discuss this with your mortgage consultant prior to writing up the offer. Once the offer has been accepted by all parties it may be difficult to change the closing date.
- How much of the seller’s stuff do you want? It is all negotiable. Do you want the window treatments and appliances? The washer and dryer?
- Is your offer contingent upon getting a mortgage? If you are reading this article it probably is. This contingency allows you to get out of the contract and get your hand money back if for some reason you aren’t able to get the loan.
- Inspections? Are you going to pay to have a home inspection by a qualified home inspector or are you willing to waive the inspections to make the offer stronger? While it may be tempting to waive this if you are in a bidding war and want to give yourself the best chance to win, you are taking a big risk. You also need to decide if you want to do pest and radon inspections and, in some cases, water and sewage inspections.
- Do you currently own a house that you plan to sell and are making an offer on a new home based on a sales contingency? If you have to make your offer contingent upon the sale of your current house it weakens the strength of your offer. The reason is that you are making an offer to buy someone else’s house, but only if you can sell your house first. That could mean the seller will have to wait for you to find a buyer, if you ever find one at all. In this situation, it is common to allow the seller to continue to market the property as if it isn’t under contract in hopes that they can find a buyer who doesn’t need to sell their home first. You will want to discuss this with your mortgage specialist to see if you can get approved for your new home without having to sell your current home first.