Making an Offer to purchase your new home

Negotiating The Deal

A deal is successful when both you and the buyer are happy with the terms. The negotiation process should be friendly and non-confrontational. After all, you’re both winners... they're getting a new home and you're able to move on.

Presentation of An Offer
The presentation of an offer/contract can be handled several ways and often times is dependent upon the buyer since they are the party making the offer. Any of these scenarios, and others, are possible.

1. You and the buyer meet to discuss terms face-to-face before it is put into writing to come to a meeting of the minds. Once you have agreed in principle, a contract needs to be drawn up that documents the agreement.
2. Your buyer has their attorney prepare a contract and presents it to you.
3. Your buyer has a real estate agent and that agent makes the offer to you on behalf of their client, the buyer. In this scenario, it is assumed that you have agreed to co-op with real estate agents.

If your prospective purchaser is working with a buyer’s agent (real estate agent) or had an attorney draft the contract for them, it is important that you understand that they are representing the buyer and not you. If you are not an expert and in this situation, our advice - hire a real estate professional to handle the negotiations on your behalf to ensure that you are adequately represented. Even if you are not in this position, it is advisable for you to get professional assistance in documenting the contract for the sale of your home.

Once an offer is presented, your options are as follows:

1. Accept the offer as is, sign it and it becomes a binding contract.
2. Counter-offer back to the buyer by making changes in the offer and initialing the changes. The buyer has the option of walking away if the changes are unacceptable to them, but this makes them know you are interested in selling them the house and keeps negotiations open.
3. Decline the offer – meaning telling them no thanks, their offer is so far off that you do not wish to counter. Our opinion is that this is never a good decision. If their offer is way off, make a counter. It can’t hurt to try.

There are numerous issues that can arise during a negotiation, far more than we can address here, but it is worthwhile to discuss a few that you should understand and be prepared to handle.

Buyer Offers a Low Price
If the offer is lower than the range you are willing to accept, counter offer a little below your asking price. Be prepared to go through several counter offers. You also consider asking the buyer how they arrived at their offer. It is possible that the buyer may have done more research than you and has good evidence that your price is high in comparison to the market. If this happens, then you’ll eventually have to drop your price - no matter who buys the property. If the buyer tells you this is all they can afford, then very likely they are not really qualified to buy your home so don’t spend a lot of time negotiating. Buyer Has a House to

Sell Before They Can Buy Yours (The Contingent Offer)
Accepting an offer contingent on the sale of another property has many pitfalls. If possible, you should avoid accepting an offer of this nature. Your first response should be to suggest to the buyers that they get a bridge loan. They will need to qualify to carry both houses at the same time. If they can qualify, you can extend the closing date on your house to give them the time to sell their house. That way, they have the time they need and you have a guarantee that they will close on your house regardless of if they sell their current home.

If they can’t qualify for the bridge loan, but it seems reasonable to you that their house will sell and these buyers seem like good prospects, you should consider amending the offer to include a “Contingent on Sale of Home” addendum or clause. This contract language means that you continue to market your house, and if you get another offer, the first buyers will have 24-48 hours to prove that they can perform on their contract without selling their current home and remove the contingency on the contract for your home. If they don’t, they lose their first position on your home and you are allowed to sell the property to the new buyer. In this scenario, they will get their earnest money returned and you are free to accept a contract with the new buyers.

It is important to note that if you include the “Contingent on Sale of Home” Addendum or clause, you must make an agreement with the new buyers that their contract is contingent on the first buyers being released. This is a good example of necessary, but tricky contract language that makes getting the assistance of a real estate professional advisable.

Buyer Wants To Do a Lease-Purchase (or Lease-Option)
This means the buyer wants to rent the property for a period of time and then purchase it during or at the end of the rental period, which is when you get your money. A lease purchase is often used to sell less desirable properties or to sell properties in a slow market. It is also used in lieu of other contingencies. If a buyer has a house to sell and can’t qualify for a bridge, a lease-purchase can be a good solution.

The Offer Is Contingent Upon The Buyer Obtaining Financing
This is very a standard situation since most people do not pay for a house with cash; however, there are certain financial contingency circumstances that you want to avoid as a seller. Generally, you should not enter into a contract that is contingent on the buyer receiving a certain interest rate, certain points or other similar terms. Let the buyer know that it is fine for them to shop around to get the best mortgage terms, but that the contract must say that that they will take "market" terms. This means that the buyer can’t get out of your contract just because interest rates go up - unless they no longer qualify for the loan.

Buyer Has Too Many Personal Property Items in The Contract
If it’s not nailed, fastened or attached to the house, it is not included in the sale unless the buyer has made special provisions for it in the contract. Buyers and sellers must be careful because if there are too many valuable personal items in the contract, the mortgage lender may deduct the value of these items for the purpose of the mortgage. These items will also not be included in the appraised value of the property, which can also cause the buyer financing problems if the property does not appraise as a result of including many personal items.

Sale is Contingent On The House Passing Inspection
A home inspection is separate from an appraisal and is becoming common practice for this contingency to be in real estate contracts. The purpose of the home inspection is to disclose the condition of the property to the buyer; the contract usually sets a limiting dollar value for repairs within the contract. As a seller you do not want an open-ended clause, it needs to be capped.

It is important to note, that in Florida, the law requires a disclosure by the seller for purposes of property condition and history. In some cases, it may be prudent to opt to have your home inspected prior to putting it on the market. This shows potential buyers that you are selling a structurally and mechanically sound house and brings any known issues to the forefront immediately. Regardless of when it is done, a prudent buyer will require an inspection and you should expect it.

Several times in this section, references were made to engaging professional assistance for contract and negotiation assistance. If you are not well versed in these items, we believe you are best served by getting assistance. This is not say that you will not save lots of money by not using the traditional system, just that you should not cut all the corners if you are not in a position to do so. These types of services can be procured from attorneys, title companies and real estate professionals. To learn more about these types of services, check out Fee For Services At Capstone Residential.