An offer is a proposed sales contract. Once the seller accepts your offer, and signs it, it is binding. For this reason, your first offer should be as much in your favor as you can make it.
Hand money is a portion of your down payment that you present with the offer in order to show your good faith. It indicates an earnest intent to buy the house. The amount of hand money to offer depends on local tradition and the cost of the house. Ask your real estate agent what is common in the community in which you are purchasing. If you back out of the agreement you lose your right to reclaim the hand money. Exceptions may exist, such as not being able to obtain financing, and a few others. The money is held in a neutral trust account by the broker, or closing attorney. It should not be given to the seller until the transaction is complete and final funds are being disbursed. Be sure to include all verbal agreements in the sales agreement. For example, if the seller agrees to pay a portion of the closing costs, get it in writing in the sales agreement. See the Contingencies section for more information.
HOW MUCH TO OFFER
Houses usually sell for between five and ten percent below the asking price, but there are external conditions to consider in deciding how much to offer for the home.
market value: Know whether it is a seller's market, meaning more competition and the need for a higher offer, or a buyer's market, meaning that a lower price has a better chance due to a sluggish market.
loan approval: An offer backed with a pre-approved loan is more appealing than offers that are still waiting for approval.
A clean and straightforward offer is more appealing than one with many addendum.
WHAT HAPPENS NEXT
The real estate agent takes the offer to the seller, and they have a limited time period to decide to do one of three things:
Accept your offer-at this point the
offer becomes a sales agreement and you are one step closer to owning your
Reject your offer-you can make a
second offer in the hopes it is accepted, or you can begin the house hunting
Make a counter-offer-the seller has rejected your offer, however, makes a new offer, showing interest in trying to obtain an agreement. You are now able to accept or reject the seller's counter-offer, or continue to negotiate a mutually agreeable price.
A seller's disclosure statement should accompany the signed offer. The disclosure is a legal requirement that sellers use to inform you of any problems and repairs they have made to the home. This should be reviewed closely by you and your lawyer before signing the offer.
Back to Housing Resource Guide