First and foremost, always remember writing an offer is creating a contract to perform. If accepted, you are now contractually obligated to see through the terms of the contract. So it is very important to take your time when writing your offer and ensure that you are financially and personally willing to move forward with the property to your current knowledge. You will have contingencies such as an inspection contingency, financing contingency if there is a loan, and an appraisal contingency that can allow cancellation, but always be prepared to move forward with an offer you are initiating.
Make sure to notify the seller that an offer is incoming. This gives them notice to keep an eye out for an offer and allows you time to write an offer in the event there are other offers that have already arrived. It is more than acceptable to ask if there are any other offers on the property.
The first item is simply the contact information of all parties and the address. If there are multiple buyers and sellers, be sure to list all of them. You will be able to find the Tax Parcel Number and Legal Description in the tax records. This is what the title company will use to confirm the property ownership and be able to properly convey title to the new owners.
~The biggest item of note is the purchase price. Anyone can list their home for anything they’d like, however, it is important to take some time to make sure it is worth that amount. Ultimately your lender will require an appraisal, but this is usually after you’ve already paid for an inspection and the appraisal itself so you want to properly reduce the chances of investing money into a home that ultimately does not appraise. The sellers are not required to come down to a low appraisal, however you are not also required to come up and may cancel the contract and receive your earnest money back if a low appraisal does result. There is a video on how to establish an appropriate list price if you need help in coming up with this price.
~The amount of your Earnest Money deposit will need to be provided. There is a video specifying earnest money but this essentially is the deposit you are putting down immediately after offer acceptance to show in good faith that you intend to move forward with the sale of the home. Industry standard states 1% of the purchase price, however I have had some success with $500 or $1000 earnest money deposit, although this may cause a counter from a seller, it is always negotiable.
~A closing date is needed to be provided, typically with a loan this is 30 days, and as little as 10 days for cash, but you do want to make sure you select a business day that the county, banks, and title companies are open. So avoid holidays or a weekend. If a day is selected that is not a business day, typically closing will default to the next business day. If you have a lender, it is a good idea to confirm how much time they will need to close on your loan.
~If there is financing, you’ll want to confirm the lender name and contact information, the type of loan (so FHA, Va, conventional, assumption, or jumbo) your down payment, loan amount, and if you need closing costs assistance. Buyers will have costs beyond their purchase price of the home. This includes loan origination fees, title costs, prepaid interest and more. A good general rule of thumb estimate is 2.5-3% of the purchase price will be additional closing costs. This should be consulted with your lender during the prequalification process prior to your offer so that you can properly identify if you need seller concessions or help paying for these costs. Just know that anything you ask for, does reduce your offer power. For example if you offer $300,000 but need 3% from the seller, your offer is now going to be seen as $291,000.
~Next item on the list is the items to convey. Do you want the fridge, washer, and dryer? These items usually go with the seller unless specified in the contract. Oven, Microwave, Dishwasher usually stay with the home but if these are important to you, it is not a bad thing to put in the contract to make sure there are no surprises at closing. Same rules apply for ceiling fans, blinds/curtains, chandeliers etc. Typically if an item needs to be removed using a tool, it’s a fixture, but there are many cases where a buyer shows up at a walkthrough and an item they thought was going to stay is gone, so always be sure to over clarify if needed.
~Hoa information should be provided by the seller such as cost and contact information. You will want to determine who should pay for disclosure fees (customarily seller) and for the hoa transfer fees and/or capital improvement fees (customarily buyer). Both are negotiable and are a part of closing costs.
~Confirm who the title or settlement company should be. This is also negotiable but one does need to be listed on the initial offer. The title agent’s name, phone number, and email should be provided as they will be the one that coordinates closing with all parties. You can always request who you would like the title company to be, however, if you do not have one, we can provide a list of title companies.
~Are you asking for a home warranty and is it to be paid by the seller? This is typically anywhere from $500-$1000. You can always request what home warranty company you would like to use, but if you do not have one, we can provide a list of home warranty companies.
~Confirm the following items and feel free to refer to the listing, seller disclosure statement and/or the seller:
Septic or Sewer connections?
Well, city water, or private water company? Is there a well transfer fee or inspection fee? If so, who is paying for this? These are customarily buyer closing costs, but are negotiable as well
~The contingencies you will want to list out specifically. There are inspection contingencies, financing contingencies, appraisal, and sale contingencies. The verbiage for each of these are listed in your buyer portal.
Inspection Contingency: this is generally 10 days and will allow the buyer to conduct inspections to ensure they want to move forward with the home and the property is in acceptable condition. During this time the buyer can cancel for any reason and is their time to inspect the property to ensure that it fits their needs. It is good to use the verbiage: “Buyer to obtain an Inspection Contingency that will be a period of 10 days from contract acceptance. Buyer to notify seller within that 10 days of any requested repairs or disapproval of the property. If buyer does not submit repair request within 10 days, property is accepted in as-is condition. Seller to reply within 5 days of repair request receipt if seller is willing to complete any or all repairs. If seller does not reply within 5 days, no repairs are offered from seller, buyer to reply within 5 days of seller response if they choose to continue with contract or disapprove property. If Buyer chooses to cancel within the Inspection Period guidelines, earnest money is to be returned to the Buyer”
Financing Contingency, this will confirm that the contract is contingent on approval of a buyers loan, and if denial is received, the contract can be canceled. This verbiage can be: “This contract is contingent on loan approval. If buyer does not obtain loan approval within 3 days prior to close, or is denied for any reason, notice of cancellation shall be given within 48 hours of denial and earnest money to be refunded to the buyer.”
Appraisal Contingency is the contingency that protects the lender and buyer in the event the property does not appraise. This verbiage can be: “This contract is contingent on appraisal to be received prior to close of escrow. Appraisal opinion of value must be at or above contract price. If the appraised value is less than contract price, buyer has 3 days from low value notice to notify of cancellation and earnest money to be returned to the buyer.”
Sale Contingency is when the buyer is currently selling their own property. This can be after they’ve received an accepted offer or before. When an offer is contingent on closing of their home, that means they’ve received and accepted offer and are waiting to close. If for any reason the sale of that home falls through, the buyer can no longer purchase the home and thus is able to cancel the contract. If the offer is contingent on an accepted offer, this means the buyer does not have an accepted offer yet and needs one in order to move forward with the home. Both of these will typically be coupled with expiration dates or deadlines that the closing and/or accepted offer should be received by. Verbiage for either of these can be:
Buyer Already has an offer on their property and is in escrow: “This contract is contingent on the closing of buyers property at (address). Contingent Property to close by (date). If Property does not close for any reason, buyer has 3 days to notify all parties and cancel this contract and earnest money returned to the buyer.
Buyer still needs to receive an accepted offer on their property: “This contract is contingent on the accepted offer of buyers property at (address). Contingent property to have an accepted offer by (date) and to close by (date, usually approximately 30 days later). If Property does not have an accepted offer or close for any reason by the dates specifed above, buyer has 3 days to notify all parties and cancel this contract and earnest money returned to the buyer.
~Lastly, you want to create an expiration to your offer. This usually is within 24 hours of your offer being sent. For example if you are offering on 10/22 at 4pm, you want to set a required response timeframe of 10/23 at 4pm. This creates a sense of urgency to reply so that the seller does not simply shop your offer. They need to consider it and reply. Once that time expires, you are no longer obligated to accept the terms and the seller can always send a counter extending this timeframe if needed.
When you are writing the offer, only proceed when you feel confident and knowledgeable in your offer and if it still feels overwhelming, we always recommend to contact a real estate professional or a real estate attorney to assist with the process.