☞ The Offer
Once a buyer finds a home to purchase an offer must be written up for the property. For some homebuyers, this can be a stressful experience. After all, the buyer and the seller may not be able to come to an agreement and neither may meet their goals.
A buyer’s offer to purchase will be presented to the seller asap. After the seller has reviewed the offer, it may be accepted as is, rejected, or returned with a counteroffer. The counteroffer may be in regard to price, the closing date, personal property, or any number of reasons. The offers can go back and forth until both parties have agreed or one ends the negotiations.
A buyer may present a contract to buy a home contingent on something else, such as a home inspection or the financing or sale of a present home. The seller’s home would generally stay on the market as before and the buyer would be given the right of first refusal. If another buyer were to present an offer, the seller would give the first buyer the opportunity to either drop the contingency and go through with the purchase or void the contract (the precise conditions vary in relation to how the contract was written). The seller may be required to take the home off the market for a specified period of time.
☞ The Purchase Agreement
A contract exists when the buyer and seller have arrived at an agreement, initialed all changes, and signed and dated the final documents. The purchase agreement explains all the rights and responsibilities of the buyer and seller that are to be fulfilled at the closing.
A purchase agreement generally includes the following items:
- Legal description of property
- Total price offered
- Amount of down payment
- Amount of earnest money
- Financing arrangements
- Inspection requirements
- Personal property included (appliances, fixtures, etc.)
- Any contingencies (sale of buyer’s existing home or home inspection, for example)
- Contract expiration date
- Proposed closing and possession date
☞ Earnest Money
It is routine for the buyer to provide earnest money when contracting to purchase a home. Earnest money is generally a cash payment (check or online payment) that is a percentage of the home’s purchase price. It assures the seller that the buyer is acting in good faith and has serious intentions to purchase the home. Generally, it is applied to the purchase price when the purchase is completed.
In most cases, a buyer can walk away from the deal and take back the earnest money if the lender does not approve the buyer’s loan application. However, if the buyer merely changes their mind and decides not to purchase the home, the earnest money is forfeited to the seller for having taken the home off the market.