An Offer To Purchase Explained

So you finally found the house you were looking for, now what? Your next move is to make an offer to purchase. The Offer to Purchase is an important legal document that says you agree to buy the seller's house (often contingent on certain conditions). This process is not as straightforward as it sounds. You want the seller's house, but to reach that point, you must be mindful of the seller's reaction to any conditions you demand in the offer. Your Realtor will guide you through the decision making process leading up to the preparation of the offer.

Your offer can be firm (without conditions), or conditional:

Firm offer to purchase a home: This is usually preferable to the seller, because it means that you are prepared to purchase the home without any conditions. If the offer is accepted, the house is yours.

Conditional offer to purchase a home: This means that you have placed one or more conditions on the purchase. Common conditions make the completion of the sale subject to a clean home inspection, financing approval, or to the sale of the buyer's existing home. The house is not sold until all the conditions have been met. Since this is one of the most expensive purchases you will make in your lifetime, both you and the seller will want to take every precaution, stating any contingencies clearly, to avoid the possibility of legal issues later on.

Some of the main elements to consider when you're making an offer to buy a home are:

Price - Deciding how much to offer is one of the most difficult judgments to make. Offer too little or too late, and you stand the chance of losing the house to another purchaser (especially in a seller's market). On the other hand, nobody wants to pay more for something than it's worth. Your Realtor can help you understand the local housing market by showing you what comparable homes are selling for, helping you assess the condition of the house, and determining the type of competition you may face from other buyers.

Deposit - The deposit shows your good faith and will be applied against the purchase price of the house when the sale closes. Your Realtor can advise you on an appropriate amount, but it is usually 5% of the purchase price.

Terms - Terms include the total price offered and the financing details. You can arrange your own financing or ask to assume the seller's mortgage (especially if it has an attractive interest rate).

Conditions - Conditions are items that must be completed or fulfilled prior to the closing (such as a home inspection, obtaining financing, or selling your existing house). List anything you want the seller to pay for – carpet cleaning, warranties and any repairs or credits for damages, etc.

Inclusions and exclusions - Your offer may be contingent on certain items being either included or excluded in the sale. These items can be anything from appliances to decorative items, such as window coverings or mirrors (these are called chattels).

Closing date - The closing day is generally the day the title of the property is legally transferred and the transaction of funds finalized, unless otherwise specified.

When the negotiations are finalized and all the terms are agreed upon, your Realtor usually prepares a copy of the agreement of purchase and sale showing the final terms for you to sign. Careful attention to detail and consideration of the seller's point of view should result in a successful home purchase!

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