Writing an Offer to Purchase Real Estate

Once you find the home you want to buy, the next step is to write an offer – which is not as easy as it sounds. Your offer is the first step toward negotiating a sales contract with the seller. Since this is just the beginning of negotiations, you should put yourself in the seller’s shoes and imagine his or her reaction to everything you include. Your goal is to get what you want, and imagining the seller’s reactions will help you attain that goal.

Why close at the end of the Month?

Mostly, this has to do with lowering your out of pocket costs by minimizing the amount of “prepaid interest” you pay on your  mortgage at closing. Interest on your mortgage begins running from the date your transaction closes, but most loans are due on the first day of the month. So when you close, you “pre-pay” the interest between the closing date and the end of the month.

Real Property vs. Personal Property

When selling or buying a home, you need to think ahead about what you are actually selling along with the property and the house. The general rule is, “if it attached to the structure or the ground, it is real property and stays with the house.” This confuses some people, especially when selling their first house.

Title Insurance

Tennessee mortgage lenders require their customers to get Tennessee title insurance. A title is the legal document of ownership for property. The companies also require you pay for a title search, which is an extensive search through legal documents to prove the person selling you property has legal claim to do it. So why have title insurance when you’ve had a title search done? The search may have made an error, or it may have come across forged documents which would pass the title search. Around six percent of all policies have a claim, so it is not as uncommon as some may think to have a claim.

Tips For the Relocating Homeowner

You own a home but are planning to move to another one. This can be one of the greatest stressors in your life, yet with proper planning, the process can be a smooth and satisfying one.

Determining Your Offer Price

When you prepare an offer to purchase a home, you already know the seller’s asking price. But what price are you going to offer and how do you come up with that figure?

Determining your offer price is a three-step process.

Things Not to Do Before Purchasing a Home

No Major Purchase of Any Kind

You do not want to make any major purchase that would create debt of any kind. This includes furniture, appliances, electronic equipment, jewelry, vacations, expensive weddings…

…and automobiles, of course.

The Earnest Money Deposit

Most offers to buy a house are accompanied by a check. This check is generally referred to as the “earnest money deposit.” The basic reason for the deposit is to impress the seller that the buyer “earnestly” intends to purchase the property. The amount of the deposit varies from purchase to purchase, depending on a variety of factors. If a property generates a lot of interest, a buyer may make a larger deposit to convince the seller that their offer is stronger than the others. During “hot” markets, deposits are generally larger than during slow markets.

Should You Buy a Home in Today’s Market?

Before we start, let us give you one reason to not buy a new home right now.

Contingencies & Negotiations in Real Estate Contracts

Some buyers make an offer to buy a home before they even list their own home for sale. However, they need to sell their present home in order to come up with the down payment to make the purchase. So they make their offer “conditional” on the successful sale of their own home. That is a “contingency.” Actually, it is a major contingency.

How Financing Details Affect Your Offer

Most buyers do not have enough cash available to buy a home, so they need to obtain a mortgage to finance the purchase. Since you will probably make your purchase contingent upon obtaining a mortgage, the seller has the right to be informed of your financing plans in order to evaluate them. That is one of the major reasons that financing details are included in your offer.

How FHA and VA Loans Affect Your Offer

If you are obtaining a VA or FHA loan in order to finance your purchase, you must include that information in your offer. This is because government loans place additional financial and performance obligations on the seller.

Home Inspection

Dallas home inspections provide a definite value by giving a level of objectivity in evaluating a home. When a home owner determines the value or condition of a home, it is very difficult to separate the emotional aspects of the home from the objective inventory of features and condition. It is part of our nature to invoke the emotional value in a home from our personal perspective, which can cause conflict in the sale process. A Dallas real estate deal for buying a home can fall apart over old appliances or home improvement work that has sentimental but not intrinsic value.

Gifts Still Make Great Down Payments

Down payment assessment gift programs are dead for the foreseeable future, but home buyers can still receive and use gifts to supplement their down payments with FHA loans. It’s just important to be informed about the rules and restrictions. In response to the foreclosure crisis of the past several years, legislators created the Housing and Economic Stimulus Act that was signed into law by President Bush on October 1, 2008. One of the new regulations banned FHA home buyers from receiving down payment funds from any interested third party participants. Statistically it has been shown than buyers that put almost none of their own money down up front are much more likely to default. There used to be several not-for-profit companies that facilitated the transfer of down payment money from sellers to buyers using FHA loans. These have all been essentially eliminated from the market as a result of the new law.

Concerns About the Property

Disclosures

Although you have toured the property, looked at the walls and ceiling, turned on the faucets and played with the light switches, you have not lived in it. The seller has years of knowledge about his or her home and there may be some things you want to find out about as quickly as possible. For this reason, you will require certain disclosures as part of your offer.

Asking the Seller to Pay Closing Costs

Some aspects of real estate become very routine to real estate agents, who deal with the same issues over and over. However, these same issues are sometimes new to buyers and sellers – and not immediately understood. This situation came up recently between a buyer and seller. A home was listed for sale at $210,000. The excited buyer made an offer to buy the home at $203,000, asking the seller to pay all of their closing costs. The seller scratched his head.

How much are closing costs, anyway?