When you have an idea to find a home that you love in your budget, here is the time to make an offer at home, you and your real estate manager make a document and give it to the seller who has the desire; that is called a purchase contract.
Key Elements of a Purchase Agreement
Your real estate manager will have copies of the type of purchase agreement that’s considered excellence in your area. Purchase contracts contain the following:
- Your proposed price, including details of the initial down payment
- Details on financing, specifying the mortgage amount you intend to obtain, and naming
- the lending institution
- Legal information of the property description
- A list of items included in the sale (such as appliances, fixtures, carpeting, etc.) and
- those excluded
- Proposed move-in day
- Agreed-upon closing day
- A termination date to ensure the seller cannot postpone the process
Common Contingencies in Real Estate Contracts
The purchase agreement you provide to the seller should include contingencies or addendums
that permit you to withdraw from the agreement if specific conditions are not fulfilled. Adding
these contingencies is an essential step to safeguard your finances as you navigate the
transaction.
- Mortgage Contingency: Grants you the option to withdraw from the agreement if you’re unable to secure the necessary mortgage.
- Inspection Contingency: Permits you to exit the contract if the inspection reveals hidden structural issues or other unacceptable defects in the home.
- Attorney-Approval Contingency: Allows you to cancel the deal if your attorney does not approve the terms of the contract.
- Negotiations for Corrective Work: Enables you to reopen discussions if inspections identify costly repairs or work required on the property.
- Title Contingency: Provides you the right to review the property’s title for accuracy and validity, with the option to back out if any title issues are discovered.
- Final Verification of Condition: Allows you to renegotiate or withdraw from the agreement if, during the final walk through before closing, you identify a significant new defect or one previously concealed by the seller.
Earnest Money or Down Payment
When submitting the purchase offer, you will typically need to include either earnest money or
the full down payment. (Earnest money is a deposit that generally ranges from $500 to several
thousand dollars.) Be sure to specify in the contract that the funds must be placed in an
interest-bearing account and that any accrued interest belongs to you.
How to Price Your Offer?
Your objective when bidding on a house is to propose the lowest possible offer that the seller
will accept. Make an offer on a home could be above, below, or equal to the seller’s asking price. When
determining your bid amount, consider the following factors:
Comparable Market Analysis (CMA): If the asking price is significantly higher than the sale
prices of similar homes in the area, it’s advisable to bid below the asking price.
Market Conditions: In a seller’s market, you may need to bid higher than the CMA
price—sometimes significantly higher. Conversely, in a buyer’s market, you can likely bid below
the asking price with less risk.
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