Submitting an Offer
Congratulations for making it to this stage! Now that you have found a property that you like and fits your financial profile, you are now ready to make an offer. The items listed below will cover what needs to be included in your offer package when it is presented to the seller or seller's agent.
No buyer or seller ever likes to get a bad deal for themselves. It cannot be stressed highly enough that a win-win scenario should always be the goal. Since you have filled out the Property Walkthrough Checklist from the Free Tools section, use that form to estimate the amount of needed work (not nice-to-have items, such as brand new stainless steel appliances when the current appliances are fine) and present the estimate with a comparable market analysis provided by your real estate agent (CMA shows the price of similar homes in the neighborhood sold within the last 3-6 months) with your offer so that the seller can understand how you came up with the offer figure.
Try to be as accurate as possible when estimating repairs, because stating that a new small bathroom upgrade costs $20,000 is unreasonable. If your area is a declining market, print out any articles as recent as possible forecasting the decline over the next year or two to help your case in why your offer is fair and not a low ball offer. Click Here for Sample Offer Letter Part 1, Part 2 or view in the Free Tools Section.
Offer Package Given to the Seller
- Pre-Approval Letter
- Earnest Money / Good Faith Deposit
- Offer Letter / Letter of Intent
- Offer date and expiration date
- Name of buyer and seller (seller can just be listed as "owner on record")
- Address and description of the property
- Offer Price
- Earnest Money Amount
- Down Payment Amount
- Loan Amount
- Terms such as dates for home inspection, purchase and sale contract
- Contingencies; typically financing and home inspection
- Prorations (how property taxes, homeowner fees paid will be divided)
- Concessions (items to be fixed or included such as a refrigerator, or money back from seller to help pay for repairs or closing costs)
- Name and signature of both parties (buyer and seller)
Letter given by a lender or mortgage broker that should always be presented with an offer and earnest money to show that the buyer has sufficient funds, income and qualified credit to purchase the home. A pre-approval letter is given after a lender or mortgage broker performs a credit check, employment verification, income verification (recent pay stubs, tax returns from last year or last 2 years), and proof of funds (last 2 bank, 401k, and other account statements). Do not confuse a pre-approval letter with a pre-qualification letter. Most sellers will not accept a pre-qualification letter because pre-qualification letters can be given out without any income, assets or debt verification.
Typically a check for $500, $1,000 or 1% of the offer price is submitted with the offer letter and pre-approval letter to show that the buyer is serious in purchasing the home. The earnest money is applied to the total purchase of the home if the purchase goes through completion and is held in an escrow account. If the purchase does not go through, the buyer usually receives the earnest money back unless the buyer defaults on the terms of the purchase and sale contract (P&S is after the offer letter) such as failure to notify the seller's party within the specified deadline of inability to obtain a mortgage with at least one lender after completing a full mortgage application. The home inspection is usually the critical factor which determines whether the buyer wishes to proceed with the purchase of the home, in which the earnest money is held in a 3rd party escrow account, or if the buyer wishes to cancel the purchase, in which case the buyer receives their earnest money back if it is stated on the offer letter (make sure it is stated on the offer letter to protect yourself from losing your earnest deposit; another reason why using an attorney can be helpful).
Initial offer contract to purchase property usually drafted by the buyer, buyer's agent or attorney which contains the following items:
