When you find a house you'd like to buy, you'll want to present the seller with an offer to purchase the home.
While your real estate agent will likely suggest that you use a standard purchase agreement form, it's best to hire a real estate lawyer to review the contract.
Every home purchase contract, sometimes called an "earnest money agreement" or "residential offer", should include:
Purchase price you're offering
- Amount of down payment (sometimes called "earnest money" or "deposit")
- How long the offer will be open. It's best to limit the seller to not more than 48 hours to respond to your offer, to keep the seller from waiting for better bids from other buyers.
- The date the sale will be finalized ("closed") and the date you'll move in
- Who will hold the deposit money (usually an escrow agent) and who will be the closing agent and/or escrow agent for the closing
- Items to be included in the sale, such as carpeting, lighting fixtures, appliances and so forth
- Items not included in the sale
- A legal description of the property
- A guarantee that the seller will provide clear title to the home, through an abstract of title, certificate of title or a title insurance policy
- A provision that the seller is responsible for paying utility bills, property taxes, insurance and other house-related expenses through the closing date
- Language that requires the return of your deposit if the sale isn't completed due to not obtaining financing or some other contingency of sale
- An inspection clause that allows you to have the home inspected by a professional inspector, usually within a few days of the date of the contract. This provision should make your purchase offer contingent on a satisfactory inspection report.
- Language that details when you can do a walk-through inspection before the closing date to make sure everything is in order according to the guarantees made in the contract
- A mortgage contingency provision that allows you to be released from your offer if you're unable to obtain a loan in a specific amount at a specific interest rate within a specific amount of time (usually between 30 and 60 days)
- A provision that requires the seller to pay a certain amount of money for every day beyond the date of your occupancy that the house is not available for you to move into (often called a "liquidated damages clause")
- A clause that makes the offer contingent on selling your current house, if you'll need to do that before you can move
A seller isn't required to accept a particular offer.
A seller will usually respond to a buyer's offer with a counteroffer that accepts some of the terms but proposes changes to others.
Common counteroffer proposals include:
- A higher purchase price
- Giving the buyer less time to remove contingencies such as inspections and selling your current home, or removing these contingencies altogether
- Excluding certain items from the sale, such as the seller's antique heirloom chandelier
- Providing the seller with more time to vacate the house after the sale is closed
- A clause making it a contingency that the seller's attorney approve the contract (if the seller hasn't had the time to have their attorney review the agreement)
- A "liquidated damages clause" that details how much money you'll owe to the seller if you back out of the deal for reasons other than the contingencies you've listed. In some states, laws limit your liquidated damages to the amount of the earnest money deposit.
If the buyer is not satisfied with the seller's counteroffer, the buyer can reject the counteroffer and submit additional changes in a buyer's counteroffer. The parties can negotiate the terms of the contract until they reach an agreement. Once an agreement is reached, both parties must sign the counteroffer that states the correct terms and conditions of the contract.
Role of Brokers
If the seller or the buyer is using a real estate broker, the broker or brokers usually negotiate the terms and conditions of the contract, as directed by their clients. However, the final decisions are made by the seller and the buyer, and they must sign the purchase agreement or contract of sale.
Questions for Your Attorney
- How does a buyer make a formal offer to buy a house?
- Who holds the deposit money after a purchase agreement is signed?
- If a sales contract allows time for each party's lawyer to review the contract, what terms are subject to change based on the lawyer's advice? Can the price be changed?
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