The Basics of Making an Offer
A written offer is the foundation of a real estate transaction. In New Jersey, all offers are presented in contract form, signed by the buyer. Your written offer will specify the purchase price, as well as the additional terms and conditions of the purchase.
We will prepare a written, legally binding offer that reflects the price as well as terms and conditions that are right for you.
Keep in mind that a Buyer’s Agent works in your best interest as a fiduciary. If you work directly with the Listing Agent, you will not have a fiduciary guiding you through the process. The Listing Agent can only work as an intermediary, and you lose the full range of representation when you are not represented by your own Realtor.
What is in an Offer?
The purchase offer you submit, if accepted as it stands, will become a binding sales contract, also known as a purchase agreement. So it’s important that the purchase offer contains all the items that will serve as a blueprint for the attorney review period. The purchase offer includes items such as:
- Address and legal description of the property
- Financial terms: for example, all cash or subject to obtaining a mortgage for a given amount
- Seller’s promise to provide clear title (ownership)
- Target date for closing (the actual sale)
- Amount of the deposit and where the deposit will be held (typically in the seller’s attorney escrow account)
- Time frame parameters for conducting home inspections
- Method by which real estate taxes, rents, fuel, water bills, and utilities payments are to be adjusted (prorated) between buyer and seller
- Time frame and parameters for conducting home inspections
- Type of deed to be given
- Other state-specific requirements, which in New Jersey include a chance for an attorney to review the contract, disclosure of specific environmental hazards, or other state-specific clauses
- A provision that the buyer may make a last-minute walk-through inspection of the property just before the closing
- Important contingencies, which are discussed in detail below
Contingencies – “Subject to” Clauses
If your offer says “this offer is contingent upon (or subject to) a certain event,” you’re saying that you will only go through with the purchase if that event occurs. Here are common contingencies contained in a purchase offer:
- Mortgage: The buyer obtaining specific financing from a lending institution. If the buyer makes a good faith effort to obtain a loan and it is denied, the buyer won’t be bound by the contract.
- Inspection: A satisfactory report by a home inspector within a set time frame, typically 14 days, and terms outlining negotiations of home inspection issues.
- Title: Clear title, with no clouds or liens.
Tips on Crafting a Winning Offer
Favorable terms will put you in a stronger bargaining position. You will look particularly welcome to a seller if:
- You’re an all-cash buyer.
- You have been pre-approved for a mortgage AND you do not need to sell your present house in order to buy.
- You’re able to close and take possession at a time that is especially convenient for the seller.
With favorable terms, you may be able to negotiate a discount from the listed price.
On the other hand, if the perfect house comes on the market and is competitively priced, you may need to offer the list price – or above – to beat out other early offers. When competing in a multiple-offer scenario, we will carefully craft the offer and terms to give you the best chance of standing out from the crowd. And we will always guide you with comparable sold homes so you can make an educated decision.
The Seller’s Response to Your Offer
You will have a contract when the seller counter-signs your offer. If the seller likes everything except the offer price, or proposed closing date, you may receive a counteroffer including the changes the seller prefers. You are then free to accept it, reject it or make your own counteroffer. It may take 2-3 counteroffers before an agreement is reached.
In New Jersey, you have the right to have an attorney review the contract before the contract becomes binding. During attorney review, the attorneys will check the contract, revise, and add clauses to the contract in a rider or addendum to the contract. After this review period, the offer becomes a binding contract for both parties, subject to the contingencies, such as a satisfactory home inspection, loan commitment, and clear title.
Buyers: Withdrawing an Offer
Can you take back an offer? It depends. You may take back your offer during attorney review before the contract becomes binding. The deeper you are in the transaction, however, the more difficult it will be to back out without any penalties. If you do want to revoke your offer, be sure to do so only after consulting with an attorney who is experienced in real estate matters. You don’t want to lose your deposit or find yourself being sued for damages the seller may have suffered by relying on your actions.
Sellers: Counter Offer
When the seller receives a purchase offer from a buyer, remember that unless the seller accepts it exactly as it stands, unconditionally, the buyer is free to walk away. Any change made in a counteroffer puts the deal at risk.
Who pays for what items is often determined by local custom. One can, however, negotiate who pays for the following costs:
- termite inspection
- buyer’s closing costs
- points paid to the buyer’s lender
- repairs required by the lender
- home protection policy
The seller may feel that these costs are not their responsibility, but some buyers – particularly first-timer buyers – are short of cash and helping them may be the best way to get the deal done.