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How do I decide the best way to structure my proposed offer?

Congratulations! You’ve found a home that you want to make a proposed offer on!

Let’s go over the Proposed Offer Details page so you will have a better idea of how to structure your offer. This section includes the most important terms. Each of the items we will discuss can contribute to the strength of your proposed offer.

Sales Price 

Price is the most obvious factor in the strength of your proposed offer. When you are choosing your price, it’s helpful to look at what similar homes have sold for in the area. Pay very close attention to these properties and make sure they are very close in square footage because square footage has a huge impact on a home’s value and is often overlooked by those who aren’t experts in real estate. Also pay attention to location, lot size, year built, bedroom & bath count, features, and condition. As far as a home seller’s general mentality, if they just listed their property, they are less likely to come down much on price, but you never know since every situation is different.

Pre-approval and Proof of Funds

If you are getting a loan, it’s imperative you provide a copy of your lender pre-approval letter. You also may want to provide a redacted copy of a bank statement showing proof that you have adequate funds to close; whether you are paying all cash or just putting a down payment. The seller will want to see your name on the statement so they know the funds are yours, however, you should redact any sensitive information such as any account numbers, address, transactions, etc.. Typically the first page that shows your balance will be adequate for a seller.

Down Payment

This one is simple. The more you put down, the stronger your proposed offer. That being said, if you are putting a low down payment, don’t be discouraged; even if your proposed offer isn’t strong in this area, there are other aspects to a proposed offer where you can make up for it, such as inspection time-frames which you’ll see later.

Good Faith Deposit

Your good faith deposit is basically telling the seller that you are serious about making the deal. You will need to deposit this money into the escrow account within 3 business days of receiving an accepted offer. It’s showing the seller that you have some skin in the game. Keep in mind that this money goes towards your down payment in the end. This is not a separate fee… it all goes in the same bucket.

It’s customary that a buyer should put 3% of the purchase price in escrow as a good faith deposit. Generally, you really don’t need to put more than that, but you want to avoid putting an extra low deposit. Sometimes, if you want to strengthen your proposed offer a little, you could go above 3%. In that case, it may make your offer stand out if you are competing in a multiple offer situation.

Your good faith deposit is typically safe if you follow your contractual obligations, but make sure you read your contract in detail to educate yourself as to how to keep it safe. If you end up properly canceling using a contingency, you can typically receive a full refund of your deposit. 

Closing Time 

How quickly can you close the sale? Usually the lender will need to determine this depending on their workload, however, other special circumstances may apply. in a normal market, most lenders will say to allow 30 days for closing. Typically, the faster you can close, the stronger your proposed offer is. However, it’s a good idea to ask the seller what would be ideal, then structure your proposed offer around what they say. Asking some questions up front can avoid some of the back and forth.

Days to Close

This time period is known as the escrow period. It’s typically 30-45 days depending on everyone’s needs. Usually you will need at least 30 days to get everything done if the buyer is getting a loan. If you are paying cash and want a quicker escrow and the property is occupied, it would be a good idea to message the seller and ask if your potential closing date is too soon to allow them to move. 

Loan Contingency 

This gives you as a buyer the opportunity to go through the loan process, which is arduous these days, and obtain a full approval before removing the contingency. This involves the lender doing a thorough analysis of your finances and then issuing an approval or denial. The loan officer should have done their homework up front to pre-qualify you, but the approval process is more intense and more heavily scrutinized. If you have a loan contingency, you need to obtain the approval by the end of the contingency period. If you aren’t able to be approved, you can typically cancel based on this contingency and usually receive your full deposit back provided you have not removed your contingency in writing.

Appraisal Contingency 

The lender will be ordering an appraisal of the property. The appraisal is needed to make sure they are lending money on a property within their guidelines and it also assures you as the buyer that you are not overpaying for the home. If the property doesn’t appraise for the purchase price, you can back out using this contingency. 

Inspection Contingency 

This contingency gives you a certain amount of time to perform any non-invasive inspection that you want. Many buyers choose to only do a general home inspection, but it’s also common for some buyers to want to look at things more closely, so you may end up having multiple different types of inspections completed. The seller is obligated to allow these inspections during the inspection period. If you inspect and decide you aren’t okay with the condition of the property, you can back out using this contingency and usually receive your full deposit back.

Home Warranty 

It’s common for the buyer to ask for a home warranty to be paid for by the seller. This is something that gives buyers peace of mind over some of the homes systems and appliances. Usually a home warranty company will repair or replace an item if there is a covered issue during the warranty period (typically one year). Everything is negotiable, so the seller may decline your request of a home warranty. If that happens, you are still free to purchase one on your own. You typically are able to renew or get a new plan once this one expires. 

Sale Contingency 

This is a contingency allowing you as the buyer to sell the home you currently own before closing on the new one. Oftentimes buyers will only qualify if they sell their current home, so this is a way to help facilitate a sale. These sales are more complex and come with some risk. However, it’s not an uncommon situation. It’s important to stay on top of all parties to make sure things are going smoothly with both sales. Constant communication in these situations is paramount.

Included Items (Personal Property):

All permanently attached items are included in the sale unless specifically excluded. It’s suggested that sellers remove anything they don’t want as part of the sale prior to listing the home. Some items may need specific clarification like the stove, refrigerator, or the washer/dryer, as these items are not always permanently attached. If there is something you as a buyer are unsure about, write it into this section. If the seller doesn’t want that particular item included in the sale, they can counter offer you. Addressing these items up front help to avoid future issues towards closing time. 

Seller to Remain in Possession 

This is a seller contingency that can be added to the sales agreement via a counter by the seller. If the seller’s situation requires you to stay in the home after closing, for a period of up to 29 days, the seller may ask you if you would agree to that. If it needs to be more than 29 days, it gets a little more complicated and all parties would need to agree to some sort of lease.

Usually there will be some compensation paid to the buyer to allow this. Commonly, this compensation would cover the buyers new expenses (mortgage, interest, tax, insurance, etc.). The compensation is negotiable and will be included in the seller’s counter offer to you if this contingency is something they need.

Keep in mind that your lender may only be okay with this for a short term. Lenders have different lending products and different guidelines for lending on homes that are considered to be non-owner-occupied, so you would want to check with the lender before moving forward with something like this. 

Seller’s Replacement Home 

This is another seller contingency that can be added to the sales agreement via a counter offer. If the seller needs to find or close on a new home (replacement property) before they can close on this one, they will likely ask for this within a counteroffer. 

Good luck with the offer! If you ever need anything more than our help center offers, always feel free to contact us using the chat feature on the lower right of every screen, and we will help you in any way we can.

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