Making an Offer

In some states, you do need an attorney to complete a real estate transaction, but in others you do not.

The vast majority of people buying a home do not use the services of a real estate attorney but all do in states such as Florida, for example. Even real estate lawyers admit that attorneys usually are unnecessary. Most home buyers are capable of handling routine real estate purchase contracts as long as precautions are taken. They should definitely make sure they understand every single term of the contract. Every contract is different, even though they're on preprinted forms. Buyers should closely study the contingency clauses allowing them to back out if they cannot obtain financing or an inspection turns up problems.

Hiring an attorney after a conflict erupts may be too late. Lawsuits are costly and time-consuming. People who anticipate a problem should stay out of the transaction altogether. Not all real estate attorneys are competent, let alone good. And it's important to find one who will help, rather than hinder, the deal.

Buyers who need an attorney should call several and inquire about fees, but be willing to pay for someone with experience. Do not hire Uncle Harry, the tax attorney to handle a transaction that may be the biggest investment of your life. On a $100,000 home, the attorney's fee is minuscule, and on a bad deal, that fee could save you a tremendous amount of heartache as well as money to fix whatever problems crop up.

Most real estate experts encourage buyers to learn about the sellerís motivation so they can obtain the best deal possible. For example, a lower price with a speedy escrow may be more acceptable to someone who must move quickly due to a job transfer. People going through a divorce or are eager to move into another home are frequently more receptive to lower offers.

A seller's advertised price should be treated only as a rough estimate of what they would like to receive. Different sellers price houses very differently. Some deliberately overprice, others ask for pretty close to what they hope to get and a few (maybe the cleverest) underprice their houses in the hope that potential buyers will compete and overbid. In considering the list price of a house you're serious about, take the time to learn about the seller's personality.

Some experts discourage making deliberate low-ball offers. While any offer can be presented to the seller, a low-ball offer can sour a prospective sale and discourage the seller from negotiating at all. And unless the house is extremely overpriced, the offer probably will be rejected anyway.

Before making an offer, also investigate how much comparable homes have sold for in the area so that you can determine whether the home is priced right.

The typical home buyer looks at three to five houses before buying. The investors who consistently make bargain purchases consider far more properties for every one they buy from about 50 to about 1,000.

Several approaches to buying property below market value:

  • Buy a house thatís due to be torn down, move it to a new lot, and resell. Carefully done, this technique often produces a property which is worth twice what it costs to buy a resale home.
  • Interests in real estate which are less than 100 percent fee-simple often sell at enormous discounts. Tenants in common are an example. Sometimes, the owners of tenant-in-common interests want to sell or are forced to sell.
  • Life and remainder estates are another way.
  • Home-builder leftovers. When home builders put up a housing development, they almost invariably end up with a handful of hard-to-sell houses. Finding these unusual deals is a challenge. It takes a great deal of research and determination.

The list price is the amount an owner would like to receive for a property. The sales price is the amount a property actually sells for. It may be higher or lower, depending on how accurately the property was originally priced and on fluid market conditions. The listing price may need to be adjusted if offers are not made within the first few months of the propertyís listing period.

Obligations to disclose information about a property varies from state to state. Under some strict state laws, the seller and the seller's broker, if there is one, are required to disclose attracts materially affecting the value or desirability of the property which are known or accessible only to them. Items sellers often disclose include: homeowners association dues; whether or not work done on the house meets local building codes and permits requirements; the presence of any neighborhood nuisances or noises which a prospective buyer might not notice, such as a dog that barks every night or poor TV reception; any death within three years on the property" any restrictions on the use of the property, such as zoning ordinances or association rules.

There are always some sellers who for some reason must sell quickly.

While a very low offer in a normal market might be rejected immediately, in a buyer's market the below-market offer will usually either be accepted or generate a counteroffer.

When few offers are being made, and outright rejection of offers becomes unlikely. While it is true that offers at or above full price are more likely to be accepted by the seller, there are other considerations involved.

  • Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, such an offer, even at full price, may not be as attractive as an offer without that condition. Is the offer made on the house as is, or does the buyer want the seller to make some repairs before close of escrow or make a price concession instead?
  • Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.

There are two standard contingencies:

  • a financing contingency, which makes the purchase conditional on the buyers' ability to obtain a loan commitment from a lender, and
  • an inspection contingency, which allows the buyers to have professionals inspect the property to their satisfaction.

A deposit could be forfeited by the buyers under certain circumstances, such as the buyers backing out for a reason not provided for in the contract.

The purchase contract must include the seller's responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.