Help for you in making a real estate offer


How To Make A Real Estate Offer!

Have you found a property you would like to purchase? How do you let the seller know the terms and price your willing to pay for their property? You write up and submit an offer.

When you make an offer you need to remember that you are submitting a contract that is legally binding once signed. You need to be sure that you can fulfill the items you place on that contract. To be safe its usually a good idea to let your attorney or Title Company review your contract before you sign it especially if its your first offer or the contract is overly complicated. This is not a requirement of law but to protect yourself from future problems that could come up.

An offer does not have to be written on a professional form but it does help to cover all the areas of your deal and also gives a better chance of being accepted from a neater, more business look. I have seen offers written on napkins before but I will not recommend this! As long as your contract, which is your offer, has the requirements that are necessary to be legal in your state then it can be used. These requirements generally are:
Parties involved, "seller" and "buyer" legal names.
Description and location of the property.
Total purchase price.
Terms for payment of purchase price.
Statement of which party pays which expenses to transfer ownership.
Signatures of all legally recorded owners.
The date of agreement.

The best way for you to make an offer is to use the Contract for Purchase and Sale form you will find by clicking here. This is a general use contract that covers every state and county requirement that I know of. (but you still should make certain before signing.)

There are sections that will not pertain to every offer you are going to make. Just draw lines through whichever section you don't need or delete them on your computer before you print out a copy. Below is a guide to help you fill in the blanks on this contract. Just get a copy of the contract and follow the guide below to better understand how to answer the blank areas.

PARTIES: Put the seller's name, contact address and telephone number in the seller's blanks. Put your information in the buyer's blanks.

DESCRIPTION:
Write in the county/borough and state the property you are purchasing is located in.(Note: The laws you will follow are the ones which govern the property location)
The street address of the property.
In this area list all the buildings and other improvements that are on the property i.e. storage sheds, swimming pool, dog houses, etc. Also list any right of ways to the property and all encroachments by size i.e. 5 feet from the center of the road, etc. When you first make your offer you will probably leave this blank. After the offer is accepted you or the Title Company will fill in the details.

PURCHASE PRICE: Buyer to pay under the following terms and conditions:
The first line put the name of the company that is handling your escrow account. On the second line put the total amount of cash you are willing to put up as earnest money. On the last line list any amount and the terms and conditions for any promissory notes you are giving for additional security.

If you can assume the present mortgage than circle the word assume. If you have to or decide to finance out the present mortgage than circle the word finance. On the first blank write in the name of the current mortgage company. On the next line write the percentage rate of the present mortgage. On the third line write the amount of the monthly payments being made to repay the principle and interest on the mortgage.(Note: Most people have insurance and taxes escrowed from their mortgage payments. These need to be separated from the amount you place on this line.) Then write in the approximate balance left on the mortgage and how many years are left till it is paid off.

On this line you will list the interest, principal amount, monthly payment and length of time you are willing to pay for any private loan above the amount listed in the above section.

Use this space to refer to any other amounts and agreements you are willing to make with the seller. Example: Use addendum to show payment terms for the down payment.

Example: Refer to a contract you have with the real estate agent to pay their commissions, which you want credited to your total purchase price, etc.

List here any other amounts you are willing to pay the seller at closing. Example: Seller has already paid the taxes and insurance for the entire year. At closing you will prorate the year and refund any amount already paid past your closing day.

TOTAL PURCHASE PRICE: Add up all the above sections and this will give you your total purchase price.

This is more for depreciation of income property on your taxes but you should do this whenever you purchase a property for just in case reasons. If there is an appraisal use it for these figures. If there is not an appraisal than use the current recorded numbers and adjust as needed.

III. FINANCING: Use this section if you are going to borrow any money to complete the deal. On the first line put how long you want the seller to give you to arrange a loan. On the next line list the maximum amount of interest you are willing to pay on this loan. Then list the maximum length of time you will accept for repayment on this loan. On the next line put in the amount you are going to borrow. Then check off which direction you want to go if this loan does not become available. Its always good to have more than one plan before you submit your offer.

V. Use this section to make known the amount of time you want or are willing to take to make this offer work. i.e. 60 days, 90 days, 180 days, etc.

VI. CLOSING DATE: If you are using a Title Company let them fill in this date for you. If you are not using a Title Company you will have to figure out how long it will take you to do all the necessary work to close this deal. Give yourself at least 60 days when you first start out.

VII. RESTRICTIONS, EASEMENTS and LIMITATIONS: This section is used to express what conditions you need to be present to use the property for your needs. If these conditions are not possible then the deal would be dead. If all you need is to live there than it probably doesn't matter but if you plan on having any kind of business you will need to check out all of these very carefully to make sure you can legally do so.

XV. TERMITES: Put a check mark on who will pay for this inspection. I strongly recommend you have this inspection done before you close on any property.

XXII. EXPENSES: Put a check mark on who pays each item listed.

XXXIV. UTILITIES: Put a check mark on whichever you want done. You should always ask the seller to pay for everything so you will appear flexible when you agree to cover some of these costs!

XXXIX. List here what you plan on using the property for.

XLI. SPECIAL CLAUSES: Use this space to offer any special ideas you may have to help the seller accept this offer. Example: Seller needs to live on the property for a month after you close. Your special clause would be granting the seller the right to live there for the amount of time agreed on for whatever amount in rent you decide on. This usually works the other way though with you asking to occupy the property before closing. This is common and the terms would be listed here.

Witnesses: Top section is for the buyer's to sign on.

Next section is for the seller's to sign on.

Deposit(s) under II(a) received: Have the agent for whichever company you use for an escrow account to sign here. This will be an Attorney, Title Company or Real Estate Broker.

BROKERAGE FEES: Put a checkmark on who is going to pay the real estate commissions on this property. Then have the appropriate signature placed under the real estate agents signature.

This contract covers just about any and all things involved in the transfer of a title. Make sure that you and the seller always initial above and below any crossed out sections, mistakes, and each page number.

The other form used in making your offer is the Addendum. You will use this form to explain the terms of your offer. An example would be: On your "Contract for Purchase and Sale" under section II part (d) Other:____$___. Let's say the owner wants $10,000 down. You would write the word "Addendum" in the first blank and put the amount 10,000.00 in the second line. On the "Addendum" you would explain the terms you are offering the seller to pay the $10,000 down payment, such as:
The $10,000.00 down payment the seller is requiring will be paid by the buyer as follows:
A.) Payments of $100.00 a month will be made for 59 months.
B.) Interest on the $10,000.00 will be at 10% and will accumulate but not compound.
C.) Balance of the $10,000.00 principle and any interest can be paid off at any time during the 59 month period but is due in full by the end of the 60th month from date of closing.

Another example would be where the buyer sends the monthly payments. On the "Addendum" write:

  • All payments the buyer makes toward the purchase of the property described above will be made to the escrow account located at (Escrow Company Name) at the buyer's expense. (This is the only way I recommend you ever make payments on any contract!)

    Now you should see how you use the "Addendum" to make known any terms or conditions that are not explained in the main contract.

    The "Addendum" is also used by the seller to make any counter offers back to you. I have seen as many as 4 pages of "Addendum" sheets filled up before an offer was accepted! Make sure you read the contract and all Addendum's in full each time they come back to you as a counter offer before you sign them off to closing! I have seen sellers change things in a contract that have not been noticed until the closing was over. It ended up costing hundreds of dollars in extra expenses over the first year that was not planed for. Always read and reread your contracts!

    When you first start writing offers it will probably be one of the scariest things you do in your new business. Just remember to always offer less than you will actually give. This will create a safety zone for you and possibly get you a great deal! After you make a few offers it will become routine and in time you will be creating more complicated offers that bring a since of great accomplishment!

    QUICK TIPS!
    Make sure you know what you are offering on your contract before you sign it or submit it. Get all the facts you can and always offer less than you will agree too.
    Have your contract reviewed by an attorney or Title Company before you start the closing process.
    Review the contract and all Addendum's completely every time they change hands. Make sure and check it closely before you sign off to closing.


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