When you are ready to make an offer on a home, knowing how to craft it well can be the key to securing a dream house. However, for first-time homebuyers, especially in a competitive market like that of the Palm Desert area, submitting that first sales contract to the seller can be daunting. Before you are ready to make an offer, familiarize yourself with the important pieces of a purchase agreement to make sure you will be bidding with confidence.
Continue to read to take a look at the 4 most important elements of making an offer on a residential property.
4 Elements of a Good Purchase Offer
1. Money
It isn't just the buyer who has financial considerations to make during a home purchase deal. Both the seller and the person purchasing a property need to look at several monetary components before signing a purchase agreement. These include the following:
- Purchase Price: The notable part of your offer will be the amount of money proposed to pay for the home.
- Financing Plan: The seller has to know the proper financing to pay for the property, for example, using an adequate loan.
- Earnest Money Deposit: This shows you are serious about purchasing the property, and the money is placed in an escrow account. Once the seller has accepted your offer, the earnest money is applied toward the closing costs or downpayment at closing.
- Closing Cost: Covering items like property, taxes, title fees, loan-related fees, and insurance fees, closing costs are to be considered early in the offer-crafting process to pay depending on the loan type, the time of month you close, property taxes, and how much is put down on the loan.
- Inspection Costs & Utilities: Buyers can expect to pay for inspection costs themselves, while sellers are responsible for revealing major issues with the property. Buyers are responsible for digging deep before purchasing a property, and the seller is responsible for keeping the utilities on and running throughout the buying process.
2. Contingencies
Making an offer on a home is not a simple process. Many real estate contracts have contingency clauses that define a condition or action that has to be met for the offer to go through. The following are typical contingencies seen:
- Home Inspection: The most common contingency is a home inspection, allowing the buyer to have a professional home inspection conducted, and leave it open to requested repairs from the seller, or the deal can be terminated completely at no penalty.
- Moisture & Termite Inspection: If a loan is being obtained, this contingency is a must as all lenders are required a clear moisture and termite letter before a loan will be finalized. This inspection is separate from the home inspection and is conducted by a licensed moisture and termite expert.
- Appraisal: When a standard type of mortgage is used, your offer will be contingent based on an appraisal. Banks require a professional appraisal to confirm the value of the home is equal to or greater than the purchase price.
- Loan Contingency: If you are obtaining a loan, ensure your offer is contingent on securing your financing.
- Viewing the Property: In many cases, you will be making an offer before you, your spouse, or other invested parties have had a chance to view the property in person. If you live out of state but wish to show your serious interest, you will want to use this contingency before you can view it.
- Other Inspections: Depending on the property, you might make your offer contingent on completing other inspections, like the well, fireplace, or chimney.
3. Timing
Timing is another key component in creating an offer on a dream home in the perfect school district for your family. There are many time-b based items to consider:
- Closing Date: Many factors drive your ideal closing date, and in general, a quick closing date is considered to be about 30 days. To settle any sooner than that mainly requires a cash offer, and financing can take some time to come through. If you don't have a specific move-in date in mind, ask the listing agent what the seller's ideal closing date would consist of.
- Inspection & Contingency Completion: If you include contingencies, like getting an offer on your current home or completing inspections, it is a good idea to state when these contingencies will be resolved.
- Life of Your Offer: Depending on the pace of the market, you might also specify in your offer how long the seller has to respond to you before your offer is rescinded.
4. Disclosures
Depending on the state in which you live, there are tons of different disclosures provided by the buyer that you will be required to review and sign. These will look like addendums to the purchase agreement like the contingencies might be. Some of the most common disclosures are the following:
- Lead Paint: It is common knowledge that lead paint leads to a slew of health issues, such as kidney damage, brain damage, and anemia for those exposed. Sellers must disclose the presence of lead paint in their home or on the property if they know of this.
- Brokerage Relationships: If you have an agent and the seller has an agent, chances are both agents work for a specific brokerage that is a vested party in the sale. This type of disclosure states which brokerage represents you as the buyer and which represents the seller.
- Defective Drywall or Pending Violations: Sellers must disclose the known use of defective drywall, a rare but real issue, and pending building or zoning violations for the property so the buyer isn't caught unaware.
The Bottom Line
Making an offer on a home requires attention to detail—many details—and with the right Palm Desert real estate agent on your side, your offer can be airtight and work in your interest. Spend the majority of your time considering costs, contingencies, timing, and disclosures before signing your purchase agreement. Every minute is a minute well spent.