So you have found the perfect home and you are ready to take the next step and make an offer. At this point in the process, your Realtor will provide the critical market knowledge and experience to help you determine the home’s value and a fair offer.
What does an offer look like and how does it work?
It’s actually pretty simple. In Texas we use a standard eight page contract form that has been developed by the Texas Real Estate Commission. Your Realtor will use this contract, any required contract addendums, your pre-approval letter, and a copy of your earnest money check to submit to the listing agent as your offer. The contract form and addendums will need to be signed by you and your spouse (if you have one).
What are the important things that go into an offer?
Sales price: The offer will contain a breakdown on the cash portion and financing portion of your offer. The higher the cash portion, the stronger your offer will appear to the seller.
Financing: Most buyers will make their offer contingent on their approval for the financing detailed in a Third Party Financing Addendum.
Earnest Money: This is the cash amount that a buyer delivers to the title company to show the seller that they are a serious and qualified buyer. For most purchases, this amount is roughly 1% of the overall sales price. The earnest money is credited to the buyer at closing.
Title Company: This is usually selected by the seller. It is common practice to request that the seller pay for the owner’s title policy.
Survey: This is where you will identify whether you are requesting for the buyer or seller to pay for a new survey. In some instances, the seller may have an existing survey that they can deliver. A ballpark cost of a survey is around $450.
Close Date: This is where you identify the actual end date of the contract which will also be your closing date. For offers with financing, you should make this date at least 30-45 days from the date of the offer.
Seller Paid Closing Costs: This is where you will identify whether you are requesting the seller to pay for all or a portion of your closing costs. Most loan programs will allow up to a 3% contribution. This can be helpful to buyers that would prefer to hang on to as much cash as possible.
Option Period: This allows the buyer to identify the number of days and cost for the unrestricted option to terminate the contract. It is common to ask for 10 days for $100. This period will start once the contract is executed by the seller. It’s a good idea to get the home inspected during this option period.
There are many other details in the contract that your Realtor should review with you, but this should give you a good idea on the major points. Once your Realtor submits your offer to the listing agent, the seller will usually respond within 48 hours. At that point, you may accept the seller’s response, hold firm to your original offer, or provide a counter offer. Your Realtor should advise you on the appropriate response.
This is the sixth post in our ongoing series aimed to provide help and guidance to Houston’s first-time home buyers. Check back with us soon, subscribe to our feed, or follow us on Twitter or Facebook for updates on this topic.
This is the sixth post in our ongoing series aimed to provide help and guidance to Houston’s first-time home buyers. Click here to check out the 7th Step for Houston’s First-time Homebuyers. Or if you would like to speak to a real live human about these questions and steps, fill out the form below.