What goes into a written offer

Buying a home is not only one of the biggest investments a person makes in his or her life, but the amount of paperwork and legalities involved are also enormous. A written offer is the final and one of the most important aspects of the home buying process.

Once you have found your dream house and you are ready to pull the trigger on purchasing it, what comes next is a written offer. Although it sounds simple, a written offer is a legally binding contract which can have serious legal and financial implications if done incorrectly.

All the paperwork that’s involved in the formal written offer is prepared by the buyer’s real estate agent. The agent will get input from the buyer for payment terms, contingencies, and legal protections. It is very important to be knowledgeable about what goes into this document.

The starting point of a written offer is the price the buyer is willing to pay for the house. Other factors include the method of funding the mortgage, the down payment amount, earnest payment, and closing costs, inspection of the home, conveyances, terms of cancellation, any repairs to be performed by the seller, timeline of events leading to the closing, mediation, etc.

The following terms are typically included in a written offer according to Freddie Mac:

Proposed purchase price
It is a good idea to discuss the offer price you are proposing with your agent because they can figure out the prices at which similar homes were sold in the area, market conditions, overall condition of the house, supply and demand, etc. Too many people make the mistake of low-balling their first offer, hoping the seller would come back with a slightly higher counter offer. This strategy can backfire if the seller feels insulted by the low offer and refuses to make a counter offer or if another buyer makes a better offer and purchases it while you are waiting to hear from the seller.

Concessions
This includes things you'd like the seller to help pay for, such as portions of the closing costs, home owners warranty, and other expenses.

Conveyances
This includes any personal property that the seller may leave behind such as kitchen appliances, washer or dryer. These items must be clearly itemized and listed in the written offer.

Home inspection contingencies
The written offer must clearly state that you would proceed with the sale only if the home inspection comes out clean. Many surprises can show up after a home inspection such as mold, radon, termites, etc.  You must determine if you would ask for a reduction in the sale price and do the repairs on your own or if you want the owner to repair them before the sale is made.

Earnest money
Earnest money is a deposit the buyer offers to show their seriousness about purchasing the house. Earnest money is usually held in escrow and applied to the buyer’s closing costs at settlement.

Acceptance
This covers how long the seller has to respond to the buyer’s offer before the offer is no longer binding. If the seller accepts the offer outside of this time limit, the offer may no longer be legally binding

Mediation and arbitration
These are legal methods for handling contract disagreements between the buyer and the seller.