Finding your dream home can be exciting but also a bit terrifying. Are you sure it’s the one? After all, the offer you put in is a legally binding agreement and that agreement includes a great deal of details.
There are several things to consider before you make an offer on a house. First, have you gotten a mortgage preapproval from at least one lender? It is ideal to get preapproved before you start looking at houses because this will allow you to learn how much house you can afford. The preapproval also lets the seller know you’re a serious buyer who can close the deal.
Next, consider your market to ensure your offer is competitive. Your real estate agent can provide you a comparative market analysis or you can gather the information from your own research. Submitting an offer that is slightly less that your preapproval amount will allow you some room to negotiate.
Lastly, verify with your lender that the down payment required is in the bank and ready to go. Having the money set aside or assets planned for the funds to buy the home isn’t enough to ensure a smooth transaction. Having direct money with immediate access for the earnest deposit, down payment and closing costs is essential. Only the earnest money will be paid right away. It gets transferred into an escrow account after your offer is accepted.
While it may be called an offer letter, it is a legally binding agreement. The offer typically contains the home’s legal address along with a legal property description, details regarding the price and terms, the amount of money and terms concerning the earnest deposit, title, closing costs, the date and time of the offer’s expiration, a projected loan closing date, and contingencies.
When you man an offer on the home, you will most likely be required to include a deposit known as earnest money. This is given to a neutral party like an escrow agent or a real estate title company. These entities will hold the money in escrow and can be anywhere between 1% and 3% of the total purchase price. The offer letter will likely include what circumstances you will have to forfeit the money. For example, you decide to back out of the deal without a reason covered in the purchase agreement. However, if the deal goes south due to the seller like refusing to make repairs found in the home inspection, you can get your deposit returned. If the deal goes through, the earnest money is applied to the down payment.
Once the seller reviews your offer they can decide to accept, counter or decline. If the offer is accepted, you will apply for a mortgage and being the process of closing. If the seller offers a counter, you can accept and being the closing process or you can choose to counter again. This will require a new offer letter.
If the seller refuses the offer, it’s time to move on to a new home. Good luck!