Negotiating Your Offer
Buying Boston Area Real Estate
After deciding on a price, the offer is written. All offers must be in writing to be enforceable according to the Statute of Frauds.
Most real estate professionals use the preprinted form provided by their area REALTOR® association. Consequently there is not one standard form in Massachusetts. The one we like to use is a “contract to purchase” and is legally binding. This form allows the buyer to end the transaction while the seller has no escape clause.
Price isn’t the only consideration in your offer, although it is usually the strongest. Other factors are: how strong you are financially, if your closing date is agreeable with the seller's closing date and how flexible you can be. How can you convince the seller you are the best buyer for their property? What does the seller need and want?
You also need to know when to ask for what. We need to look for any exclusions on the listing sheet. You need to decide what personal items you want to include as part of your offer.
Fixtures typically stay unless they are excluded. Personal property is a different story, but it’s not always best to ask for a lawn mower, piano, refrigerator, or washer/dryer in your initial offer. Your Buyer’s Choice Agent will coach you in this area.
Timing is also an important factor. Is the seller in a rush or comfortable staying for a while? Is the sale contingent upon them finding suitable housing? Can the parties close and the sellers lease back? The information in the offer will eventually be transferred into the purchase and sale agreement along with your attorney's additional addendums and riders to protect your interest.
Contingencies These contingencies should be included in any written offer:
Financing Contingency This states the amount of financing you will be applying for and accomplishes two things. One, it protects your deposit should your financing be turned down and states that if you are unable to obtain your loan by a certain date, you may withdraw from the transaction and have your deposit money returned. Two, it tells the seller how strong a buyer you are. They can see from the mortgage amount whether you are a 5%, 10%, 20% down or more buyer and this could matter in a multiple offer situation.
The Home Inspection Contingency is written into the offer and is a 10 day time-frame, to give you a chance to have the property inspected. A buyer broker contingency should state something to the effect that "If the property is found to be unsatisfactory in any way to the buyer, the buyer may terminate the offer and have the deposit returned."
The traditional seller agent will have a contingency that states that a only certain amount of damage, i.e. $500 or $1,000, will allow the buyers to get out of the transaction and have their deposit returned.
The Body of the Offer will contain the address of the property, the brokers involved in the transaction, the offer price, an initial deposit (usually $1,000), the second deposit to be put down at Purchase and Sale (usually 5% of the purchase price minus the $1,000 initial deposit), the date of the Purchase and Sale Agreement (usually within two weeks); the closing date; who holds the deposit (usually the listing agency); what is included in the sale (i.e., refrigerator, washer, dryer); any additional terms of the offer.
Presenting Offers After you have met with your agent and completed the offer it is now time for the agent to present it. This is often done by phone and fax as the two agents speak with each other and go over the specifics of the offer. This is where your Buyer’s Agent can influence the listing agent and schmooze a bit to get the agent wanting you as the buyer. Sometimes it is better for the two agents to meet alone privately instead of settling for a phone conversation. On other occasions your agent may suggest it is best for them to meet with the seller in the presence of the listing agent. This is usually done when there is some animosity present. It is inappropriate for the agent to “go around” the listing agent. But in some instances when your agent is not getting cooperation from the listing agent they may talk to you about alternative ways of presenting the offer to the seller.
Counter-Offers Sometimes counter-offers are handled verbally until price and terms are agreeable to both parties. Then it must be put in writing in order to be legally binding. Many times a counter-offer is in writing but requires the seller’s signature after the buyer agrees in writing to the counter-offer. From the buyer’s standpoint this doesn’t make much sense, so we usually are inclined to write a new offer with the clause “already agreed verbally” and then get the seller to sign and return to us and the buyer.
Accepted Offers An offer is never legally accepted until you have a contract signed by both parties. A phone call from the listing agent saying, “congratulations, the seller accepted your offer” means very little until you have the fully executed contract to purchase in hand. next topic »
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