A written proposal is the foundation of a real estate transaction. Oral promises are not legally enforceable when it comes to the sale of real estate. Therefore, you need to enter into a written contract, which starts with your written proposal. This proposal not only specifies the price but also all the terms and conditions of the purchase. For example, if the seller offered to help with $2,000 toward your closing costs, make sure that’s included in your written offer and in the final completed contract, or you won’t have grounds for collecting it later. REALTORS® have standard purchase agreements and will help you put together a written, legally binding offer that reflects the price as well as terms and conditions that are right for you.  Your REALTOR® will guide you through the offer, counteroffer, negotiating, and closing processes. In many states, certain disclosure laws must be complied with by the seller, and the REALTOR® will ensure that this takes place.

If you are not working with a real estate agent, keep in mind that you must draw up a purchase offer or contract that conforms to state and local laws and that incorporates all of the key items. State laws vary, and certain provisions may be required in your area.

 After the offer is drawn up and signed, it is usually presented to the seller by your real estate agent, by the seller’s real estate agent, if that’s a different agent, or often by the two together. In a few areas, sales contracts are drawn up by each party’s lawyers.

What's Included in your Purchase Offer

The purchase offer you submit, if accepted as it stands, will become a binding sales contract (known in some areas as a purchase agreement, earnest money agreement, or deposit receipt). So it’s important that the purchase offer contains all the items that will serve as a “blueprint for the final sale.” The purchase offer includes items such as:

• address and the legal description of the property
• sale price
• terms: for example, all cash or subject to you obtaining a mortgage for a given amount
• seller’s promise to provide a clear title (ownership)
• target date for closing (the actual sale)
• amount of earnest money deposit accompanying the offer, whether it’s a check, cash or promissory note, and how it’s to be returned to you if the offer is rejected – or kept as damages if you later back out for no good reason
• method by which real estate taxes, rents, fuel, water bills, and utility payments are to be adjusted (prorated) between buyer and seller
• provisions about who will pay for title insurance, survey, termite inspections, etc.
• type of deed to be given
• other requirements specific to your state, which might include a chance for an attorney to review the contract, disclosure of specific environmental hazards, or other state-specific clauses
• a provision that the buyer may make a last-minute walkthrough inspection of the property just before the closing
• a time limit (preferably short) after which the offer will expire
• contingencies, which are an extremely important matter and are discussed in detail below

Contingencies – “Subject To” Clauses

If your offer says, “this offer is contingent upon (or subject to) a certain event,” you’re saying that you will only go through with the purchase if that event occurs. Here are two common contingencies contained in a purchase offer:

The buyer obtaining specific financing from a lending institution: If the loan can’t be found, the buyer won’t be bound by the contract.

A satisfactory report by a home inspector: for example, “within 10 days after acceptance of the offer.” The seller must wait 10 days to see if the inspector submits a report that satisfies the buyer. If not, the contract would become void. Again, make sure that all the details are explicitly stated in the written contract.

Negotiating Tips

 You’re in a strong bargaining position, that is, you look particularly welcome to a seller, if:

• you’re an all-cash buyer
• you already have a preapproved mortgage and you don’t have a present house that has to be sold before you can afford to buy
• you’re able to close and take possession at a time that is especially convenient for the seller

In these circumstances, you may be able to negotiate some discount from the listed price. On the other hand, in a “hot” seller’s market, if the perfect house comes on the market, you may want to offer the list price (or more) to beat out other early offers. It’s very helpful to find out why the house is being sold and whether the seller is under pressure. Keep the following considerations in mind:

• every month a vacant house remains unsold represents a considerable extra expense for the seller
• if the sellers are divorcing, they may want to sell quickly
• estate sales often yield a bargain in return for a prompt deal

Inspection Timing And Results

Homebuyers usually arrange for an inspection after signing a contract or purchase agreement with the seller. The results may be available immediately or within a few days. The home inspector will review his or her findings with you and alert you to any costly or potentially hazardous conditions. In some cases, you may be advised not to buy the home unless such problems are remedied. You could include a clause in your purchase agreement that makes your purchase contingent upon satisfactory inspection results. If major problems are found, you can back out of the deal. If costly repairs are warranted, the seller may be willing to adjust the home’s price or the contract’s terms. But when only minor repairs are needed, the buyer and seller can usually work out an agreement that won’t affect the sale price.