Signing On The Dotted Line
A buyer makes an offer by submitting a written and signed offer to purchase, which will become the sales contract when ratified by everyone’s signature. Once the seller and buyer sign the paper, they are bound by the contract conditions.
The “presentation of a contract” begins when the selling broker registers the offer with the broker’s own office and notifies the listing broker of the offer. The listing broker then arranges a presentation appointment with the home seller, and with the selling broker in some areas. (The buyer doesn’t attend the presentation.)
Either the selling broker or the listing broker presents the terms of the offer, depending on local customs. The listing broker acts as the home seller’s advisor. Part of the presentation is determining that the buyer is qualified financially to make the purchase. (Should either the seller or buyer be out of town, the contract is presented via telephone and confirmed later by FAX.)
Included in the presentation of the offer are a number of specific concerns. After all, once the contract is signed, it becomes the binding guideline for the transaction. Description of the offer will include, but is not limited to:
- Date, name and address of the buyer and seller, and the legal description of the property.
- Amount of earnest money deposit, which will be held in an escrow account by the broker, unless otherwise noted.
- Sales price.
- Size of down payment, and how the remainder of purchase price is to be financed. The offer should indicate the maximum interest rate the buyer is willing to pay, and the right to cancel without penalty if such financing proves unavailable.
- Proposed settlement and occupancy date, and daily rent provision for “post-settlement occupancy” if the seller cannot vacate and becomes the temporary tenant of the buyer.
- Contingencies, if any, such as satisfactory review by attorney, structural inspection, appraisal, or sale of the buyer’s present house.
- Other important provisions, including a list of items that convey with the sale, stipulation that title must be insured, and who is to pay various settlement costs.
Seller’s Net Sheet
Taken all together, this offer is reduced to dollars and cents on a sample net sheet, similar to the exercise during the listing appointment. The estimated outcome is determined, which allows the home seller to consider the “bottom line”.
A decision on an offer should be made at presentation, if possible. A home seller has three possible options.
- Accept the offer as written.
- Make a “counter offer” on unacceptable aspects. Counters are written in the margin of the contract or in addenda, and initialed by the home seller. A purchase offer with counters is not a ratified contract until the homebuyer accepts and initials the counters. Buyers can withdraw, accept or counter the counter offer.
- Reject the offer, if it is totally unacceptable. (Outright rejection, without a counter, should be the last resort.) A contract exists when all terms including changes are ratified by initials of all principals. When the contingencies are satisfied, the contract becomes enforceable.
All offers registered must be presented to the home seller. They will be presented in the order registered. The home seller should hear each offer completely and ask questions. No action is necessary until all offers are heard. If more than one offer is accepted or countered, an order of precedence must be established, such as primary, first backup, second backup. Be careful not to sell the home twice.
Questions and Answers
Is it best to turn down the first offers? In any transaction, it’s normal for the seller to wonder “Could I have gotten more?” and for the buyer to wonder “Should I have paid less?”. When your reasonably-priced house is put up for sale, the very first lookers may make an offer to buy. That doesn’t mean that you’ve priced your home too low. It means qualified buyers and their brokers have been looking — and waiting — for the right house to come on the market at just the right price. Your listing broker will advise you on all offers.
Does the sale of a condominium or a property within a Homeowners Association (HOA) require any special action? The purchase offer for a condo sale or homeowners association property will contain, in compliance with the law, a requirement that the seller furnish the buyer with certain disclosure information and documents. Ask about condo and homeowners association resale procedures in your area.
Do buyers ever offer more than the listing price? Rarely, but they do offer “above list” sometimes if they believe it makes their offer more acceptable than other competing offers. For the protection of all parties, it is best to include a separate statement signed by the buyer, indicating the buyer’s awareness of the list price and their reasons for the higher offer.
What do you do if the property doesn’t sell? The first step is to go over carefully with the listing broker why the property has not sold. Usually price and property condition are the key. Study and analyze what has sold in your area and at what price. Then relist the house after adjusting for shortcomings. Another option is to withdraw from the market and rent until the market improves, or simultaneously offer for sale or rent.
When will the yard sign be removed? Placing a sign in the yard is always done by mutual agreement between the listing broker and home seller. The law in Maryland, Virginia, and the District of Columbia allows the sign to remain in the yard after contract ratification, even though “for sale” is changed to “sold” after contract acceptance. However, ask your listing broker about local sign ordinances.
If a buyer forfeits the deposit, who gets the money? If the buyer fails to make full settlement, the deposited earnest money may be forfeited only after a release is signed by all parties. In the event of forfeiture, the deposit will be divided equally between the seller and the real estate brokers, but not to exceed the amount of the commission, or according to the sales contract.