Breaking Down the Offer

The truth is in the details
After all the preparation and waiting you finally get the call you’ve been waiting for: Someone is writing an offer.
First, you experience a rush of adrenaline, followed by the thought it could be a low-ball offer. Welcome to the rollercoaster. Agents don’t usually want to tell you the amount of the offer over the phone because there are other aspects to consider, such as contingencies, seller concessions and real property requests.
It’s only natural to focus on the price, but once you’ve processed that, make sure to look at the rest of the offer before you jump up and down or ready a tirade. It’s possible to get a full-price offer and have it net you less money than one $20,000 under your asking price.
Your agent will help break down the offer but it’s a good idea to have a working knowledge of the contract beforehand. Although real estate sales contracts can vary by state, they generally need to include similar information. Here’s a look at what you’ll find in a real estate sales contract that could affect your bottom line:
Earnest money deposit. This is intended to show how serious the buyer is. If an offer might be thought of as weak, a buyer will sometimes include a large earnest money deposit to show they are committed to purchasing the property. The buyer usually dictates where the deposit is to be held and that’s rarely in the hands of the seller. Usually, the check goes to a third party, such as escrow, an attorney or even a broker’s trust account. This depends on local real estate custom. The earnest money deposit usually goes toward the buyer’s down payment. If either party is unable to meet the agreed upon contingencies and the deal falls apart, the buyer receives their deposit back. Most real estate contracts also have a section on any disputes going to arbitration, so the odds of the seller getting all or a portion of the earnest money deposit if the buyer backs out, is doubtful.
Purchase price. This is the line everyone cares about the most. But before breaking out the champagne, read on and make any adjustments to the price based on what the buyer wants as part of the offer.
Mortgage contingency. This is likely the first contingency you will see. Here, the buyer state’s their offer is based on acquiring a mortgage for a certain term and rate. You need to make sure the rate and term are realistic. Occasionally, a buyer will use this as an out clause by stating unrealistic figures, such as a 30-year, 5 percent fixed-rate loan with no points when that type of loan carries a 7 percent rate with 1.5 points in your area. If this goes unaddressed, a buyer could be hedging their bet by tying up your property and then backing out because of cold feet or they find something they like better. It doesn’t happen often, but you need to be aware of the possibility. Also, make sure there is a realistic time limit stated in the contract, otherwise the buyer can take as long as they want “looking” for terms that they are not going to get. This is also where a buyer would specify whether they want you to carry back a first or second mortgage.
Seller concessions. This could be anything from the seller paying some or all of the buyer’s closing costs to agreeing to having seller funds put aside to pay for a new roof. If you are in a hot market, buyers usually ask for few concessions because they know they aren’t likely to get them. The cooler the market, the more seller concessions the buyers want.
Inspection contingencies. Here the buyer states that their offer is contingent on them accepting a home inspection report that they pay for. It also can include contingencies for the pest, well and/or septic inspections. Legally, they could include a contingency for their mother-in-law approving the purchase, so make sure the contingencies are realistic.
Personal property. This is where the buyer can ask for everything and the kitchen sink. They may not want anything or they may want your great aunt’s grand piano that looks great in the music room, or the fountain in the back yard. They may want the washer and dryer or the refrigerator. Basically, anything that is physically attached to the property is considered part of the transaction and would belong to the buyer. This would include light fixtures, a dishwasher or custom book cases. Furniture or a refrigerator are not attached and therefore belong to the seller. As the seller, though, make sure to state in your listing or any counter offers if there are “attached” items that will not be included, such as the dishwasher, Viking stove and trash compactor that match your fridge or your antique light fixtures. Buyers may also include items they want removed before closing, such as the dilapidated shed or the 27 cans of old paint in your garage.
Appraisal contingency. The buyer will include this to make sure the house appraises for the sales price. In rare cases, a bank won’t appraise the house for the agreed upon price. It becomes more common if there are more seller concessions. For example, if the agreed upon price is $300,000 but includes up to $10,000 in buyer closing costs, the house may not appraise if it’s really worth $295,000
Buyer selling property contingency. You may get an offer that is contingent on the buyer selling their property. Sellers must be careful of this situation. Basically, the buyer can only fulfill the contract if he sells his house. The key to this contingency is to make sure there is a time limit, otherwise the buyer can tie up the property for possibly months or longer. Usually, a seller responds by including a 72-hour clause, also known as a kick-out clause. This clause allows the seller to keep the house on the market. If another offer is received, the seller gives the buyer 72 hours to fulfill the contract or the deal is cancelled.
With all of these other aspects to an offer to consider, it should be obvious to a seller that the purchase price is just the beginning. You won’t know how much the sale really gets you until all the other factors are subtracted or weighed.

Raised and educated in the Bay Area, I have an unique insights and perspective on the area. As a Mother I have first-hand knowledge of the local school systems, as well as recreational and business opportunities. My clients' satisfaction is my ultimate goal, and my genuine love of people makes a personal approach to service the key to fulfilling Real Estate dreams Whether buying or selling, I am committed to meeting my client's expectations. I understand that buying or selling a house can be a stressful time. With my expert knowledge of the real estate process, I am able to guide my clients and relieve some of the stress. I love what I do, and I am dedicated to providing professional service with honestly and integrity. My mission is not complete unless my clients are happy. Please contact me if there is anything I can do to help you.

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