Making an offer to Purchase
- When you have found a property and are ready to make an
offer, it is important to figure out the true market value
of the property. In order to do this, you need to find out
how much, similar properties, in the same area, are selling
for. One source for this information is the Multiple Listing
Service(MLS). This service lists all properties currently
listing for sale and a history of prices of properties that
have already sold. The MLS provides detailed descriptions
of the # of bedrooms, bathrooms,square footage, age, monthly
assessments, market timing, as well as a description of
the property and its condition. Realtors will have access
to the MLS and will be able to help you to formulate an
offer. If you are not working with a realtor, an appraiser
would be a good source to determine value.
Terms
of the Purchase Contract
Earnest Money - When you submit an offer, you should
be prepared to make a deposit. This deposit is referred
to as "earnest money" and is given as a show
of good faith that you are sincere about your offer. If
the sale goes through, your earnest money will be deducted
from the amount you owe the seller at closing. The earnest
money will be refunded if the sale has to be cancelled
because you are unable to get a mortgage loan. The amount
of the earnest money deposit is negotiable. This amount
should be substantial enough so that the seller feels
comfortable with taking the property off of the market.
A larger deposit will show a seller that you are very
serious about purchasing this property. You want to make
sure your earnest money will be placed in an interest
bearing account as this money will sit idle until you
close on the home.
Attorney Review - Defined as the period of time
in which your attorney can review, rewrite, and/or delete
sections of the contract that he/she feels is not in your
best interest. This period of time is typically between
5 to 10 days, and allows for amendments to the contact,
as well as hiring a home inspector to make sure the home
is structurally sound and that the appliances are in working
order.
Tax proration - The seller of a property is going
to credit you the amount of real estate taxes due on that
property up to the day of closing. This amount is referred
to as the "Tax Proration". When signing a contract
it is common practice to make that proration based on
105% of the most recent assertainable tax bill. This is
to cover an increase in taxes.
Mortgage Contingency - This is a period of time
allowed for you to obtain mortgage financing. Typically
the time frame is 30 - 45 days from the date of the signed
contract. Without this contingency you risk losing your
earnest money in the event that you are unable to obtain
financing.
Closing Date - The date by which legal posession
of the property shall be delivered to the buyer.
