MAKING AN OFFER? HERE’S WHAT TO EXPECT.
About to make your first offer on a house or condo? No idea what the heck that means? Here’s what to expect (unless in you’re in a bidding war, where all the rules are different):
- Decisions, Decisions Once you’ve found the house or condo you want to buy, you need to decide the terms and conditions of what you want to offer the Seller (price, closing date, conditions, etc.) There’s more than just a number to think of! Your real estate agent will help in determining a fair price, and will give you guidance on what other terms and conditions you should include.
- The Purchase and Sale Agreement it’s your official offer to the Seller.
- Time To Accept Your offer is only valid for a certain amount of time – we call this the time to accept – this is the time period that the Seller has to consider your offer. After the time period has expired, if the Seller hasn’t accepted your offer, your offer bursts into flames and you aren’t committed to it any more. Irrevocable periods vary, but we’ve seen everything from 12 hours to 72 hours. If the seller counters your offer, you are not committed to abide by the terms of the initial offer you presented.
- Offer Presentation The real estate agents for both the Buyer and the Seller generally make plans for an informal offer presentation – usually via email and then they discuss it over the phone to make sure all of the terms are clear.
- Negotiations The Seller can now do one of 3 things with the offer:
- Accept the offer as is They agree to the terms and conditions you’ve offered and sign it. Congrats!
- Counter the offer with different terms (for example, at a higher asking price, with different closing date, etc.). This now becomes a counter-offer from the Seller back to the Buyer. This is the most common scenario–usually a number of back-and forth negotiations take place with each side making concessions until hopefully a mutually agreeable contract is reached. Counter offers are typically done informally, either verbally or via a short email until the terms are agreed to by all parties. At that point, a new Purchase and Sales agreement is drawn up and signed by all parties.
- Decline the offer If your offer is totally unacceptable to the Seller, they have the option of simply declining it–no negotiation, no anything. We’ve seen Sellers decline low-ball first offers, and we’ve seen offers declined mid-negotiation.
If an accepted Purchase and Sales Agreement is reached, the Buyer will need to provide a deposit (in escrow) to the Listing Broker (usually anywhere between 1-10% of the purchase price and usually paid within 24 hours of the agreement being reached). Any conditions (for example, a financing condition or home inspection condition) then need to be met before the agreement is considered “Firm.” If there aren’t any conditions, the agreement is firm as soon as the agreement is signed and deposit paid. Yay! You now own a new home.
Making an offer on a house or condo is an exciting but crucial (and often stressful) part of the process; a good realtor can help reduce the stress by preparing you for potential scenarios ahead of time, helping choose a strategy, guiding you through the process and advising you of your options (and possible outcomes) at each step. It may be the biggest financial step of your life, but remember, we do this every day!