Preparing the Offer to Purchase
You have located a property that you would like to purchase. The first step is to determine your financial strategy to purchase. The next steps are to determine the conditions of your offer – price, time, terms, and chattel. All offers to purchase consist of balancing of these four elements. This article will contain information regarding:
I. Financial Strategy – the mortgage amount, monthly payment, and required cash
II. Price – potential factors affecting value and price
III. Time – the date closing will occur
IV. Terms – contract terms
V. Chattel Property – personal property to be conveyed
VI. Other considerations
AskChristee offers a very powerful tool to develop your financial plan for purchasing a particular property. The module is also on the AskChristee phone app. Click here to run the ‘Buyers Choice’ AskChristee Module.
Yes, buying a home can be an emotional and stressful situation. We suggest that you attempt to control your emotions and move forward in a business like matter. Buying a home is a business transaction and should be approached as such. You really should resist falling completely in love with the property until your offer is accepted by the seller.
I. Financial Strategy
Prior to submitting your offer, you need to have a firm understanding of your mortgage options to purchase the property. The options to consider are:
1. Mortgage Type – Conventional, FHA, VA, or USDA
2. Mortgage Amount – Base mortgage amount plus any upfront mortgage funding
3. Monthly Payment – Total payment, PITI, plus any mortgage insurance
4. Minimum Cash – Payment based upon minimum down payment
5. Optional Cash – Should you invest more than minimum down payment?
6. Closing Cost – Estimated closing cost
7. Seller Concessions – Seller contribution to closing cost
8. Total Cash Required
AskChristee Module ‘Buyer Choice’ will detail all the data required to quickly and efficiently develop a financial strategy to purchase. Use the AskChristee mobile app while viewing homes.
II. Price
Your agent should be willing to share their opinion regarding market value of the property. Nevertheless, you ultimately must decide the price you are willing to pay. Often, your agent will have had a conversation with the listing agent and has some insight into the seller’s circumstance and their position relative to things such as:
1. Asking Price – Is the asking price reasonable? Have you reviewed comparable homes either on the market or that have recently sold? Your agent should be able to interpret the comparable homes data and make a recommendation.
2. Days on Market – How long has the home been on the market? Should “days on market” be a consideration or are there extenuating circumstances?
3. Urgency – Based upon the asking price and days on market, do you think you need to move quickly in making an offer?
4. Current Owners – How long have they owned the property? Are you aware of any circumstances that may be motivating the sellers?
5. Financial Considerations – Are there any known financial urgency to the sellers?
III. Time
How quickly can you close on the property? Do you know if time is important to the sellers?
IV. Terms
Potential terms of the offer would include items such as:
1. Mortgage Contingency. Will your offer be contingent upon mortgage approval?
2. Concessions. Are you asking the seller to pay part of your closing cost? Depending upon market conditions, sometimes buyers pay asking price in exchange for seller concessions.
3. Contract Contingencies. Are there any other contingencies you require such as selling your current home?
4. Inspections. A large percentage of offers to purchase are subject (contingent) upon a structural inspection of the property. Would you like a separate inspection for things such as: (a) Chimney (b) Swimming Pool or Spa (c) Radon (d) Termites (e) Mold (g) Septic (h) Well (i) Lead paint (j) Asbestos (k) Environmental Study.
V. Chattel Property
Are you asking the seller to include any items that are not considered fixtures (permanently attached to the property)? Some chattel (personal) property may be included in the listing such as washer and dryer. For example, do you want the deck furniture included in the sale which was not part of the listing?
VI. Other Considerations
Other items to consider when drafting the offer:
1. Utilities – Would you like to see current owner’s utility bills?
2. Condo or HOA – How much are the fees? Possible Condo/HOA restrictions?
3. Property Disclosure – Have you reviewed any seller disclosures regarding property condition?
Your goal is to make your offer appealing to the seller. Price is certainly a major component of the offer. However, terms, time, and chattel property may make the offer price more or less appealing.
AskChristee does not render tax or legal advice. The above declarations are for informational purposes only. Please consult a lawyer for legal advice.