Step 5: Make an offer

Finding a home that meets every single one of your wants is highly unusual, so looking for perfection can be frustrating. When you come across a property that meets your must-have list and checks off many items on your want list, it’s often time to consider it. For many buyers there’s a “feeling” that this is the right one, felt soon upon entering the right home.

In today’s competitive market it’s quite common to see multiple offers on properties under $350,000. Anytime it’s a “Seller’s market” you’re more likely to see this occur. However, it can happen under any market conditions, particularly when a home is priced very attractively, or under market value. Pricing a home under market value can be a strategy used to generate this competition in the form of multiple offers. Situations like this are where an escalation clause might be worth consideration by a Buyer, and we can explain this to you in more detail if a multiple offer situation is possible.

Here is what we will need for the offer:

Names

We’ll just need exact spellings of how you’d like to make the offer. This is straightforward but we’ll want to write on the contract the names with which you’d like to take title. This can be first & last name, with a middle initial or full middle name, or in a trust. While it’s most common that married couples are both on the contract, it’s also not unusual for sometimes only one to be making the purchase too. If this is the case, the non-buying spouse will need to sign a Disclaimer Deed on or before the closing.

Arizona Residential Resale Purchase Contract Line 1

Offer Price

This one is obvious. We’ll provide you with a market analysis (comps), and you can decide on your initial offer price for the home based on what you believe it’s worth and are willing to pay for it. The Sellers will then either accept, reject, or counter your initial price and/or other terms.

Our expertise in negotiating real estate deals of all types and price points is a crucial asset to you when considering an offer. We will run comparable sales for you that best suit the property type and location. Sometimes this is the immediate neighborhood, but it might also be much further away if the property is very unique, like a luxury home. We also have the Long Realty Housing Reports that give broader context to the overall market and can help shape the appropriate offer. Current market conditions play a big role. For instance, right now many homes under $250,000 are receiving multiple offers, so crafting the right offer is of the utmost importance, and this goes beyond just price. We also use tools such as escalation clauses when appropriate to help our buyers land the deal.

Earnest Money

Earnest money most simply is a deposit that shows a Seller that you’re a committed buyer willing to put up money in good faith of completing the transaction. Other than in 100% financing transactions where conceivably the buyer can get this back at closing, the earnest money is applied towards a Buyer’s down payment. There is no specified amount of earnest money per transaction, but it’s common in the Tucson area to put forth at least 1-2%. A buyer willing to put more earnest money down can be looked at more favorably by a Seller, and the item is a negotiated term so a Seller can counter your original offer and ask for more earnest money.

There are a few contingencies where a Buyer can receive this entire money back, most notably during the inspection period process if you disapprove of the property or the Seller doesn’t agree with your repair requests. It’s extremely unusual that a Buyer would ever lose the earnest money unless they decide to back out of the purchase beyond any contingency period that’s in the contract, and we do everything possible to make sure that doesn’t happen for obvious reasons.

For a resale home, the earnest money is nearly always specified in the contract that it will be deposited with the escrow company which is handling the closing upon contract acceptance. This escrow company is a neutral third party to the transaction and therefore is used for, among other things, to handling monies. These funds can be in the form of a personal check, cashier’s check, or wire transfer.

Earnest money for new construction properties vastly differs and is worth mentioning. Nearly all new home builders have written into their contracts that the earnest money will be released to the builder immediately, even if it is initially deposited with an escrow company. Therefore, in the event that the builder is unable to perform for some reason, there is a possibility that the earnest money could be forfeit through no fault of the Buyer. While this risk is minimal in the case of larger, national builders, we’ve seen big companies across the US fail, so keep it in mind. We’ve successfully asked builders to keep it in escrow before for clients, but this is unusual.

If your offer is not accepted, the earnest money won’t even be deposited at all. Only if the contract is accepted will we deliver the check to the escrow company.

Financing Breakdown

This is put on the first page of the contract to indicate to a Seller how you’ll be arranging payment of the property. One item is the earnest money mentioned above, plus any additional down payment. For instance, using as an example a $200,000 purchase price, you might have a $2,000 earnest money plus an additional $8,000 towards down payment for a total of 5% down payment with the balance to be financed.

For many Buyers the down payment is one of the largest obstacles in purchasing a home. There’s a common misconception that 20% of the purchase price is needed to buy a property which is not true. Many programs exist with little to no down payment required, but speaking with a lender and/or a financial advisor can be helpful in determining the appropriate amount for your circumstances. A down payment of 20% does typically allow a buyer to avoid mortgage insurance, although other avenues also exist to avoid that, most notably a one-time payment at closing. From a Seller’s perspective a larger down payment shown on an offer indicates a more qualified Buyer, which can make that offer more appealing, so keep this in mind.

Arizona Residential Resale Purchase Contract - Price
Arizona Residential Resale Purchase Contract Lines 10-20

Close of Escrow Date

We go beyond just price when helping clients with an offer and look at all the terms that make up a contract. If we can provide the seller with what’s most important to them you stand a better chance of getting the home over other competing offers. Sometimes this is a shorter or longer close date, a personal letter to the sellers, a larger earnest money deposit, or a “cleaner,” less complicated offer.

A closing time frame of 30 – 45 days is a typical time frame for most resale transactions. Much of this is dependent on the lender, although most lenders can usually accommodate a 30 day closing so long as the rest of the inspection process moves along promptly. Many of our buyers go slightly longer than 30 days because of the potential for negotiations to go back and forth. We usually recommend something along the lines of 35-40 days from the initial offer to allow sufficient time and not add additional stress to the process.

We like to make the close of escrow date occur on a Tuesday, Wednesday, or Thursday so that a delay in a Friday closing will not push it over the weekend, and the escrow company has Monday to put finishing touches on a Tuesday closing.

Arizona Residential Resale Purchase Contract - Close of Escrow
Arizona Residential Resale Purchase Contract Lines 21-31

Personal Property

Check the listing to see what the Seller is offering, but the most common personal property usually offered are the refrigerator, washer, and dryer. You can include some minor additional items, but if you wanted any substantial additional items you’d put those on a separate bill of sale. We have closed homes and more commonly condos/townhomes sold “turn-key” with all furniture, decorations, and everything down to the kitchen utensils included.

Arizona Residential Resale Purchase Contract - Fixtures and Personal Property
Arizona Residential Resale Purchase Contract Lines 39-67

Closing Costs aka Seller Concessions

You can ask the Seller as part of your offer to pay for a portion (either a percentage or $ amount) of your typical Buyer related closing costs. This is something more commonly done with Buyers who don’t have as much cash on hand for the closing costs, plus down payment amount, and keeping more cash on hand allows them to feel comfortable after the purchase. A Seller views any down payment assistance as a lower purchase price since it basically impacts their net return at the closing (for example: a $200,000 offer with no closing cost assistance would be seen by a Seller as equal to a $205,000 offer with $5,000 in closing cost assistance, as their net is the same in both scenarios). For those Buyers not needing the help in terms of cash flow, it’s common to just focus on the purchase price alone. Either way can be a suitable offer strategy depending on your personal circumstances.

Arizona Residential Resale Purchase Contract - Seller Concessions
Arizona Residential Resale Purchase Contract Lines 100-102

Appraisal

It’s most common for the Buyer to pay for the appraisal once it’s ordered by the lender. However, this is a negotiated item in the contract and can be among the items a Seller provides a credit for if they agree to pay some of the Buyer’s closing costs. Appraisal costs vary but expect at a minimum a $450 fee to be safe and up to $1,000 for some properties or multiple appraisals, which aren’t typical but can be necessary occasionally.

Arizona Residential Resale Purchase Contract - Appraisal
Arizona Residential Resale Purchase Contract Lines 107-114

Escrow & Title Company

This is usually a Buyer selected choice although few Buyers have a real preference as most companies’ rates are comparable. Because we do many transactions with Title Security (Pam Woods as the escrow officer) and Long Title, things usually go very smoothly because of the continuity, however if you happen to have a preference that can be selected by you.

Arizona Residential Resale Purchase Contract - Escrow
Arizona Residential Resale Purchase Contract Lines 115-119

Inspection Period

The Purchase Contract provides for a 10-day inspection period as a standard length, but when submitting an offer there is a line which allows for that to be lengthened or even shortened. We recommend at least the standard 10-day period or up to 15 days in case additional inspections/quotes are needed after the general inspection is performed. A slightly longer time frame is not unusual and is unlikely to meet any resistance, though a standard 10-day inspection period makes for a cleaner offer which can be preferable in multiple offer situations.

Arizona Residential Resale Purchase Contract - Inspection Period
Arizona Residential Resale Purchase Contract Lines 213-224

Home Warranty

It’s extremely common with resale transactions for Buyers to ask the Seller to pay for a 1-year home warranty to cover many of the major components and systems of a home such as the HVAC, appliances, ceiling fans, garage door openers, and water heater. This usually ranges somewhere in the $400-$600 range. It gives Buyers some peace of mind for that time period if something major should break down.

There are a number of different companies offering these plans, with two of the most popular being American Home Shield and 2-10 Home Buyer’s Warranty. If you’re asking the Seller to pay for a home warranty it’s simply another debit from the Seller’s net return at closing, so they’ll factor that into the totality of the offer presented. If the Seller is not offering any particular home warranty up front, you can still ask for them to provide one.

If you choose not to ask for a home warranty now, you can still of course pay for your own later on in the process.

Arizona Residential Resale Purchase Contract - Home Warranty Plan
Arizona Residential Resale Purchase Contract Lines 290-296

Response Time

When an offer is presented it’s only good for the time period you indicate you’d like a response by. At a minimum most offers have at least 24 hours for a Seller to respond, although 48 hours is also not uncommon. In a highly competitive market a Buyer might like to keep this time frame shorter to entice the Seller to respond before other offers potentially come in.

Arizona Residential Resale Purchase Contract - Terms of Acceptance
Arizona Residential Resale Purchase Contract Lines 435-439

Address

Finally, we’ll need to put your current address in the offer paperwork which will be used for the escrow/title company to send you documents once a contract is accepted.

Arizona Residential Resale Purchase Contract - Signatures
Arizona Residential Resale Purchase Contract Lines 451-456

You will also be signing Long Realty Company’s “We Notice Our Buyers and Sellers” packet full of disclosures and recommendations. In addition to this “We Notice,” you will also need to sign the Real Estate Agency Disclosure & Election form, and possibly an HOA Addendum (for properties located in HOAs), a Lead Based Paint disclosure (for properties built before 1978), a Wastewater Treatment Facility Addendum (for properties on septic instead of sewer), and/or other forms depending on the property’s characteristics.

Once we have written up the offer for you based on your terms, we will email it to you via DocuSign. This program allows you to sign digitally from any device. The signature will not look like yours (unless you can draw well with a stylus on a touch screen), but it will carry the same weight as a “wet” signature, and it’s a lot more convenient! You’ll also get a copy of the signed documents in your email inbox when you are finished.

Team Woodall will deliver the offer to the listing agent and let you know right away when we receive a response.

Next: I have an accepted contract. Now what?