Buyer's Guide
Lansing Area Real Estate
REAL ESTATE
 
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Making an Offer

When you find the "right" home, the next step is to prepare a purchase offer for presentation to the seller. Your offer will be written on a standard, pre-printed Buy and Sell Contract form provided by the Greater Lansing Association of Realtors.

Everything related to the purchase of real estate must be in writing. Verbal contracts to purchase real estate cannot be enforced. A contract is created when there is a "meeting of the minds" on all terms and when the buyer and seller have signed the offer forms along with any counter-offers and addenda.  

It is important to remember that when you fill out an agreement to purchase real estate that you are creating a legally binding contract. This contract sets forth the terms of the sale and establishes the rights and obligations of all parties involved. It specifies the actions to be taken in order to close the sale and sets the time frame for the completion of all steps.

Included in your written offer…
Of primary importance to the seller is the amount money your offering for the home and how you plan to pay for it. If you’re financing the home, a letter from your lender stating that you have been pre-approved for a loan, should be included with the offer. Such a letter assures the seller that you are able to purchase the home.

  • List any personal property be included with, or excluded from, the sale. If the seller has reserved the refrigerator, you may ask for it to be included in the sale.
  • You will indicate on what date you would like to close and take possession of the property. You should also ask for compensation to be paid to you should the seller remain in the home for any length of time after ownership has been transferred to you.
  • It is important that you reserve the right to perform appropriate inspections to make certain there are no hidden problems. You will indicate the nature of your proposed inspections and set an end date for there completion.
  • A deposit is required to validate your offer and to let the seller know you are serious. Your deposit will apply toward the purchase price upon acceptance of the offer. If your offer is declined, the deposit will be returned.
  • Write in any special conditions, provisions, or contingencies that you wish to include in the terms of the contract.  If it’s necessary to sell your current home before closing on the seller’s home, you must make this clear in your offer.

Contingencies in your offer
Purchase offers almost always include two standard contingencies:  

1.    Financing Contingency:  Unless you are able to pay cash, your offer will be dependent on your ability
to obtain a mortgage loan. You cannot be forced to purchase the home if you are denied a loan.

2.     Inspection Contingency: This allows the buyer to have professionals examine the property to determine the condition of the structure, plumbing, electrical system, heating and cooling, well and septic. Pest and radon inspections are often included in this examination. Should the home inspection reveal problems that were not noticed when you made your offer, you can give written notice that you are terminating the offer and walk away from the contract.

Many buyers must make an offer that is contingent upon the sale of their current home. This is not unusual, but such an offer is not very attractive to the seller.  Varying market conditions may, however, affect the seller’s willingness to accept such an offer.  


What stays with a home? 

Items that are physically attached to, and intended to be part of a home, are called “fixtures” and are expected to stay. Fixtures include such items as drapery rods, sinks, built-in bookcases, or a furnace. A built-in dishwasher should remain, otherwise, removing it would leave a large hole in the kitchen cabinets. 

It's sometimes difficult to determine what is, or is not, a fixture. Many sellers reserve their washer and dryer, and very often the refrigerator. Sellers are required to itemize these questionable "fixtures" as reserved items on the listing agreement, and are to refer to them as "not available" on their disclosures. A buyer can request that any of these reserved items be included in the purchase offer as a condition of the deal. 


How much should I offer?
The amount you offer will depend upon market conditions, your financial situation, and how badly you want that particular home.

Should there be only a few good homes on the market and a large number of ready buyers, then the competition for each home will be furious. During such a seller’s market homeowners will receive full price offers, and may likely see offers that are higher than the asking price. 

Sellers should not be shocked to receive offers below their asking price during a buyer’s market when there is a huge selection of homes and very few buyers. What the seller might accept will be a matter of his personal motivation.

Common rumors about real estate pricing and offers

  "A home is worth only half of the State Equalized Value."

State Equalized Value (SEV, equal to 50 percent of the true cash value) is not a true indication of a properties market value. SEV is established when a home is first built, and again whenever it changes hands or has gone through extensive remodeling.

Beginning with the 1995 tax year, the tax base was changed from State Equalized Value to Taxable Value and a limit of 5% was placed on annual increases. The SEV may increase to reflect fluctuation of local property values, but will not change radically unless the size of the home has changed, or the property changes hands.

A homeowner who is selling a home he has lived in for twenty years will base his asking a price on today's market value, not his home's SEV. The seller may have updated his kitchen with premium cabinets and top of the line appliances, installed a new heating and air conditioning system, re-shingled the roof, replaced windows and doors, and done extensive landscaping. Each of these improvements will have increased the home’s market value without causing much change in the SEV. 


  "The seller must accept a full-price offer".

Normally, a homeowner would have no reason to refuse a full-price offer. However, the seller does not have to accept a full-price offer if he has a problem with other conditions in the offer, such as your financial arrangements or the occupancy date.

Also a homeowner may find that he is sitting on a "hot" property with buyers fighting for the chance to get the home. If he has been informed that several offers are to be presented, the seller will wait to see all offers before making his decision. Even if the first offer presented is for full-price, he need not respond to it if he believes that he might receive higher offers.


 "Homes are intentionally overpriced to allow for negotiation".

This may be true in some parts of the country, but not in the Lansing area. A Realtor in the Greater Lansing area will usually advise his client to price the home close to its true market value. Overpricing a home so that there is “room to negotiate” will only cause the home to linger on the market. It will be unappealing in comparison to the competition, and may never sell. As it’s in everyone’s best interest to price the home properly, we generally expect the asking price of each home to be fairly close to what it should be. 

Does this mean that all homes are priced correctly? Absolutely not! Often a seller will order his agent to overprice the home. This might be the result of a seller owing too much on his mortgage, having invested too heavily in updates and improvements, or simply an emotional attachment to the property.
 

Low-ball Offers
A seller may regard a "low offer" as an insult.

Everyone has heard a story in which a friend or distant cousin "stole" a home from a seller by making a low-ball offer…an offer substantially less than the asking price. These stories are always fun to listen to but are often are too incredulously good-to be-true. Even if a story were true, these deals wouldn’t happen very often, as most sellers are not so desperate that they need to "give away" their home.

When a seller places his home on the market, he begins to think of it as commodity to be sold for cash. He invests time and money in pre-listing repairs to make his home is more appealing and his Realtor provides sales data for comparable homes that have sold in his neighborhood. The seller has a pretty good idea of what his home is worth and he expects to sell for that price.

While any offer can be presented, a low-ball offer may sour a prospective sale and discourage the seller from negotiating at all. Unless the house is badly overpriced, the offer will probably be rejected.


Is the property priced correctly?
Suppose you are serious about making an offer on a home, but are uncertain about the property's value. We can prepare a Comparative Market Analysis to determine if the home is reasonably priced.

This report compares properties that are similar to the home you are considering and takes into account all of the variables that may affect the value and marketability of that home. 

We evaluate the amenities your chosen home has to offer, factor in information about current market conditions and arrive at the price that should be offered for the home.


The Seller's Response
The seller will review your offer and reply in one of these ways:

  • Accepted as it is written. This means that seller is satisfied with all aspects of your offer and has accepted it without any additional provisions. 
  • Rejected. This usually occurs when your offer is unacceptable to the seller.  A Seller will often reject an offer with a very low price or one that contains conditions that he is unable to work with.  
  • Amended by the seller. A seller will counter with an amendment if much of your offer is attractive and he would like to continue negotiation. An amended response is considered to be a counter offer. You can accept the seller’s terms, reject them, or write a new offer.

Should you be satisfied with the seller’s acceptance of your offer or the conditions of the sellers amended counter offer, your signature on part two of the Buy and Sale Contract will create a binding contract. 


Earnest Money Deposit and Impact on the Seller

When making an offer to purchase real estate you are required to show “good faith” by leaving a sum of money with the Realtor. The money is held in a private bank account for The Lawton Group and is given back to you
at closing.

The amount of the deposit will have an impact on the seller’s attitude about your offer. A deposit of only a few hundred dollars will lead the seller to think that you are not serious about purchasing his home or possibly can’t afford it. You should make a large enough deposit to help your offer win acceptance.

How much deposit you leave will vary with the price of the property. $500 to $1000 would be appropriate for anything up to $100,000. Homes priced between $100,000 and $200,000 would require deposits of something between $1000 and $2000. A home priced above $200,000 may require several thousand dollars.

Your deposit will be returned to you if you decide to not purchase the home as a result of the inspections or if you should fail to get financing. 

You may forfeit your deposit only if you choose not to close on the deal after having removed all contingencies.

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