Offers and Contracts
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 or conditions, and when the buyer and seller have signed the
offer forms along with
any counter offers and addenda.
When someone decides to buy your home, the buyer and his agent will
prepare a purchase agreement that will be presented to you through
your agent. The offer
will be written on a standard, pre-printed
Buy and Sell contract form provided by the Greater Lansing
Association of Realtors.
important to remember that your response to an offer to purchase
real estate can create 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 a time frame for the
completion of all steps.
What will be
included in the written offer
primary importance to you is the amount of money being offered for
the property. Offers made during a seller’s market, or a balanced
market, will be very close to the asking price. During a buyer’s
market you should not be surprised to see offers that are lower than
You need to be
open minded about all offers, including the seemingly rude “lowball”
offers. People negotiate in various ways. Some will simply pay what
you’re asking, while other will start at very low price just to see
how you will respond.
Buyers rarely pay cash. A buyer who is financing the purchase will
need to provide a letter from his lender stating that he has been
pre-approved for a loan. Such a letter is provides assurance
that the buyer will be able to complete the transaction.
arrangements are critical. A buyer with questionable financing is
not a good risk. An offer is worthless if the buyer can’t close the
and personal property
buyer may request that certain reserved items, furnishings, or
perhaps garden equipment be included in the purchase of the home.
You may have
identified the refrigerator and a specific light fixture as excluded
from the sale of the property, but this doesn’t mean that the buyer
might not ask for them.
The offer will specify the approximate closing date and when the
buyer would like to take possession of the property.
The buyer will ask that compensation to be paid to him should you
choose to remain in the home for any length of time after ownership
has been transferred. This compensation is referred to as “rent
back” and is based on the daily amount the buyer is paying for
principal and interest on his loan, taxes, and insurance.
These charges are fair. The buyer should not be stuck paying your
living expenses while anxiously waiting to move in to his new home.
Be prepared to write a check for rent if you plan to remain in the
home after closing.
The buyer is required to include “earnest money” along with his
offer. This money is deposited in a trust account with either a Real
Estate Broker or a Title company. The amount of
the deposit is important. Low amounts may indicate that a buyer
lacks funds or is not very serious. Larger deposits indicate a more
serious buyer with substantial financial support.
Contingencies in the offer
contract provides for special conditions or
contingencies that will become a part of the contract.
These are the most common:
This contingency is built in to all Real Estate contracts and is not
negotiable. Even though an accepted contract is in place, a buyer
can not be forced to purchase a home if they are denied a loan.
Even after a
buyer has been approved for a mortgage, circumstance can arise which
make it impractical for the lender to finance the loan.
The buyer will have a limited time period during which to
examine your property to determine the condition of the structure,
plumbing, electrical system, heating and cooling, well and
septic. Should the home inspection reveal problems that were not
noticed when the buyer made his offer; he can withdraw the offer and
walk away from the contract. A buyer is not required to do an
inspection and may wave this contingency.
of Current Home
Some buyers must make an offer that is contingent upon the sell of
their current home. Such an offer is not very attractive, but might
be appealing. Varying market conditions may affect your willingness
to accept such an offer. If it’s
necessary for the buyer to sell his current home before closing on
your home, he must make this clear in the offer.
Your response to the
You may respond to an offer in one of these ways:
as it is written
This means that you are satisfied with all aspects of the offer
and are willing to accept it without any additional provisions.
This usually occurs when the offer is completely unacceptable.
Many sellers will reject an offer with a very low price or
one that contains conditions that too difficult to work with.
You may amend the terms if much of the offer is attractive and
you would like to continue negotiation. An amended response is
considered to be a counter offer. The buyer can accept your
proposed terms, reject them, or write a new offer.
discussions and exchanges of paperwork will be handled through the
agents representing each party. You
should never receive calls from a potential buyer or his agent.
inappropriate for a buyer to have direct communication with the
seller during the period of negotiation.
This is the most practical way of conducting Real Estate business.
Emotions tend to run high during the sale of a home and personality
clashes could sour what would otherwise be a very manageable
transaction. You may not actually meet the buyer until the day of
A binding contract is created when both the buyer and seller have
agreed to all terms and conditions the offer and subsequent counter