5. Make an Offer

When you are ready to make an offer to purchase a home, you and your agent will prepare a purchase offer. This is a fairly lengthy legal document that your agent will help you complete.

There are numerous components of your offer and some of the highlights include :

• the price you are willing to pay
• your down payment
• your mortgage amount with the maximum interest rate you will pay
• the amount of earnest money
• a closing date
• any personal property to be conveyed in the home
• type of financing you are seeking

You may also want to include special contingencies in your offer. A contingency requires a certain act to be performed in order for the contract to take effect. Some of the more common contingencies are home inspection, financing, and appraisal. Ask your real estate sales agent to help you decide the contingencies you should select.

This offer to purchase a home will be accompanied by earnest money deposit, which indicates to the seller that you are making a serious offer. The earnest money is normally in the form of a check made out to your Broker or Title company (do not make it out to the seller). It is deposited in an escrow account and will be applied to your down payment. If the sale is not finalized for a reason beyond your control (i.e. due to one of the contingencies), the earnest money will be returned to you. Subsequent offers and counter offers may take place until all terms are agreed upon by both parties.

After the Offer

After you make an offer on a home, the seller can accept, reject, or make a counteroffer. Each of these responses may require different actions on your part. In each case, your real estate agent will be the one to relay the seller's response back to you.

If the seller rejects your offer, decide whether you can -- or want to -- make another offer on the home. Start by reviewing the "wish list" you compiled for the home of your dreams.

The seller can also make a counteroffer. If you plan to accept it, you should review whether you need additional mortgage financing to pay the new price.

It is also likely that additional negotiation among you, your real estate sales professional, and the seller will take place. You should take your time and carefully review the counteroffer before making any decisions on whether you will proceed with the purchase of the home or make a counteroffer of your own.

Once both parties agree on the terms, you then have a ratified contract.

How do I determine the amount of my initial offer?

There is really no rule to use in calculating a realistic offer. Naturally, the buyer wants the best value and the seller wants the highest price, but negotiations can be influenced by many factors, such as a seller who may be changing jobs and wants to sell quickly, or a buyer who really wants a specific home. Having an experienced agent with a solid understanding of the local market is extremely valuable at this stage.