What is a purchase offer? July 2013

So you've found it: the perfect house, on the perfect street, in the perfect neighborhood. You're ready to write a check, sign some papers and start packing your current home in preparation to move in.
 
Not so fast. Unfortunately, buying a home isn't like shopping at the department store. In general, you don't get to just pick a house, write a check, and move in. There's a lot more paperwork involved, and in today's market, you may even have some competition for the perfect home.
 
Why Can't I Just Buy? When you find the home you want, you'll be making a bid on it, rather than simply purchasing it outright. A bid is an offer to buy for a certain amount of money, with a certain set of conditions. This is your purchase offer and it is written by your real estate agent.
 
Your agent is going to be invaluable in these negotiations. Is your area experiencing bidding wars for properties? Your agent will know, and will counsel you on the amount to offer. Will a larger down payment make a difference? What kind of loan do you want to use, conventional, FHA, VA, or something else? All of these financial decisions will make a difference to the seller when they are considering your offer, especially if you're competing with other potential homebuyers.
 
More than Money. Your purchase offer is really a precursor to a purchase contract, so there's more to it than just a dollar amount you're willing to pay for the home.
Factors that can be negotiated include:
  1. How closing costs are paid, the seller may pay a portion.
  2. What inspections or repairs you want.
  3. Under what circumstances you can cancel the purchase.
    • Time frames for each step of the process.
Is a pest inspection critical? How about a roof certification? Does it need to be written into the contract as a contingency for purchase? Your agent will counsel you on this and other important factors that need to be included in the offer.
 
When One Is Not Enough. Your bid or purchase offer could be rejected, and there are a number of reasons why. You may also receive a counteroffer from the home seller, changing terms in the bid you offered to make it more favorable to them. It's up to you and your agent to determine whether the counteroffer is acceptable, and whether you're willing to sign it, or to provide yet another counteroffer of your own. The type of loan you are using and the amount of your down payment can be hugely influential when the seller is considering a number of purchase bids.