I have received an offer on my house – Now What?

j0305899 Your Realtor has just informed you that he/she has received an offer on your property! Now what?!

I know your head is full of questions that you want ask your agent but it is best to just sit down with your agent and go through the entire offer. Your agent may send you a copy and go over on the phone with you, either way – be sure you cover all the details and understand exactly what the buyer is offering. There are several things you should pay close attention to on the offer:  The purchase price, the due diligence date and fee, the closing date, the earnest money, requested closing costs, type of financing the buyer is getting, fixtures and personal property, warranty requests and any additional addendums.

Offer Price:

Of course, the price is the first item to check. Don’t be shocked when it is not what you expected right off the bat.  In many places it is still a buyers market and the buyers are doing their best to get the lowest price possible – even to the extent of coming in at an insulting low ball price.  Don’t be offended, at least the door is opened for negotiations.  Take a look at the entire contact with all terms before rejecting or send back a counter offer.  The best case scenario would be that you love the price and just accept the offer without any negotiation, but that rarely happens.  Be sure to check and see if the buyer is also requesting closing costs be paid on their behalf. You will need to consider this as part of the offer price.

Due Diligence:

In North Carolina, we have a fee that is paid directly to the seller that enable the buyer to have a set period of time to get all their “due diligence” done on the property that will include but is not limited to: Home inspections, surveys, septic inspections, review of covenants and bylaws, financing and water testing.  The fee paid for this period is negotiable between buyer and seller and will be credited to the buyer at closing.  The due diligence date is a critical date that allows the buyer to make the decision to move forward or terminate for any reason or no reason.  If the buyer terminates, the due diligence fee is forfeited. :

Earnest Money:

Earnest money is another “good faith” fee that is offered by the buyer to let the seller know they are serious about purchasing the home.  It is usually between 1-3% of the purchase price and is held in a trust fund by the listing agent or buyers agents broker.  This money will go to the seller if the buyer breaches the contract and will be credited to the buyer at close if all goes well.  If a dispute arises and the buyer terminates, you must request in writing that the seller release the EM.  If they refuse, the money is held in the trust fund until settled or sent to the clerk of court for resolution.

Closing Date:

The buyer should have specified a closing date on which the closing will take place on or before. This date is likely 4-5 weeks from the date of the offer. If the buyer is not using a mortgage and is offering “all cash”, the closing date could be 1-2 weeks away.

Fixtures and Personal Property:

Be sure to check as see if the buyer is asking for you to leave any fixtures you had excluded from the offer (like a Shed or light fixture you planned to keep). Also check to see if they are requesting any personal property such as a refrigerator, playset or anything that is not affixed.  These items should convey at no value.  If you decide you would like to sell some of your personal property, you would need to do this with a bill of sale and not include as part of the offer.  Lenders do not like to see personal items as part of the deal.

Home Warranty:

Check to see if the buyers is requesting a home warranty and if they are, who is paying for it?

Additional Addendums:

There may be other addendums that apply to the offer such as a contingency that the buyer may need to sell another house or the buyer may ask for deadline for the answer, or even ask for certain repairs be done in advance of inspections.  Check to make sure you have gone through ALL forms in detail.

Pre-Approval Letter:

Be sure that the buyer has included a pre-approval letter from a bank or proof of funds if paying cash along with the offer.  Do not even consider an offer until you know they are qualified to buy.  Pay close attention to the type of loan they are getting, this will help you see if they have put money down or if they need 100% financing.  Keep this in mind if they are requesting closing costs.

Make a decision:

After you have reviewed all the terms with your Realtor, it is time to make a decision.  You may decide to accept the offer as written, reject it outright or offer a counter to their terms.  In NC, we have a “response to buyers offer” form that is wonderful for going back to the buyer and suggesting more favorable terms. This form rejects the original offer but in a gentle way to encourage a new offer.  This also keeps you open for other offers to come in. It is best to try and keep the door open to negotiate a win-win situation rather than just reject outright.  Once you respond, give the buyer a couple of days to come back with another offer.

 

Other titles in the seller series:

Article #1: Seller Questions Answered – A preview to Listing your home for Sale
Article #2: What do I need to do to prepare my home for sale?
Article #3: Why do I need an Real Estate agent and how do I select one?
Article #4: I have signed the paperwork, now what? -What to expect during the listing period
Article #5: A buyer wants to see my home -How can I maximize showing opportunities?
Article #6: I have received an offer – now what?
Article #7: My home is under contract – What are the next steps?
Article #8: What can I do to prepare for my move?
Article #9: What can I expect at the closing table?
Article #10:  What happens after my home is SOLD?

 

 

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Sonya Leonard –Keller Williams Realty – Mooresville NC.  The Home Style Team provides free access to individualized home searches for all homes in Statesville, Mooresville, Troutman, Lake Norman and the entire Lake Norman Area.  Explore buyer and seller reports, community resources, new home communities, and be sure to sign up for instant alerts to help find your dream home.  Let Sonya help you INVEST in Real Estate and your Future! (704) 450-0588.

What is this new “Due Diligence” Fee in North Carolina and how does it affect me?

I know I will be explaining this question for a long time to come!  As of January 1st 2010 in North Carolina, we no longer have just the Earnest Money deposit option on the Offer to Purchase Sales agreement.  Our new forms are now are more like the commercial forms and offer a Due Diligence period for buyers to do all their inspections, appraisals, review of covenants and restrictions, surveys……..you name it.  Previously, there was a negotiated amount of earnest money that would be held with the listing firm, now there is “due diligence” money as well as Earnest Money to be negotiated.  The new due diligence fee will be made out directly to the seller and will be non-refundable unless there is a breach by the seller.  The buyer will be credited this fee at the closing. 

The Due Diligence fee enables the buyer to back out of the contract for ANY reason or NO reason up to the specified due diligence date.  For agents, this new form simplifies things as far as watching for critical dates.  Just remember the Due Diligence Date and the closing date and you are good to go! 

WARNING: As buyer’s agents, this will for force you to do a lot more of your homework upfront before signing the offer- if you miss something critical, your buyer will not be pleased they have lost their money due to something you overlooked.  Talk with your lender and be sure you know how long it will take to get a full loan commitment.   The buyer wants to put down as little as possible for the longest amount of time they can get.

For listing agents, they will need to get more information about the home from their sellers and be prepared to give a lot of documentation to the buyer.  The seller wants as much money as possible for the shortest amount of time.  It will be interesting to see how this shakes out this year.

Both the due diligence fee and the earnest money deposit are both negotiated between the buyer and seller and BOTH are not required.  You could have a due diligence fee with no earnest money, due diligence with earnest money, no due diligence and earnest money or none at all.

The important part is to be informed, be prepared, work with a good Realtor® and do your homework.

Here are some links to additional information about the new Due Diligence Contract and how it will affect you:

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Sample NC Offer to Purchase Form

Ask the Forms Guy

Video from Will Martin, NCAR General Council regarding the changes