Making an Offer | Real Estate

Some first time home buyers think that making an offer on the house of their dreams they’ve just found is simply a matter of establishing the price they’re willing to pay and proposing it to the seller.  In actuality, an offer to purchase real estate is a complicated legal document that when agreed to and signed by both parties will be the blueprint followed to complete the sale.

Offers need to include potential home inspection dates, closing dates, terms of financing, the amount and disposition of an earnest money escrow deposit, as well as a mechanism for prorating utility costs dependent on the actual sale date.  These items only scratch the surface.  There are also issues of who pays closing costs and other fees and while there are standard legal forms buyers who are working without the services of a professional real estate agent can use to prepare the initial offer to purchase, the age old adage of “A lawyer who represents himself has a fool for a client” immediately comes to mind.

If you’re buying on your own, you need to have an experienced real estate attorney to help you draw up the offer to purchase.  For some reason when it comes to real estate transactions some buyers think any kind of lawyer will do just fine.  But that tax attorney who’s a neighbor of yours rarely knows the intricacies of real estate law.

In general, the best help you can get in building an offer to purchase is an experienced real estate agent.  The agent will also present the offer to the seller’s agent, lawyer, or the sellers themselves when in a “for sale by owner” transaction.  In an ideal world where the seller immediately signs your offer one might not need an agent, provided you have written a solid offer.  In the real world sellers frequently counter the initial offer; sometimes on the price as well as on other issues.  Experienced real estate agents provide an invaluable service in the back and forth world of negotiations.

Regardless of whether you draft the offer on your own or with professional help, you should try to make the offer as clean as possible.  In real estate parlance, a “clean” contract is one with no contingencies.  A contingency is a statement of “depending on”; as in the offer depends on the ability of the buyer to secure a mortgage.  If you’ve been pre-approved for a mortgage, there is no need for such a contingency and your offer can specify the pre-approval amount and the name of the lending institution.

Another contingency that can make your offer less attractive is the sale of your existing home.  Many sellers are unwilling to pull their homes off the real estate market while waiting for your home to sell.  Although few buyers are in a position to do so, the most attractive offer a seller can get is an all cash offer.  

Right now most of Australia is in a sellers market where the competition for homes is high as there are fewer homes for sale in the market than there are buyers looking.  In this kind of market, you should generally lead with your best offer as it is likely there will be competing offers that might be more attractive.  To give yourself an advantage, limit the number of contingencies you include in the contract.