For some, this is a stressful experience. After all, you and the seller may not be able to come to an agreement and you won’t get your dream home. There are eight basic elements to an offer and there are various offer strategies that you may want to use during your negotiations.
When you’ve found your home, you will make a formal, written offer to purchase. This is a legally binding contract outlining what you will give (a combination of price and terms) in exchange for the home. Your associate will probably use a pre-printed form covering all of the legalities and will modify it to cover what you want to offer.
Remember, everything is negotiable. You should ask for what you want, but keep in mind what you’re willing to give up. I will put everything in writing. Of course, the more contingencies in your offer, the less attractive it will be to the vendor. In a buyers’ market, that’s OK.
The vendor may counter your contingency with an escape clause. For example, the vendor may wish to continue showing the house and if they receive another offer, you’ll have the option of backing out or removing your contingency.
A firm offer means that you are prepared to purchase the home without any conditions. If the offer is accepted, the home is yours. Although a firm offer to purchase is usually preferable to the seller, if you are unable to close you will lose your deposit and may get sued. Take time to confirm your financing and to think twice about the investment.
A conditional offer to purchase means that you have placed one or more conditions on the purchase, such as subject to home inspection, financing or sale of your existing home. The home is not sold until all the conditions have been met.
Your offer to purchase will be presented as soon as possible. After the seller has reviewed the offer, it may be accepted as is, rejected, or returned with a counter offer.
The counter-offer may be in reference to the price, the closing date or any number of variables. The offers can go back and forth until both parties have agreed or one ends the negotiations.
It is best to know your absolute upper limit before you begin negotiations, so that in the heat of the moment you don’t end up with a home you really can’t afford.