BUYING
GUIDE STEP 9
- MAKE A WRITTEN OFFER
A written
proposal is the foundation of a real estate transaction. Oral promises
are not
legally enforceable when it comes to the sale of real estate.
Therefore, you
need to enter into a written contract, which starts with your written
Offer to
Purchase. This proposal not only specifies price, but also all the
terms and
conditions of the purchase.
For example, if the seller offered to help
with R2,000
toward your closing costs, or is leaving the curtains behind or anything else, make sure that's included in your written
offer and
in the final completed contract, or you won't have grounds for
collecting it
later. See the Legal Section for detailed information.
Reputable
agents have standard purchase agreements and will help you put together
a
written, legally binding offer that reflects the price as well as terms
and
conditions that are right for you. Strong companies such as PROPERTY NETWORK
have drawn upon years of professional and legal experience in proving
you the
buyer with a solid contract – with no small print.
Make sure
your agent guides you through the offer, counteroffer, negotiating and
closing
processes.
After the
offer is drawn up and signed, it is presented to the seller by your
real estate
agent, by the seller's real estate agent, if that's a different agent,
or often
by the two together. In a few areas, sales contracts are drawn up by
the
parties' lawyers but this is not necessary at all.
PRIOR TO
MAKING AN OFFER
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You will
want to inform your real estate agent what you like about the house and
make a
list of your likes and dislikes with the property. You can then get
some final
professional input on investment values etc from your agent. Remember though that the
final
choice is yours and you must choose a home you will be happy in.
There are three possibilities when
making an offer :
- accept the
seller's asking price and have your agent write up the contract,
- reject the
seller's asking price and have your agent make a different offer,
- or agree
to different terms and have your agent write an offer. This is all a
part of
the negotiation process.
Communicating about the house and how it makes you feel is important
when
making this decision.
Also, at
this stage, try not to become emotionally attached to a home. Your
offer may
not be accepted for any number of reasons. Have backup homes in mind.
Be
prepared to negotiate through your agent with the sellers – this is
what they
do best.
Please do remember that verbal offer are worth nothing and a
professional agent will tell you so. Do NOT request your agent to make
an offer of so and so verbally. Only offers in writing are valid.
Additonally, your agent needs ammunition to negotiate with - verbal
offers are not as powerful as something in writing.
FINDING
THE RIGHT SELLER
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The best
seller is one who is highly motivated. A highly motivated seller is
more likely
to sell for less than his or her house is worth. And it matters that
you find
out why; learning the reason why can help you get the price you want
and help
the seller get what they want: a timely sale.
This is where you agent will be at
work, delving and getting information,
finding our as much as possible about the sellers and why they are
selling. The
reasons could be anything from job change to a new location to
financial
problems. If you can solve their problem, whether it is cash related or
time
related, do so. For example, if the sellers are highly motivated
because they
need to move quickly, give them a fast sale - and a lower price. If you
can
make an offer, even a low one, that gives them cash in a short time,
they are
more likely to accept.
There are also some sellers however
that you should try and avoid. Not every
seller is as genuinely motivated as they make themselves to be and are
maybe
just testing the market and are not even genuinely interested in
selling. Your
agent will recognise the delaying tactics and let you know very
quickly.
NEGOTIATING
TIPS
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You're in
a strong bargaining position, that is, you look particularly welcome to
a
seller, if:
- you're an
all-cash buyer
- you're
already have a preapproved mortgage and you don't have a present house
that has
to be sold before you can afford to buy
- you’re
able to close and take possession at a time that is especially
convenient for
the seller
In these
circumstances, you may be able to negotiate some discount from the
listed
price. On the other hand, in a "hot" seller's market, if the perfect
house comes on the market, you may want to offer the list price (or
more) to
beat out other early offers.
This is
why it’s very helpful to find out why the house is being sold and
whether the
seller is under pressure. Keep the following considerations in mind:
- every
month a vacant house remains unsold represents considerable extra
expense for
the seller
- if the
sellers are divorcing, they may want to sell quickly
We, as your
buying agent will attempt to ascertain as much pertinent information as
possible, so
as to guide you and this is where our strong relationships with other
realtors,
built up on trust over the years, comes into play.
You may be
tempted to make a very low offer in an attempt to grab a bargain but
others may
also be making offers and if these are higher you could miss out. If
you really
want the property make sure your offer is realistic and in line with
current
market value.
Even in a
buyers market, every home has a minimum value, regardless of whether
the owner
is receiving offers or not. A too low offer simply makes the seller
withdraw
from the market and look to other financial alternatives – and you lose
out on
a wonderful home.
You have
decided on a home, discussed it with you agent and agreed on a price
and terms
to offer – now GO GO GO! Do not hesitate but get your agent to submit
the offer
as quickly as possible.
BASICS OF
AN OFFER
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The
purchase offer you submit, if accepted as it stands, will become a
binding
sales contract. So it's important that the purchase offer contains all
the
items that will serve as a "blueprint for the final sale." Please
read the Legal Section if you want more detailed information
The
purchase offer includes items such as:
- address
and the legal description of the property
- sale price
- terms: for
example, all cash or subject to you obtaining a bond for a given amount
- seller's
promise to provide clear title (ownership)
- target
date for closing (the actual sale)
- amount of the
deposit accompanying the offer, whether it's a cheque, cash or
promissory note,
and how it's to be returned to you if the offer is rejected - or kept
as
damages if you later back out for no good reason
- method by
which real estate taxes, rents, fuel, water bills and utilities
payments are to
be adjusted (prorated) between buyer and seller
- provisions
about who will pay for any surveying, borer beetle inspections, etc.
- disclosure
of specific environmental hazards or other known defects
- a
provision that the buyer may make a last-minute walkthrough inspection
of the
property just before the closing
- a time
limit (preferably short) after which the offer will expire
- contingencies,
which are an extremely important matter and that are discussed in
detail below
CONTINGENCIES
– “SUBJECT TO” CLAUSES
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If your
offer says "this offer is contingent upon (or subject to) a certain
event," you're saying that you will only go through with the purchase
if
that event occurs. Here are three common contingencies contained in a
purchase
offer:
- The buyer
obtaining specific financing from a lending institution: If the loan
can't be
found, the buyer won't be bound by the contract.
- A satisfactory
report by a home inspector: for example, "within 10 days after
acceptance
of the offer." The seller must wait 10 days to see if the inspector
submits a report that satisfies the buyer. If not, the contract would
become
void. Again, make sure that all the details are explicitly stated in
the
written contract.
- The buyer
successfully selling their own home first and by a certain date.
SELLERS
RESPONSE TO OFFER
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You will
have a binding contract if the seller, upon receiving your written
offer, signs
an acceptance just as it stands, unconditionally. The offer becomes a
firm
contract as soon as you are notified of acceptance. If the offer is
rejected,
that's that - the sellers could not later change their minds and hold
you to
it.
If the
seller likes everything except the sale price, or the proposed closing
date, or
the basement pool table you want left with the property, you may
receive a
written counteroffer including the changes the seller prefers. You are
then
free to accept it, reject it or even make your own counteroffer. For
example,
"We accept the counteroffer with the higher price, except that we still
insist on having the pool table."
Each time
either party makes any change in the terms, the other side is free to
accept,
reject or counter again. The document becomes a binding contract only
when one
party finally signs an unconditional acceptance of the other side's
proposal.
WITHDRAWING
AN OFFER
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Can
you
take back an offer prior to acceptance?
In many cases the answer is yes, right up until the
moment
it is accepted, or even in some cases, if you haven't yet been notified
of
acceptance. Many offers though will clearly state that they are
irrevocable until acceptance date has passed, which means you cannot take back your offer.
If you do want to revoke
your offer, be sure to do so in writing,
to all parties. Speak to your agent explaining your corcumstances and maybe you will be advised to consult a lawyer who is
experienced in
real estate matters before doing this.
And cancelling after the offer has been accepted?
As mentioned under the previous section, once the offer has been
accepted, it is binding and forms a valid contract. You cannot cancel
or withdraw simply because you have changed your mind.
Once again, speak to your agent as soon as possible explaining your
reasons. Once again, this is a good reason for you to have been working
with a buying agent who is on your side as opposed to the seller. There
might be valid reasons for cancellation and they can advise you on this
and might again refer you to an attorney who would guide you.
Please however, proceed carefully. You don't want to lose your
deposit or
find yourself being sued for damages the seller may have suffered by
relying on
your actions. This of course also applies to the seller.
Special Circumstances
In South Africa,
under the Alienation of Land Act of 1981, buyers of properties under
R250,000
have five working days as a cooling off period in which they can
withdraw from
the sale.
ONCE
AGREEMENT IS REACHED
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If you and
the seller have agreed to terms and both signed, you have a legal
contract and
your dream home is about to become yours!
The red
tape machinery now kicks into gear and your agent, lawyers, banks and
other parties
begin to make sure everything is processed according to plan. Remember
that
there are also obligations on you, such as providing certain documents,
a
deposit etc
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