Thursday, July 25, 2013

How to Write an Offer for a Home

What should you do when writing an offer for a home? Just send a letter with check attached? What about repairs? What if you find out later the listing agent and the seller were lying and you want to back out? So many questions! And with so much money at stake, a home buyer is understandably nervous, nut just about the questions she or he does ask, but about those she or he don't know to ask.

This post assumes you're using a real estate broker who has access to either state- or Multiple Listing Service (MLS)-approved forms. MLS lawyers design and continually update the documents in order to protect the interests of, first, brokers and brokerages, and second, buyers and sellers. If you are not using a broker, you really do need to retain an attorney. Some people retain both, and in some states, use of an attorney is customary.

Understand, too, that I'm not licensed anymore. Nothing in this post should be construed as real estate (or legal) advice. Terms and conditions of purchase offers need to be as varied and dynamic as peoples' needs, and they need to seek professional advice in meeting them.

The sections in the MLS forms offer protections against problems so many lay people, not just first time buyers, worry about. In essence, you, as buyer, will have your earnest money at risk, but the language in the forms will protect your earnest money and ensure the seller will verify most everything claimed about the home--the quality of the title, known structural flaws, pending homeowner association assessments, and the like. It will deal with home inspections and repair issues and deadlines. Lay people should not attempt to deal with all these without professional help.

I'm also assuming you know what the price should be, how much your down payment is and what your loan looks like. You and your broker can determine what the earnest money should be. You will also have your own set of contingencies to enter into the contract.

The house a buyer looks at usually contains both real property--the house, lot (if it's not a condo) and fixtures (see below)-- and personal property, which would include a refrigerator, window coverings, free-standing range, and the like--including the light bulbs! If you, as buyer, want any of the personal property to be included, you have to ask for it.

Always ask for the window coverings, even if you hate them (some updated MLS contracts already include them, but be sure). Do you want the fridge? Ask for it, and to be really hard-core, describe it by brand name and model number. Same for the fireplace equipment and anything you want that isn't physically attached to the structure.

Buyers will often put personal property in the same category as fixtures. As a general statement, fixtures are, well, things permanently attached to the real property, like a sink or toilet. Note that many kitchen ranges are free-standing and may not be attached, so they should be included in your offer. Same for things like above-ground pools, hot tubs, and playground equipment.

People sometimes disagree on what is or is not a fixture. What, for example, is a high-end, built-in refrigerator? It's not always clear cut, and care should be exercised.

Once again, be sure your offer clearly describes the personal property you are asking for. If your offer says, "Seller to include the washer and dryer," what would you do if you took possession and it was a different washer and dryer than the set that was there when you saw the home? If the language wasn't clear, you could be stuck.

I try to be detached and not give individuals a shout-out, but one really good broker, Margaret Devereaux of Remax Equity Group in Hillsboro, OR, always attaches a printed copy of the MLS listing to the offers she writes. Doing so really can clear up future misunderstandings. (Disclaimer: Remax Equity Group in Hillsboro is where I worked for three years). 

All in all, writing an offer has to be done very carefully, with thought, and with attention to detail. A broker with MLS forms and/or a lawyer will go a long way towards protecting your earnest money, but give plenty of thought to items you want that aren't real property.

Question for the day: If you buy a home with a back yard apple tree laden with fruit, who gets the apples, buyer or seller?