Making an Offer to Purchase Real Estate
A written sales contract is the cornerstone of a real estate transaction. Oral promises or agreements are not legally binding in the State of Florida. Therefore a transaction begins with a written sales contract, earnest money deposit and is accompanied most times with a pre-approval letter from your bank or mortgage broker. Being pre-approved is also very important in the beginning stages of negotiating because it proves you have the financial capability to purchase the property and are a serious buyer. Florida Realtors use standard FAR/BAR sales contracts written jointly by the Florida Realtor’s Association and The Florida Bar Association of attorneys.
What is included in an offer?
An offer consists of many things. It documents everything you are offering to the seller including:
- Initialed, signed and dated sales contract
- Sales Price
- Contingent on financing or cash offer
- Down payment & earnest money
- Address , tax ID number and legal description
- Personal property included in the purchase, like washer & dryer, microwave, window treatments, light fixtures, etc.
- Time to accept the offer and/or counter offer
- Closing date
- Closing costs to be paid by seller and buyer
- Title insurance
- Home warranty
- Special assessments
- Homeowners association dues, estoppel letters
- Contingent on acceptable property inspection
Earnest money is a deposit a buyer gives when making an offer. This shows good faith that the buyer is serious about the purchase and is ready to make a deal. The earnest money is held by a third party title insurance company that facilitates the closing and issues the title insurance to the buyer. In most residential transactions in Florida the seller pays for the title insurance and therefore chooses the third party title company.
Most offers have contingencies. The two most common contingencies are:
- Buyer obtaining specific financing from a lender. Therefore if the buyer cannot obtain the written acceptable financing in the contract then buyer will not be obligated to close on the transaction and will be refunded 100% of their earnest money deposit from the title/escrow company.
- Buyer obtaining a satisfactory written home inspection within a certain timeline after the contract has been agreed upon. Therefore if the inspection is unsatisfactory to the buyer they have the right to cancel the contract and receive a full refund of their escrow money or they can re-negotiate the final sales price to adjust for the problem issues with the inspection.
Being able to negotiate with as many tools as possible offers you the best opportunity to get what you want. Some examples are:
- All cash offer to purchase
- Being fully pre-approved by a bank or mortgage broker, meaning you have submitted all the required paperwork to obtain the financing like: tax returns, bank statements, employment verification, income verification etc.
- If financing, having a large down payment towards the loan and/or large earnest money deposit
- Ability to close and take possession ASAP and/or what’s most convenient for the seller
- Quick property inspection deadlines
Also the Realtors job is to discover why the home is for sale. Depending on why the sellers are selling can greatly determine how flexible they are with the terms and price of the sales contract. Like if:
- The home is vacant and unoccupied, the seller is incurring expenses each month like a mortgage, taxes, insurance, home maintenance like pool, lawn care, pest control etc.
- Job/career related relocation
- Death in family
- Estate sales or disputes
- Purchased another property and still have one that must be sold to avoid hardships
Finalizing a Sales Contract
In Florida a contract is binding and enforceable once both parties have agreed upon all terms and have initialed, signed and dated each page of the sales contract. If the seller makes a counter offer, many times it comes in verbal form through their Realtor. Both parties will negotiate until they have come to a final agreement. Once this is done then the contract will be re-written to reflect all changes then both parties must initial, sign and date the new contract. If the old contract is used and handwritten changes have been made the all parties to the contract must initial on the same lines as the changes.