OK, I've made an offer - signed the Purchase Agreement and given my Realtor my earnest money check. What comes next?
This is part 5 of a 10 part series of FAQ questions and answers about the real estate process from the buyers’ perspective.
Answer - Your Realtor will transmit your offer to the listing agent for presentation to the seller. In some places your agent may request the opportunity to actually present the offer to the seller; although that doesn't happen much anymore here in Michigan. On most offers there will be a deadline for a response; however, if you have made an offer on a foreclosed house or a short sale, don’t worry too much about that deadline - the other side will answer when they damned well feel like it. Get used to that in a distressed sale.
One of several possible things will happen after the listing agent gets the offer.
The seller may reject your offer, but make a counter offer. In this case your agent will arrange to sit with you
The seller may return a form called a Sellers’ Expression of Intent. This is a form of rejection of your offer that keeps the process alive. The sellers are basically saying “I do not accept your offer; however, if you were to return with an offer that contains these changes (they will list their requirements) I would favorably consider that offer.” Sellers sometimes use this method because it does not tie their hands from looking at other offers (after all they've expressly stated that they are not accepting your initial offer). You agent will have to start over with a new Purchase Offer form, but at least they have expressed interest in continuing to negotiate with you. Try again with the changes that they have asked for (or at least all that you can agree to do) in their reply.
Keep in mind during these negotiations that the seller has effectively taken his property off the market while he/she dickers with you. The seller is not going to want to keep the home off the market for long. That works
If the seller rejects your counter to their counter-offer, be prepared to move on. They've had it with you for now and may not even entertain future offers from you. You’ll have to start over with a new offer. At that point it’s time to reassess whether you really want this house. If your answer is “yes”, then it’s time to stop screwing around and make an acceptable bid – you already know what the seller wants.
If you made a bid on a foreclosed house or a short sale, be prepared for a counteroffer from the bank that is essentially a new offer from them with their terms and conditions. You’ll need to go over that counter-offer with your agent. You need to be careful to understand all of the terms and conditions in
the bank’s counter-offer, because some of them may have penalties if
you don’t meet their deadline for closing and there may be other terms and
conditions that are not advantageous to you. Many banks are now requiring the
buyer to pay some of the costs that the seller used to pay, like state taxes
and fees. Some are even refusing to pay back property taxes and requiring the
buyers to bring those taxes up to date.
Make sure that you understand any and all extra costs involved with buying that foreclosed house, so that you can evaluate whether the house is still a good deal. Also remember that the banks are not required to supply any information about the condition of the house, such as Seller’s Disclosures. They are still required to give you some form of Lead-based Paint Disclosure.
If this is a short sale, you might as well settle in for the long haul. Lenders are still taking 5-6 months to get through the short-sale process and you may be required to update your loan application before this thing even gets a decision. It is up to you to decide whether you want to spend the money up front for a home inspection or wait until the bank approves the short sale. Some banks may require that you do the home inspection and the appraisal at the start of the process, which means that you could have around $1,000 sunk into the house before you even find out if the bank will approved the short sale.