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Wednesday, March 19, 2014

Question – We got an offer, now what?

This is the 8th in a series of 12 posts of frequently asked questions about the real estate process from the sellers’ perspective.

Answer - Well, great! Now you accept it or reject it or counter it. This is another area where your Realtor can make a big difference, in this negotiation phase. Money is the obvious point of most contention, but there are others – possession is a biggie, personal property or property that was to be excluded may be another issue. Your Realtor should sit with you and go over the offer page by page to explain any terms and conditions that might be contained in it. Some rather innocent looking terms (many times buried in the actual PA form itself) can have costly consequences.

Read carefully any terms or conditions concerning who will be paying for any items that the buyers have specified, to include inspections and tests, surveys, home warranties, extended coverage title insurance and others. Your Realtor can explain all of those things and will know what the local customs are concerning who pays. Remember that you can change or modify any of the proposed terms and conditions, including who pays for things, as a part of a counter-offer.

Your Realtor should share with you, and go over, a Sellers’ Net Worksheet, which is a form or worksheet to show the seller what the impact of all of the costs of the sale are – the mortgage payoff, the real estate commissions and any state mandated taxes and fees, along with the cost of the title insurance policy that the seller must provide. If you are in a state like Michigan that charges property taxes ahead instead of in arrears, the Realtor will also calculate how much you’ll be getting back from your property taxes, once they are prorated to the date of the closing. The name of the form says it all – the Realtor will show you the net that you will have after all of the costs are subtracted and any tax proration added back in. This will show you what you will walk out of the closing with in-hand. It might indicate that you’ll have to bring money to the table in order to close. I hope that wasn’t a surprise. That is a form of short sale.

Perhaps the most common issue that causes offers to be rejected (other than a low-ball bid) is a contingency in the offer, most often that is a clause making the sale contingent upon the successful sale and/or closing of the buyers’ current house. In that case it is important to let your Realtor evaluate the situation and advise you. Your Realtor will work to find out how likely the sale of the home in question is within the time frame that is specified in the contingent offer. He will look at the listing for the other house and may do a quick CMA on it to see if it is properly priced. If the house has been on the market for quite a while already, he/she will want to understand why it has not sold and what if anything the buyer is now willing to do differently to help it sell within the contingent window.

It may well be the case that your Realtor will advise you to reject the offer. Certainly he/she will
advise you to make sure that the contingent offer allows you to continue to market the house to other potential buyers and that the contingency has a clause that sets a time limit (usually 48 to 72 hours) after another acceptable offer has been received, during which time the original buyers may remove the contingency and proceed with the sale or give it up an void the contract. In this area, your listing will be marked CCS – Contingent Continue to Show – in the MLS. While that is not the same are showing it as Pending, it may turn off other would-be buyers who might not want to get theior hopes up over a house that someone else has a first position offer in on already.

Your agent will request of the contingent buyer that he/she provide some further proof of their ability to bring the sale to a close after their house sells, such as financial statements or a mortgage pre-approval document, if they didn’t already supply that. If the buyer has sold his current home and is waiting for that to close, your agent will likely ask to see a copy of that sale contract and supporting documentation.

Your agent should also go over the proposed occupancy after closing and explain that to you. If you had advertised that you needed days or weeks of occupancy after closing in order to get ready for your move, the Purchase Agreement will cover that and should provide an estimate of the cost or at least a daily rate that you will be charged. Remember that as soon as you close, you become a renter in the house and must pay the new owner (your new landlord) for that stay. The title company will retain an amount equal to the daily rate times the number of days that are specified after closing. The PA may have also provided for some amount of a damage deposit to also be retained by the title company. You will be making provisions at closing on how to handle the disbursement of that money later.

This is yet another stage in the process where you should listen to the advice of your Realtor. He/she is familiar with the wording of Purchase Agreements and will know what to look for to protect your best interests in the offer in-hand. It is also another point at which you may wish to allow your attorney to review the document. Because time is of the essence, offers normally come with fairly short deadlines for a response, so don’t drag your feet on arriving at a response.

If the offer that you have in hand has none of the issues above, and is acceptable in all other aspects, then accept it and we’ll move on to what comes next. You accept the offer by signing in the spots reserved for the sellers on the Purchase Agreement form. In the modern world that may well be an electronic signature.


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