Don’t Overlook A Well Written Purchase Offer
Some of the first things you may worry about during your journey will be the final sales price and your closing day. Although, there are some other things you want to take into consideration especially when preparing your purchase offer to the seller.
Reality television shows make the negotiation between the buyer and the seller into a simple idea of money. While negotiation of the price is key to your purchase contract, you should also know that there are other areas that can be negotiated as well. Making sure that your offer has these clauses covered can make a huge difference once everything has been signed.
Property Tax Credits
In Illinois where I am licensed, the property tax bills are paid a year behind. This means in 2016, we are actually paying a 2015 tax bill. If you plan to purchase a rehabbed home, odds are your taxes will increase the following year. For that reason you want to make sure that your offer included an additional credit for the property tax perorations. This will be a big factor for setting up an escrow account for the following year when your taxes come due.
Make sure to negotiate a 105 to 110 percent tax credit so that any increase in taxes is covered. For new construction properties the taxes will be brand new. You will want to talk to your attorney about the proper way to word your contract. This avoids insufficient tax perorations when the bill is assessed to your home the following year.
Closing Cost Credit
You may benefit from asking the seller for a closing cost credit. This will allow you to avoid having to come up with your down payment. Also, the cost to cover your loan, attorney, title, and transfer fees at closing.
Talk to your lender and your realtor about how much money you will need for closing. Asking the seller to help with your closing cost can benefit big time and allow you to purchase a home sooner rather than later.
Remember, having a seller pay your closing cost does affect their bottom line. In simple terms, if you offer $100,000 on a house and ask the seller for $5,000 in closing costs, your net offer is only $95,000.
Most states and realtor associations have an agreed upon purchase contract format they use. Each contract will have different contingencies that are present. This will allow both the buyer and the seller the option to cancel the contract if certain items aren’t met. If these areas are not carefully reviewed prior to submitting your offer, you may be at risk of losing your earnest money. The key areas that I am always sure to review with my clients are:
- Mortgage Contingency- In layman’s terms states if you are unable to secure your mortgage financing by a certain date, you have the option to cancel out of the contract. Mortgage financing is not easy. It may be the case that your lender needs more time to review your file or worse yet you may end up not being qualified to purchase the property that you were pre-approved for. Having a mortgage contingency takes away the risk of losing your earnest money.
- Attorney Review- Attorneys are not present in all areas. In a lot of areas they are absent and leave the negotiations to the realtors and the title review to the title company. If you have real estate attorneys in your area where you plan to purchase I highly recommend one. They are there to make sure that the purchase offer you signed is legit. The last thing you want to do is purchase a home and owe more money on it than when you bought it. If for some reason your attorney doesn’t like the wording of your purchase contract, they will be help you get out of the deal within the grace period.
- Inspection Review- Once your home is under contract you generally have 5-7 days to complete a home inspection. This will allow you to verify that the house is in working order. If for some reason the house doesn’t pass your own standards, you are able to cancel out of the deal. However, this needs to be done at the beginning of the transaction.
It is important to understand what you are singing. Do not just fill out forms using your smart phone. Take your time and review what is being presented to you. If you don’t understand something simply ask! If you are working with an experienced realtor, they will happily help.