Fantastic news – someone wants to buy your home!
Congratulations, you received an offer on your home! Unfortunately it’s not as simple as just receiving a price to buy your home at – there will be a lot of other items to consider.
The Purchase Contract
Most sellers have never seen a purchase contract and it can be pretty intimidating at first glance. It isn't just a price - the document is many pages long with many more conditions. Here's a look at a blank form:
That contract looks pretty intimidating, doesn't it?
Fortunately, YELLOW is here to help. We can walk through any form with you when you contact us through one of our many contact methods.
Additionally, we provide buyers with a guide and video to help them fill out this contract. These resources can help you understand the document, too.
Our Explanations Guide gives an explanation for each section and also includes links to other websites with more information on that section.
Here’s our video for the Purchase Contract, which walks through each section:
We've also created video explanations for every other form, too. Here's a link to the all our other videos:
Parts of the offer
The resources above should go a long way in explaining the purchase contract, but we'll discuss the main sections below.
This is obviously the most important part of the offer. Did the price come in at or near your goal? See how much you will walk away with using a calculator.
These are the things that must be completed or satisfied before the deal can be closed. They are for the benefit of the buyer - if they aren't completed or if they reveal a problem, the buyer can back out of the deal and keep their earnest money.
Here are the most common contingencies:
The buyer can walk away from the deal if an inspection reveals a problem that they don't feel comfortable with. Inspections will always reveal problems and usually the buyer and seller will work on negotiating a deal. However, if a deal can't be reached or the work is too great, the buyer can exit the deal. This could be any inspection - from the general inspection to the WDO or lead paint or septic or any other inspections that may have been competed.
An appraisal that comes in below the amount you agreed on (usually only if it is significantly below - slightly below is often acceptable) will give a reason for the buyer to try to renegotiate the sale price. If a deal isn't reached, they can cancel the contract.
Even though the buyer has a preapproval for a mortgage, they may not be ultimatelly be approved for a mortgage. Without financing, the deal falls apart and the buyer can exit without penalty.
If there turns out to be a problem with the title, the buyer can cancel the deal.
Existing home sale
This one is becoming less common. It is designed to give the buyer time to sell their current home within a certain time period before officially buying your home. It's unpopular with seller's, hence its reason for becoming less common. If you aren't in a rush to sell, it may be a good way to try to renegotiate for a higher sale price in this case.
Keep in mind that these, too, are all a part of a negotiation. You can decide to accept them all, some, or none and attempt to renegotiate. If you don't like the contingencies, you can also simply reject the offer.
The offer will include the way the homebuyer will finance the home purchase. This is important because it can provide clues as to how long it will take to close.
Settlement or Closing date
This is the date the buyer plans on closing. It might sound great to close quickly, but remember you will need to find a place to live and time to pack. Ideally, this date should suit both the buyer and seller.
The average closing time is around 45 days and most close between 30-60 days (what is the buyer doing during the closing process? Find out HERE). Have realistic expectations for closing times.
This is the amount the buyer will pay into an escrow account to show that they are serious about their offer. It's usually in the $1,000-2,000 range. If the buyer fails to follow through on certain parts of the contract before closing, you will likely be entitled to that money.
Calculate the net proceeds from your sale
To estimate the amount of cash you’ll walk away with when the transaction is complete, you will:
We've created an Excel spreadsheet that will help with these calculations:
It’s up to you to decide if the offer is acceptable – note that the rule of thumb is that the first offer is often the best. Remember, too, that a lower sale prices with fewer conditions may be better than a higher price and more conditions.
It’s okay to reject an offer – you don’t have to specify why. You can reject the offer outright, but most sellers will make a counter-offer. Respond to the buyer with a counter and see how they respond. The back-and-forth can continue as long as you like before a firm rejection is made.
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