When you find a prospective buyer who wants to purchase your property, the next step is to receive official notification that they are ready to buy. In real estate, this is done with a formal Purchase Offer. Now, the buyer could simply call and let you know the good news, but that wouldn't prevent the prospective buyer from changing their mind later, thus spoiling other opportunities you may have to sell the property to someone else. A formal purchase offer should absolutely be done in writing. As the old saying goes, "if it is not in writing, it didn't happen."
The written purchase offer is usually accompanied by a deposit check, which is sometimes called earnest money or a binder. The deposit is held in an escrow account, which is a special bank account held by a third party such as an attorney, a broker, or a bank. The deposit in escrow is a good faith agreement to protect both parties and the third party holds this money while the transaction takes place. The buyer is protected from the seller not following through on written contingencies. The money in escrow can be returned if contingency clauses were not met. The seller is protected from the buyer reneging on the deal without just reason. If this is the case, the seller will keep the deposit amount.
The following are essential characteristics of a written Purchase Offer:
- Legal address and description of property
- Price of the property
- Amount of Deposit to be held in Escrow
- Terms of payment
- Rate of interest
- Seller's duty to provide proof of Title
- Date of closing
- Conditions if Purchaser/Seller defaults
- Contingency Clauses
- Signatures of parties involved
The purchase offer is where the buyer will address any concerns that they have about the property. These include any defects or problems they may have discovered when the property was inspected. If the buyer wants these defects or problems corrected before completing the sale, you should include "Contingency Clauses" in the purchase agreement, meaning the sale is contingent on the correction of these issues. Contingency clauses are also known as the "subject tos" of a purchase agreement, as the legal term "subject to" often appears before the issue to be rectified.
If the buyer has any concerns about the property whatsoever; they must address them in the purchase offer. Otherwise, these items may never be addressed.
Examples of the contents of some contingent clauses are as follows:
- Subject to a professional inspection
- Subject to the replacement of the kitchen faucet
- Subject to review by buyer's attorney
- Subject to buyer's approval of title insurance
"Subject tos" or contingencies can also protect the buyer from complications that have nothing to do with the seller, such as:
- Subject to approval of buyer's spouse
- Subject to buyer receiving financing
- Subject to the sale of buyer's existing home
Your Todd Sandler Realtors agent will have a great deal of experience in creating secure purchase offers that prevent any complications before or after the sale.