After you've put your property on the market, potentially interested homebuyers should start showing up to take a look; and with any luck, some will take a serious interest in it. One or more might then submit a written offer to purchase the property. This offer takes different forms in different parts of the United States. It's sometimes called an "earnest money contract," sometimes a "residential purchase agreement, and sometimes a "sales contract."
You might not have long to decide whether to accept the offer or to make a counteroffer. Most contracts give the home seller 48 hours or less in which to respond to the buyer. (Though this could certainly be negotiated.)
You certainly don't have to accept the buyer's offer outright, especially if it differs from what you asked for in your listing agreement. Stay calm, cool, and in control, and don't let excitement or stress distract you from making an objective evaluation of the offer.
What Should a Home Seller Look for in the Purchase Offer Details?
In most states across America, you can expect to see the below terms in a real estate purchase offer. (In some states, however, such as New York, the offer will be much briefer, and it will be up to you as the seller to draft the actual contract, with the help of an attorney.)
- Purchase price the buyer is offering.
- The street address and possibly a legal description of the property.
- Earnest money amount (which the buyer will forfeit if both parties sign the agreement but the buyer then breaches the contract and fails to follow through).
- Down payment amount (and, correspondingly, how much the buyer will seek in the form of a mortgage loan).
- How long the offer will remain open for the seller's acceptance.
- The closing date for the sale.
- Date upon which the buyer may move in, or in legal terminology, "take possession" of the property (usually, but not always, on the closing date).
- Who holds the earnest money deposit (usually an escrow agent) and who will be the closing agent and/or escrow or title agent for the closing.
- Items to be included in the sale beyond the basic land and structures, such as carpeting, lighting fixtures, appliances and so on.
- Specific items not included in the sale that a buyer might have assumed would be.
- Assurance that the property seller will provide clear title to the place, through an abstract of title, certificate of title, or a title insurance policy.
- Who is responsible for paying expenses related to the property, such as utilities, property taxes and homeowners' association fees up through the closing date (usually the seller).
- Contingencies (conditions that must be met before the sale closes), such as the closing depending on the buyer obtaining financing, with return of earnest money if they can't get a mortgage; or the sale of the buyer's current home.
- An inspection contingency, allowing the buyer to have a professional home inspection done within several days of the contract date and to cancel the sale if not satisfied with the results. (Realistically, however, home defects found during the inspection more often become a topic for further negotiation.)
- Terms for the buyer's final walk-through to inspect the home's condition immediately before closing and ascertain whether the seller has really moved out and left the place in reasonable condition.
- Terms that a seller who doesn't move out as scheduled must pay; it's usually called "liquidated damages" or payment for use and occupancy of the house.
Your real estate agent, if you're using one, can help you understand these various terms and decide whether they are acceptable to you. Or if matters get complex, you might want to bring in an attorney.
Sending the Homebuyer a Counteroffer
As the property seller, you are likely to respond to the buyer's offer with a counteroffer, which accepts some terms and proposes changes to others. Common counteroffer proposals include:
- A higher purchase price.
- A higher earnest money deposit or "liquidated damages" amount, money that the buyer will owe you upon backing out of the deal for a reason not listed in the contract. State law might limit this amount.
- Reduction of the time for the buyer to remove contingencies such as inspections and selling a current home.
- Removing certain contingencies altogether.
- Excluding certain items from the sale, such as your antique stove that you wish to take with you.
- A change in the closing date to fit your plans.
- Asking to stay in the house after closing (a "rent-back"), particularly useful if you still need to find another house to buy.
- A clause allowing for review of the contract by your lawyer before acceptance is final.
Reaching a contract you and the buyer agree on might take a few rounds of back-and-forth negotiations. Fine tuning the contract can happen quickly, often with a few phone calls between your real estate agents.
Once you have both signed, you and the buyer can move ahead toward the closing date. See Escrow and Closing in Buying or Selling a Home for more on that.