Purchase Offers

Please note, all of this is strictly my opinion. Do not take any of it for legal or tax advice as I am completely unqualified to give that. Nor do I pretend that this is all up-to-date, things have been changing much too fast in this business for any of us to claim to be 100% current.

That said, I have written several purchase offers for property here in Lake Shastina and there is some misunderstanding out there among both buyers and sellers, about the effective and the less-than-effective way that purchase offers are made.

For example it's not always smart to make a verbal offer. Anybody can walk in off the street and say "I'll give him 10,000 bucks for it". Verbal offers, especially without a good faith deposit, are only as good as the paper they are written on, which is to say, not good at all. For one thing, why wouldn't a buyer take the time to write it down? Not that interested? Too ridiculous an offer to take seriously? We were taught to encourage buyers to demonstrate their intent in such a way as to grab the seller's attention __ ie. take the trouble to write down what you want to offer.

All the buyer expends to do this is time. He or she also should accompany the written offer with a deposit check ($500 for a lot, or $1,000 for a home are customary amounts for our area although it could be more for example if the buyer wants to really impress the seller). This deposit is called "good faith" money, meant to demonstrate to all parties that this is not just hot air but serious intent.

The deposit should not be more than 3% of the price however, because if the buyer and seller choose to NOT initial a special section called the liquidated damages clause, the seller is not limited in how much he can sue for in damages if the buyer bails out (if both parties do sign this clause the seller is limited to 3% of the accepted price or the good faith deposit, whichever is LESS. That's why if we represent a buyer we advise to not exceed that percentage no matter how much they want to impress a seller.)

The check is not cashed until the offer is accepted at which point the title company deposits the money into the escrow account for the pending transaction. This deposit applies toward the agreed purchase price and on the purchase agreement the buyer must spell out how much he is putting down and how much they are borrowing. If it will be all cash there is also a box lower down the page that should be checked so that it's clear the offer is not contingent on a loan.

So coming full circle, good offers are written ones. It's fine to ask the seller's agent if he or she thinks their seller would consider such-and-such amount. If they say yes, then you submit it in written form. The default period for acceptance is 3 days by the way but that can be overridden if you think the seller and/or buyer will be hard to reach, don't have a fax or internet, etc.

Next time I'll tackle the buyer's 17 day inspection period unless I hear from a reader wanting to know some other aspect of the buying process___or the selling side, we can cover that, too.