Buying a home: a checklist for bidding on a home
This may be called a purchase contract, formal offer, or contract of sale, but whatever the name is, it is the official documents that must be completed. before buying a house. While it may seem like it took forever to get there, some of the most important work is yet to come. Here is a checklist to help you get through the bidding process.
[ ] First, if you haven’t already, make sure pre-approved by a lender.
[ ] Determine a justifiable and fair bid price for the home you are interested in. This can be based on comparable sales as well as other market information from your own research or from a comparative market analysis provided by your real estate agent.
[ ] Check that the advance payment required by your lender is in the bank and ready to go. Just having the funds available to buy a home (including the money required for the security deposit, down payment, closing costs, etc.) is not enough. Having direct and immediate access to cash is essential. This means allowing enough time for investment sales and / or wire transfers from banks, brokerage houses – or even family members’ accounts – to access your home buying bank account.
“Just having the funds available to buy a home (including the money required for the security deposit, down payment, closing costs, etc.) is not enough. Having direct and immediate access to cash is essential.“
[ ] Make sure you have the funds to cover closing costs (around 3% of the purchase price).
[ ] Also prepare your deposit in good faith (serious money). This is often between 1% and 3% of the purchase price and could be more in a hot market.
[ ] Check that the offer agreement details the terms of the serious money, including its disposition when accepting or rejecting the offer.
[ ] Negotiate so that the seller (or even the lender) pays part of the closing costs or other prepaid items, like taxes. Some lenders may limit the amount of the seller’s participation in these expenses.
[ ] Determine which unforeseen to include in your offer. These may include:
Repair, replacement and / or improvement of the problems revealed during the inspection.
Verification of the value of the accommodation via a Evaluation (lenders will insist on this).
If the transaction is conditional on the sale of a home you currently own.
Any other contingency that your lender or state and local laws may require.
[ ] Establish a time frame for receiving the appropriate information from the owner regarding the improvements and the condition of the property. This may include revealing natural hazards, neighborhood issues, owners association bonds and more. Local and state laws may also require additional disclosures. The sales contract should also address the number of days you have to review the disclosures, as well as your ability to modify or withdraw your offer based on those disclosures.
[ ] Decide if you want to attach a personal letter to the owner. (This isn’t required, but some buyers do this to explain the bid price rationale – or to make a personal call for an offer to be considered.)
[ ] Set an expiration time and date for your offer. In hot markets it may take a few hours – but in most cases it’s a day or two.
[ ] Set a deadline for a loan closing date (often 30 to 60 days).
[ ] Specify the number of days after closing until you can start occupying the property, leaving enough time for an owner-occupied property to vacate.
In some states it is necessary for a real estate lawyer to prepare, or at least review, the written offer. Although it is not mandatory, it is a good thing to consider. Many purchase contracts are generated with standard state approved forms provided by your real estate agent. Boilerplate documents are handy, but be aware that they are not generated specifically for your best interests. Having a lawyer on your side of the transaction may be worth the additional cost.
Regardless of how you generate the formal offer, you want to make sure it complies with the laws in your area. It’s too big a purchase to omit important details or required language that could torpedo your transaction.