Tuesday, September 22, 2009

Contract Checklist: 5 Things Needed to Make an Offer

Posted by The Jill Smith Team at 11:31 AM
If you are new to buying in New Jersey or have not bought a property in the area in several years it is important to know what documents are needed to make an offer. Often paperwork needs to be put together in a matter of hours and in multiple bid situations there are tight deadlines to meet. Buyers may be caught off guard and feel overwhelmed by how many items are required. Knowing what documents are needed to make an offer and addressing any questions early in your home search will facilitate the process when you find a property you want to buy. Below is a checklist of paperwork need to submit an offer. If you have any questions please contact Erin Smith at erinsmith@kw.com.

Making an Offer Checklist

1) Signed Contract
2) Initial Deposit Check
3) Signed Disclosures
4) Mortgage Pre-Approval (or proof of funds if paying cash)
5) Letter to Seller

Signed Contract: The information required to complete a contract includes offering price, down payment amount and closing date. Each page of the contract needs to be initialed and the contract signed where indicated. The Jill Smith Team and Keller Williams Realty Premier Properties use standard New Jersey Sales contracts issued by NJAR (New Jersey Association of Realtors®).

Initial Deposit Check: This money represents the buyer’s good faith that their offer is earnest. The amount of the check is the buyer’s choice however the standard is $1,000 - $5,000, depending on the price of the house. Any amount less than $1000 may make the seller feel the buyer is not financially qualified to purchase the property, or that it is not an earnest offer. This initial deposit is deducted from the total deposit amount that is due 10 days after the end of attorney review. The buyer’s agent will make a copy of the check to submit with the offer paperwork. Buyers working with The Jill Smith Team will be asked to make the check payable to Keller Williams Realty. Attorneys may decide that this check should be rewritten and made payable to an attorney trust account. If Keller Williams Realty holds the initial deposit it will be held in a trust account.

Signed Disclosures: Most properties will offer a Seller’s Disclosure and a Lead Paint Disclosure although state law does not require them. In our area it is standard to have Sellers Disclosure and Lead Paint Disclosures available and that they be signed and submitted with your contract. Please read the disclosures carefully and discuss any questions or concerns with your agent.

Mortgage Pre-Approval: A mortgage pre-approval must accompany your offer and ideally should reflect the exact amount you are offering. As a buyer, you may think that having a pre-approval for well over the offering price makes you look better qualified to buy the home. However, if your offer is under asking price it may make the seller begrudge a less than full price offer if they think you can afford well above the asking price. Even if you have been pre-approved for an offer above your initial offering price, your pre-approval letter should reflect the amount of your initial offer, so that you do not disclose to the seller that you can afford to make a higher price.

Letter to Seller: A letter to the seller is not a requirement but can be very useful. Typically in this letter you tell the seller a little bit about yourself and what you like about the house. If you are making an offer on a house you particularly love sellers appreciate hearing you will appreciate their home as much as they have. In a multiple offer situation, you never know what may appeal to a seller and make a difference. It is not an anomaly that a seller accepts a less than top offer because of such a letter. Two examples come to mind. In one case, the house was an estate being handled by several adult children who had grown up in the house. The top bid on their parents’ home was by a builder who intended to tear the home down and build a new construction house. A significantly lower bid was accepted from a family who wrote a letter telling them how much they loved the house just as it was and that they never dreamed they would be fortunate enough to make an offer on such a beautiful home. The other example is of a multiple bid situation where the two top bids were very similar. One of the competing buyers had written a letter stating that they noticed the diplomas on the seller’s office wall and stated that he had also attended the same college. Having to make a choice between two strong offers, the seller chose his fellow alum. I do not know of any situation of a letter hindering a buyer so it can’t hurt, especially if you really want a particular house. And if you are not in a multiple bid, a kind letter can only make the process go more smoothly. If you have questions about what to write or would like some help writing it please let your agent know.

It is important to know that a written offer is required by law to be submitted to the seller within 24 hours so only when you are truly ready to make an offer should you begin the paperwork. It is also advantageous to secure an attorney prior to making an offer so when your offer is accepted attorney review can commence without delay.

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