A complete purchase offer in Montgomery County is a tall stack of paperwork that’s normally over fifty pages. It's overwhelming. Before diving into a pool of paperwork, first determine the basic business terms that will be included in your purchase offer. Here's seven key terms that are found in practically all purchase offers in Montgomery County.
This is the most obvious and one of the most important terms of your offer. How much are you willing to pay for the the property?
You’ll specify exactly how you’ll purchase the property: the type of loan program you'll use and the cash down payment that you will make at settlement. You must include a loan approval that supports the financial terms of the offer. This letter tells the seller that you have the financial means to make the purchase. Don't lose the sale because you have a poor loan letter! Get the best approval letter possible.
A seller credit is applied to your settlement costs and reduces the amount of cash you need at settlement. Asking for a credit makes sense if you need to preserve cash, or to compensate for obvious property improvements like paint and carpet. Note: a seller credit is not free money! This credit comes directly out of the seller’s proceeds. So the real financial offer you are making is the purchase price less the credit. Normally it’s best to negotiate just on price without a credit if possible.
You’ll make a good-faith escrow deposit that is typically 1% to 3% of the purchase price. This is deposited only if the contract is ratified, and is applied to your down payment at settlement. You will include a copy of this check in your offer. After ratification, typical contracts have basic contingencies that will allow you to void the contract and have this deposit returned. Get past these contingencies and decide not to move forward with the purchase, then this deposit is at risk. Having a higher escrow deposit gives the seller more confidence that you are serious about closing the sale.
This is the date that all parties meet at the settlement attorney's office to sign paperwork and transfer home ownership to you. You can move-in immediately after settlement. With few exceptions, this date can only be changed if both parties agree.
Your offer will specify the time period by which you'll complete inspections of the property and deliver any home repair requests to the seller. Testing for radon is also common in this time frame. These inspections are typically completed within seven to ten days after contract ratification.
Once you ratify a contract with a seller, you'll complete a home appraisal and get final loan approval. 21 to 28 days from contract ratification are typical to complete these contingencies. Sellers want to get through these as soon as possible, so shorter time-frames make your offer stronger.
In addition to these common contract terms, additional business terms may be appropriate.
If the seller would like to stay in the home for a limited period of time after settlement, then all parties agree to a rentback. In most rentbacks, the seller will compensate for the buyer's mortgage, insurance, taxes and HOA/condo fees incurred during the rentback period. The seller pays utilities during this period. The total rentback amount is calculated by the settlement attorney, and the seller credits the buyer for the full amount at settlement. Several factors limit this period to no more than 60 days. A rentback escrow amount is also specified.
If you can only purchase the property by selling your current home, a home sale contingency would be included. In addition to other terms, this contingency specifies the maximum list price for your home, and the number of days you have to get your home under contract.
If the seller owes more than what the the home's worth, the seller's bank(s) must review and approve your purchase offer. These are called short sales. Among other things, a short sale contingency will specify the number of days the bank has to approve the sale, and the number of days to settlement after approval is received.
These are the basics that cover practically all purchase offers. If a buyer or seller has special needs, or if the property requires other assessments (private well, septic, etc), then your offer will include additional terms.