0:00:00.486,0:00:01.615
- So let's say that this house

0:00:01.615,0:00:03.332
has been on the market[br]for a couple of weeks,

0:00:03.332,0:00:07.403
and the asking price is $310,000.

0:00:07.403,0:00:08.815
And you say, well, you[br]know this looks like

0:00:08.815,0:00:10.070
the type of house, and[br]you're in the market

0:00:10.070,0:00:11.282
to buy a house, you say, "Hey this is

0:00:11.282,0:00:13.252
"a type of house that I could imagine

0:00:13.252,0:00:14.648
"me and my family living in.

0:00:14.648,0:00:16.116
"I would like to buy this house."

0:00:16.116,0:00:17.416
But you think, you know this price

0:00:17.416,0:00:19.115
has been on the market[br]for a couple of weeks.

0:00:19.115,0:00:20.866
Maybe I think I could get[br]a better deal than this,

0:00:20.866,0:00:23.665
so you decide to make an offer.

0:00:23.665,0:00:26.866
You decide to make an offer for,

0:00:26.866,0:00:31.332
let's say, a little[br]bit less, for $300,000.

0:00:31.332,0:00:33.348
So the question is, how do you go,

0:00:33.348,0:00:35.436
or how does your agent go about

0:00:35.436,0:00:38.678
actually making an offer?

0:00:38.678,0:00:40.031
Well, the way it goes is, you don't just

0:00:40.031,0:00:42.998
walk up to the seller,[br]or the seller's agent,

0:00:42.998,0:00:45.698
and say, "Okay, we're[br]gonna offer you $300,000,"

0:00:45.698,0:00:48.303
because they don't know[br]whether you're serious.

0:00:48.303,0:00:49.666
They don't know whether you actually

0:00:49.666,0:00:52.081
have the money to do it, whether you are

0:00:52.081,0:00:54.148
in a position to do it,[br]or whether you're just

0:00:54.148,0:00:57.616
kind of playing around, or[br]just wasting their time.

0:00:57.616,0:00:59.597
And so, to prove that you're[br]not wasting their time,

0:00:59.597,0:01:03.005
you create, or you fill out,

0:01:03.005,0:01:05.561
an offer contract.

0:01:06.500,0:01:08.097
So let's think about what should go,

0:01:08.097,0:01:11.555
or what might go in an offer contract.

0:01:16.279,0:01:21.169
So, likely your agent,[br]if you're using an agent,

0:01:21.169,0:01:22.919
or even a real estate attorney,

0:01:22.919,0:01:25.567
or you could even find some[br]of these forms on the web,

0:01:25.567,0:01:28.451
you would create a contract,

0:01:28.451,0:01:31.233
and there's some basic[br]information that you would want.

0:01:31.233,0:01:33.867
You would obviously want info,

0:01:33.867,0:01:36.412
info on the property,

0:01:36.412,0:01:39.419
what's its address, the property,

0:01:39.419,0:01:42.523
who's buying, yourself,

0:01:42.523,0:01:45.583
so the buyer and the seller,

0:01:45.583,0:01:46.751
this is just to kind of know, hey,

0:01:46.751,0:01:48.201
what is this contract about?

0:01:48.201,0:01:49.300
It's about this property,

0:01:49.300,0:01:52.766
and who's getting into this contract,

0:01:52.766,0:01:53.800
and then you'd want to put some

0:01:53.800,0:01:56.468
information about the actual offer,

0:01:56.468,0:01:59.284
so, you would put your offer in.

0:01:59.284,0:02:03.668
You'd say, "Okay, I'm[br]going to offer $300,000."

0:02:08.084,0:02:09.368
And then you also want[br]to prove that, look,

0:02:09.368,0:02:11.869
you're not just playing around with them,

0:02:11.869,0:02:13.251
that you're serious about this.

0:02:13.251,0:02:17.229
This offer is made in[br]earnest, and so you will

0:02:17.229,0:02:20.315
give a deposit when you[br]make this offer contract,

0:02:20.315,0:02:23.171
or it's typical to give a deposit,

0:02:23.986,0:02:24.865
and it will vary.

0:02:24.865,0:02:26.283
The higher the deposit, the better,

0:02:26.283,0:02:28.514
because it shows the more earnest you are,

0:02:28.514,0:02:30.617
the more serious that[br]you are about actually

0:02:30.617,0:02:32.664
going through with this offer contract.

0:02:32.664,0:02:35.883
It's typical for these deposits[br]to be anywhere between,

0:02:35.883,0:02:38.449
I've seen one percent, two[br]percent, three percent,

0:02:38.449,0:02:41.483
four percent, five percent[br]of the actual home price.

0:02:41.483,0:02:43.831
Three percent is what[br]I'm most familiar with,

0:02:43.831,0:02:45.083
but it doesn't have to be three percent.

0:02:45.083,0:02:47.865
It's really, this is just[br]an indicator to the seller

0:02:47.865,0:02:49.304
that you're serious about this.

0:02:49.304,0:02:51.232
So you're gonna write a check right now,

0:02:51.232,0:02:53.005
along with the offer contract,

0:02:53.005,0:02:55.565
for let's just say three[br]percent of the offer price.

0:02:55.565,0:02:58.209
So three percent of $300,000

0:02:58.209,0:03:03.182
is $9,000, that's a $9,000 check.

0:03:03.182,0:03:04.714
Some places, it's not a percentage,

0:03:04.714,0:03:06.649
some people say, "Okay,[br]you just give $1,000,

0:03:06.649,0:03:09.049
"or give $2,000," whatever it is.

0:03:09.049,0:03:11.649
But this money, once[br]again, this is a check

0:03:11.649,0:03:13.664
that you're writing[br]with the offer contract.

0:03:13.664,0:03:16.149
This shows that you[br]are serious about this,

0:03:16.149,0:03:17.900
that if for whatever reason you don't meet

0:03:17.900,0:03:21.098
your end of the contract, then the seller

0:03:21.098,0:03:23.331
might be able to just keep this money,

0:03:23.331,0:03:28.072
so this shows that you are serious.

0:03:28.533,0:03:31.534
This shows that you[br]are serious right here,

0:03:31.534,0:03:32.965
that they should take you seriously,

0:03:32.965,0:03:35.116
and that they should[br]go through the process

0:03:35.116,0:03:39.415
of trying to close on this property,

0:03:39.415,0:03:42.670
and we'll talk in future videos[br]more about what closing is.

0:03:42.670,0:03:43.865
Now, you're probably[br]thinking, "Okay, look,

0:03:43.865,0:03:45.803
"I'm just not gonna buy this outright.

0:03:45.803,0:03:47.566
"I've toured the home, I like it.

0:03:47.566,0:03:49.065
"I like the neighborhood, it seems to be

0:03:49.065,0:03:51.248
"in good condition, but[br]I don't know for a fact

0:03:51.248,0:03:52.181
"that it's in good condition,

0:03:52.181,0:03:54.381
"unless I have a chance to inspect it,

0:03:54.381,0:03:56.900
"unless I have a chance to[br]get some experts in there

0:03:56.900,0:03:59.613
"and make sure that the[br]house is in good condition."

0:03:59.613,0:04:02.232
And to make sure of that, it's typical

0:04:02.232,0:04:06.845
to throw some contingencies[br]in your offer contract.

0:04:10.570,0:04:12.767
Now, the most typical contingencies

0:04:12.767,0:04:16.546
are things like inspections,[br]so you might want to

0:04:16.546,0:04:20.537
inspect for termites, you want[br]to inspect the foundation,

0:04:20.537,0:04:23.428
you want to inspect the[br]plumbing, the electrical,

0:04:23.428,0:04:25.296
and make sure that it's[br]all on the up and up.

0:04:25.296,0:04:27.579
If something comes up in the inspection

0:04:27.579,0:04:30.326
that makes this house not[br]what you thought it was,

0:04:30.326,0:04:33.124
it allows you to get out of this contract,

0:04:33.124,0:04:35.834
and hopefully get your deposit back.

0:04:35.834,0:04:36.955
Now, other things that you might want to

0:04:36.955,0:04:39.325
put a contingency on, well you think that

0:04:39.325,0:04:41.275
you're going to be able to get $300,000.

0:04:41.275,0:04:43.859
Maybe you have saved enough for a deposit.

0:04:43.859,0:04:45.424
You've saved, let's[br]say 20 percent of this,

0:04:45.424,0:04:48.474
so you have saved say, $60,000,

0:04:48.474,0:04:51.242
or maybe you've saved 70[br]or 80 thousand dollars,

0:04:51.242,0:04:53.892
'cause you also need some[br]extra money for closing costs,

0:04:53.892,0:04:55.441
and whatever else, and[br]we'll talk about that

0:04:55.441,0:04:57.458
in future videos, and[br]maybe to buy furniture,

0:04:57.458,0:05:00.491
whatever else, so you've saved[br]70 or 80 thousand dollars,

0:05:00.491,0:05:03.058
but the remainder of it,[br]you're going to need to borrow.

0:05:03.058,0:05:04.390
And you're going to need[br]to borrow it from a bank.

0:05:04.390,0:05:05.808
The bank has written a[br]letter to you saying,

0:05:05.808,0:05:08.259
"Hey, based on your income[br]and your credit score,

0:05:08.259,0:05:11.858
"we feel we have pre-approved your loan,

0:05:11.858,0:05:13.775
"we think you're going to get the loan."

0:05:13.775,0:05:16.441
But that's not the same thing[br]as actually getting the loan.

0:05:16.441,0:05:18.992
Something might happen,[br]the bank might realize

0:05:18.992,0:05:20.540
that they didn't notice[br]something about you,

0:05:20.540,0:05:22.691
or the financing conditions might change

0:05:22.691,0:05:24.741
in between the time that[br]you got your pre-approval

0:05:24.741,0:05:27.660
and the time that you[br]actually need your loan.

0:05:27.660,0:05:29.540
So another typical contingency[br]that you might have

0:05:29.540,0:05:31.776
is a financing contingency saying,

0:05:31.776,0:05:34.224
"Look, I really do want to buy this house,

0:05:34.224,0:05:36.358
"but I'm clearly not[br]going to be able to buy it

0:05:36.358,0:05:38.841
"unless I get some financing."

0:05:38.841,0:05:40.575
And then other things that might be there

0:05:40.575,0:05:43.077
are things like insurance.

0:05:43.077,0:05:45.540
Why would you need a[br]contingency on insurance?

0:05:45.540,0:05:47.207
Now this one's less typical,

0:05:47.207,0:05:48.742
so I'll put a little asterisk there.

0:05:48.742,0:05:52.075
Well, there might be a place[br]that has a lot of floods,

0:05:52.075,0:05:53.441
and the old owner had flood insurance

0:05:53.441,0:05:54.608
just because they already owned it,

0:05:54.608,0:05:57.041
but now the insurance[br]companies aren't issuing

0:05:57.041,0:05:59.257
new insurance, because[br]it's so prone to flooding,

0:05:59.257,0:06:00.325
or something like that,

0:06:00.325,0:06:02.570
so flooding insurance might be there.

0:06:02.570,0:06:05.992
There's a clear title,[br]is obviously something

0:06:05.992,0:06:10.075
that you would need if you[br]wanted to buy this house,

0:06:10.075,0:06:12.025
or that you probably should need,

0:06:12.025,0:06:14.724
and once again there's[br]other videos on that.

0:06:14.724,0:06:17.044
So these are all things that[br]if, for whatever reason,

0:06:17.044,0:06:21.241
if these things fall through,[br]it allows you to unwind it.

0:06:21.241,0:06:23.410
Now if you're in a really[br]hot real estate market,

0:06:23.410,0:06:25.441
where there's many, many people bidding

0:06:25.441,0:06:27.908
on the same property, and[br]some of them are coming

0:06:27.908,0:06:30.841
with really juicy offers,

0:06:30.841,0:06:32.576
where maybe they're[br]offering to pay it in cash,

0:06:32.576,0:06:33.874
or they're offering other things,

0:06:33.874,0:06:38.425
then it's not atypical to[br]have fewer contingencies,

0:06:38.425,0:06:40.441
because, remember, from[br]the seller's point of view,

0:06:40.441,0:06:44.108
they want the most serious buyer,

0:06:44.108,0:06:46.908
and if someone is willing to[br]waive their contingencies,

0:06:46.908,0:06:48.707
they're like, "Hey, look,[br]I know this is crazy,

0:06:48.707,0:06:51.103
"but I'm just willing to get the house

0:06:51.103,0:06:53.026
"in whatever condition it is,"

0:06:53.026,0:06:55.359
that's a lot more[br]attractive to the seller,

0:06:55.359,0:06:58.110
because the seller feels[br]good that the transaction

0:06:58.110,0:07:00.741
won't fall through because[br]of one of these things.

0:07:00.741,0:07:02.957
But that's in a very, very,[br]very hot real estate market.

0:07:02.957,0:07:04.525
In a more typical real estate market,

0:07:04.525,0:07:06.840
I suggest you talk to people, realtors,

0:07:06.840,0:07:07.475
other people in the industry,

0:07:07.475,0:07:09.641
to figure out what's[br]going on in your market.

0:07:09.641,0:07:11.858
It's more typical to have stuff like this,

0:07:11.858,0:07:16.401
especially the inspections,[br]the financing, and the title.

0:07:16.401,0:07:17.576
Now, the last part of it,

0:07:17.576,0:07:19.525
and I'm glazing over a lot of details,

0:07:19.525,0:07:20.992
in future videos, we[br]might actually look at

0:07:20.992,0:07:22.641
an actual offer contract,

0:07:22.641,0:07:25.567
you would want to throw[br]out the closing date.

0:07:28.675,0:07:30.584
So it may be this offer contract,

0:07:30.584,0:07:33.784
let's say it's made on

0:07:33.784,0:07:38.664
October 15th of 2015,

0:07:38.664,0:07:40.284
and let's say that you want to close,

0:07:40.284,0:07:42.100
so that you want all of[br]this stuff to get done,

0:07:42.100,0:07:44.418
and you actually want to get the seller

0:07:44.418,0:07:46.618
the whole amount of the money,

0:07:46.618,0:07:48.784
and you want to get[br]the title to the house,

0:07:48.784,0:07:50.901
let's say you want to[br]have it in two months,

0:07:50.901,0:07:55.803
so 12/15/2015.

0:07:55.803,0:07:58.784
And once again, from a[br]seller's point of view,

0:07:58.784,0:08:01.517
the closer in this closing[br]date, the more that they

0:08:01.517,0:08:04.683
feel good that this transaction[br]is actually going to happen.

0:08:04.683,0:08:07.571
So if you wanted to make a very[br]tempting offer to a seller,

0:08:07.571,0:08:10.668
you would have as few[br]contingencies as possible,

0:08:10.668,0:08:13.217
and you would make this closing[br]date as soon as possible,

0:08:13.217,0:08:15.967
but if it's not a super-hot[br]real estate market,

0:08:15.967,0:08:18.133
you don't need to go[br]through all of that trouble,

0:08:18.133,0:08:20.668
and it's fairly prudent[br]to get inspections,

0:08:20.668,0:08:22.551
and have contingencies on all of these,

0:08:22.551,0:08:25.001
or things like this, not[br]necessarily all of them,

0:08:25.001,0:08:27.054
but things like this.