1 00:00:00,486 --> 00:00:01,615 - So let's say that this house 2 00:00:01,615 --> 00:00:03,332 has been on the market for a couple of weeks, 3 00:00:03,332 --> 00:00:07,403 and the asking price is $310,000. 4 00:00:07,403 --> 00:00:08,815 And you say, well, you know this looks like 5 00:00:08,815 --> 00:00:10,070 the type of house, and you're in the market 6 00:00:10,070 --> 00:00:11,282 to buy a house, you say, "Hey this is 7 00:00:11,282 --> 00:00:13,252 "a type of house that I could imagine 8 00:00:13,252 --> 00:00:14,648 "me and my family living in. 9 00:00:14,648 --> 00:00:16,116 "I would like to buy this house." 10 00:00:16,116 --> 00:00:17,416 But you think, you know this price 11 00:00:17,416 --> 00:00:19,115 has been on the market for a couple of weeks. 12 00:00:19,115 --> 00:00:20,866 Maybe I think I could get a better deal than this, 13 00:00:20,866 --> 00:00:23,665 so you decide to make an offer. 14 00:00:23,665 --> 00:00:26,866 You decide to make an offer for, 15 00:00:26,866 --> 00:00:31,332 let's say, a little bit less, for $300,000. 16 00:00:31,332 --> 00:00:33,348 So the question is, how do you go, 17 00:00:33,348 --> 00:00:35,436 or how does your agent go about 18 00:00:35,436 --> 00:00:38,678 actually making an offer? 19 00:00:38,678 --> 00:00:40,031 Well, the way it goes is, you don't just 20 00:00:40,031 --> 00:00:42,998 walk up to the seller, or the seller's agent, 21 00:00:42,998 --> 00:00:45,698 and say, "Okay, we're gonna offer you $300,000," 22 00:00:45,698 --> 00:00:48,303 because they don't know whether you're serious. 23 00:00:48,303 --> 00:00:49,666 They don't know whether you actually 24 00:00:49,666 --> 00:00:52,081 have the money to do it, whether you are 25 00:00:52,081 --> 00:00:54,148 in a position to do it, or whether you're just 26 00:00:54,148 --> 00:00:57,616 kind of playing around, or just wasting their time. 27 00:00:57,616 --> 00:00:59,597 And so, to prove that you're not wasting their time, 28 00:00:59,597 --> 00:01:03,005 you create, or you fill out, 29 00:01:03,005 --> 00:01:05,561 an offer contract. 30 00:01:06,500 --> 00:01:08,097 So let's think about what should go, 31 00:01:08,097 --> 00:01:11,555 or what might go in an offer contract. 32 00:01:16,279 --> 00:01:21,169 So, likely your agent, if you're using an agent, 33 00:01:21,169 --> 00:01:22,919 or even a real estate attorney, 34 00:01:22,919 --> 00:01:25,567 or you could even find some of these forms on the web, 35 00:01:25,567 --> 00:01:28,451 you would create a contract, 36 00:01:28,451 --> 00:01:31,233 and there's some basic information that you would want. 37 00:01:31,233 --> 00:01:33,867 You would obviously want info, 38 00:01:33,867 --> 00:01:36,412 info on the property, 39 00:01:36,412 --> 00:01:39,419 what's its address, the property, 40 00:01:39,419 --> 00:01:42,523 who's buying, yourself, 41 00:01:42,523 --> 00:01:45,583 so the buyer and the seller, 42 00:01:45,583 --> 00:01:46,751 this is just to kind of know, hey, 43 00:01:46,751 --> 00:01:48,201 what is this contract about? 44 00:01:48,201 --> 00:01:49,300 It's about this property, 45 00:01:49,300 --> 00:01:52,766 and who's getting into this contract, 46 00:01:52,766 --> 00:01:53,800 and then you'd want to put some 47 00:01:53,800 --> 00:01:56,468 information about the actual offer, 48 00:01:56,468 --> 00:01:59,284 so, you would put your offer in. 49 00:01:59,284 --> 00:02:03,668 You'd say, "Okay, I'm going to offer $300,000." 50 00:02:08,084 --> 00:02:09,368 And then you also want to prove that, look, 51 00:02:09,368 --> 00:02:11,869 you're not just playing around with them, 52 00:02:11,869 --> 00:02:13,251 that you're serious about this. 53 00:02:13,251 --> 00:02:17,229 This offer is made in earnest, and so you will 54 00:02:17,229 --> 00:02:20,315 give a deposit when you make this offer contract, 55 00:02:20,315 --> 00:02:23,171 or it's typical to give a deposit, 56 00:02:23,986 --> 00:02:24,865 and it will vary. 57 00:02:24,865 --> 00:02:26,283 The higher the deposit, the better, 58 00:02:26,283 --> 00:02:28,514 because it shows the more earnest you are, 59 00:02:28,514 --> 00:02:30,617 the more serious that you are about actually 60 00:02:30,617 --> 00:02:32,664 going through with this offer contract. 61 00:02:32,664 --> 00:02:35,883 It's typical for these deposits to be anywhere between, 62 00:02:35,883 --> 00:02:38,449 I've seen one percent, two percent, three percent, 63 00:02:38,449 --> 00:02:41,483 four percent, five percent of the actual home price. 64 00:02:41,483 --> 00:02:43,831 Three percent is what I'm most familiar with, 65 00:02:43,831 --> 00:02:45,083 but it doesn't have to be three percent. 66 00:02:45,083 --> 00:02:47,865 It's really, this is just an indicator to the seller 67 00:02:47,865 --> 00:02:49,304 that you're serious about this. 68 00:02:49,304 --> 00:02:51,232 So you're gonna write a check right now, 69 00:02:51,232 --> 00:02:53,005 along with the offer contract, 70 00:02:53,005 --> 00:02:55,565 for let's just say three percent of the offer price. 71 00:02:55,565 --> 00:02:58,209 So three percent of $300,000 72 00:02:58,209 --> 00:03:03,182 is $9,000, that's a $9,000 check. 73 00:03:03,182 --> 00:03:04,714 Some places, it's not a percentage, 74 00:03:04,714 --> 00:03:06,649 some people say, "Okay, you just give $1,000, 75 00:03:06,649 --> 00:03:09,049 "or give $2,000," whatever it is. 76 00:03:09,049 --> 00:03:11,649 But this money, once again, this is a check 77 00:03:11,649 --> 00:03:13,664 that you're writing with the offer contract. 78 00:03:13,664 --> 00:03:16,149 This shows that you are serious about this, 79 00:03:16,149 --> 00:03:17,900 that if for whatever reason you don't meet 80 00:03:17,900 --> 00:03:21,098 your end of the contract, then the seller 81 00:03:21,098 --> 00:03:23,331 might be able to just keep this money, 82 00:03:23,331 --> 00:03:28,072 so this shows that you are serious. 83 00:03:28,533 --> 00:03:31,534 This shows that you are serious right here, 84 00:03:31,534 --> 00:03:32,965 that they should take you seriously, 85 00:03:32,965 --> 00:03:35,116 and that they should go through the process 86 00:03:35,116 --> 00:03:39,415 of trying to close on this property, 87 00:03:39,415 --> 00:03:42,670 and we'll talk in future videos more about what closing is. 88 00:03:42,670 --> 00:03:43,865 Now, you're probably thinking, "Okay, look, 89 00:03:43,865 --> 00:03:45,803 "I'm just not gonna buy this outright. 90 00:03:45,803 --> 00:03:47,566 "I've toured the home, I like it. 91 00:03:47,566 --> 00:03:49,065 "I like the neighborhood, it seems to be 92 00:03:49,065 --> 00:03:51,248 "in good condition, but I don't know for a fact 93 00:03:51,248 --> 00:03:52,181 "that it's in good condition, 94 00:03:52,181 --> 00:03:54,381 "unless I have a chance to inspect it, 95 00:03:54,381 --> 00:03:56,900 "unless I have a chance to get some experts in there 96 00:03:56,900 --> 00:03:59,613 "and make sure that the house is in good condition." 97 00:03:59,613 --> 00:04:02,232 And to make sure of that, it's typical 98 00:04:02,232 --> 00:04:06,845 to throw some contingencies in your offer contract. 99 00:04:10,570 --> 00:04:12,767 Now, the most typical contingencies 100 00:04:12,767 --> 00:04:16,546 are things like inspections, so you might want to 101 00:04:16,546 --> 00:04:20,537 inspect for termites, you want to inspect the foundation, 102 00:04:20,537 --> 00:04:23,428 you want to inspect the plumbing, the electrical, 103 00:04:23,428 --> 00:04:25,296 and make sure that it's all on the up and up. 104 00:04:25,296 --> 00:04:27,579 If something comes up in the inspection 105 00:04:27,579 --> 00:04:30,326 that makes this house not what you thought it was, 106 00:04:30,326 --> 00:04:33,124 it allows you to get out of this contract, 107 00:04:33,124 --> 00:04:35,834 and hopefully get your deposit back. 108 00:04:35,834 --> 00:04:36,955 Now, other things that you might want to 109 00:04:36,955 --> 00:04:39,325 put a contingency on, well you think that 110 00:04:39,325 --> 00:04:41,275 you're going to be able to get $300,000. 111 00:04:41,275 --> 00:04:43,859 Maybe you have saved enough for a deposit. 112 00:04:43,859 --> 00:04:45,424 You've saved, let's say 20 percent of this, 113 00:04:45,424 --> 00:04:48,474 so you have saved say, $60,000, 114 00:04:48,474 --> 00:04:51,242 or maybe you've saved 70 or 80 thousand dollars, 115 00:04:51,242 --> 00:04:53,892 'cause you also need some extra money for closing costs, 116 00:04:53,892 --> 00:04:55,441 and whatever else, and we'll talk about that 117 00:04:55,441 --> 00:04:57,458 in future videos, and maybe to buy furniture, 118 00:04:57,458 --> 00:05:00,491 whatever else, so you've saved 70 or 80 thousand dollars, 119 00:05:00,491 --> 00:05:03,058 but the remainder of it, you're going to need to borrow. 120 00:05:03,058 --> 00:05:04,390 And you're going to need to borrow it from a bank. 121 00:05:04,390 --> 00:05:05,808 The bank has written a letter to you saying, 122 00:05:05,808 --> 00:05:08,259 "Hey, based on your income and your credit score, 123 00:05:08,259 --> 00:05:11,858 "we feel we have pre-approved your loan, 124 00:05:11,858 --> 00:05:13,775 "we think you're going to get the loan." 125 00:05:13,775 --> 00:05:16,441 But that's not the same thing as actually getting the loan. 126 00:05:16,441 --> 00:05:18,992 Something might happen, the bank might realize 127 00:05:18,992 --> 00:05:20,540 that they didn't notice something about you, 128 00:05:20,540 --> 00:05:22,691 or the financing conditions might change 129 00:05:22,691 --> 00:05:24,741 in between the time that you got your pre-approval 130 00:05:24,741 --> 00:05:27,660 and the time that you actually need your loan. 131 00:05:27,660 --> 00:05:29,540 So another typical contingency that you might have 132 00:05:29,540 --> 00:05:31,776 is a financing contingency saying, 133 00:05:31,776 --> 00:05:34,224 "Look, I really do want to buy this house, 134 00:05:34,224 --> 00:05:36,358 "but I'm clearly not going to be able to buy it 135 00:05:36,358 --> 00:05:38,841 "unless I get some financing." 136 00:05:38,841 --> 00:05:40,575 And then other things that might be there 137 00:05:40,575 --> 00:05:43,077 are things like insurance. 138 00:05:43,077 --> 00:05:45,540 Why would you need a contingency on insurance? 139 00:05:45,540 --> 00:05:47,207 Now this one's less typical, 140 00:05:47,207 --> 00:05:48,742 so I'll put a little asterisk there. 141 00:05:48,742 --> 00:05:52,075 Well, there might be a place that has a lot of floods, 142 00:05:52,075 --> 00:05:53,441 and the old owner had flood insurance 143 00:05:53,441 --> 00:05:54,608 just because they already owned it, 144 00:05:54,608 --> 00:05:57,041 but now the insurance companies aren't issuing 145 00:05:57,041 --> 00:05:59,257 new insurance, because it's so prone to flooding, 146 00:05:59,257 --> 00:06:00,325 or something like that, 147 00:06:00,325 --> 00:06:02,570 so flooding insurance might be there. 148 00:06:02,570 --> 00:06:05,992 There's a clear title, is obviously something 149 00:06:05,992 --> 00:06:10,075 that you would need if you wanted to buy this house, 150 00:06:10,075 --> 00:06:12,025 or that you probably should need, 151 00:06:12,025 --> 00:06:14,724 and once again there's other videos on that. 152 00:06:14,724 --> 00:06:17,044 So these are all things that if, for whatever reason, 153 00:06:17,044 --> 00:06:21,241 if these things fall through, it allows you to unwind it. 154 00:06:21,241 --> 00:06:23,410 Now if you're in a really hot real estate market, 155 00:06:23,410 --> 00:06:25,441 where there's many, many people bidding 156 00:06:25,441 --> 00:06:27,908 on the same property, and some of them are coming 157 00:06:27,908 --> 00:06:30,841 with really juicy offers, 158 00:06:30,841 --> 00:06:32,576 where maybe they're offering to pay it in cash, 159 00:06:32,576 --> 00:06:33,874 or they're offering other things, 160 00:06:33,874 --> 00:06:38,425 then it's not atypical to have fewer contingencies, 161 00:06:38,425 --> 00:06:40,441 because, remember, from the seller's point of view, 162 00:06:40,441 --> 00:06:44,108 they want the most serious buyer, 163 00:06:44,108 --> 00:06:46,908 and if someone is willing to waive their contingencies, 164 00:06:46,908 --> 00:06:48,707 they're like, "Hey, look, I know this is crazy, 165 00:06:48,707 --> 00:06:51,103 "but I'm just willing to get the house 166 00:06:51,103 --> 00:06:53,026 "in whatever condition it is," 167 00:06:53,026 --> 00:06:55,359 that's a lot more attractive to the seller, 168 00:06:55,359 --> 00:06:58,110 because the seller feels good that the transaction 169 00:06:58,110 --> 00:07:00,741 won't fall through because of one of these things. 170 00:07:00,741 --> 00:07:02,957 But that's in a very, very, very hot real estate market. 171 00:07:02,957 --> 00:07:04,525 In a more typical real estate market, 172 00:07:04,525 --> 00:07:06,840 I suggest you talk to people, realtors, 173 00:07:06,840 --> 00:07:07,475 other people in the industry, 174 00:07:07,475 --> 00:07:09,641 to figure out what's going on in your market. 175 00:07:09,641 --> 00:07:11,858 It's more typical to have stuff like this, 176 00:07:11,858 --> 00:07:16,401 especially the inspections, the financing, and the title. 177 00:07:16,401 --> 00:07:17,576 Now, the last part of it, 178 00:07:17,576 --> 00:07:19,525 and I'm glazing over a lot of details, 179 00:07:19,525 --> 00:07:20,992 in future videos, we might actually look at 180 00:07:20,992 --> 00:07:22,641 an actual offer contract, 181 00:07:22,641 --> 00:07:25,567 you would want to throw out the closing date. 182 00:07:28,675 --> 00:07:30,584 So it may be this offer contract, 183 00:07:30,584 --> 00:07:33,784 let's say it's made on 184 00:07:33,784 --> 00:07:38,664 October 15th of 2015, 185 00:07:38,664 --> 00:07:40,284 and let's say that you want to close, 186 00:07:40,284 --> 00:07:42,100 so that you want all of this stuff to get done, 187 00:07:42,100 --> 00:07:44,418 and you actually want to get the seller 188 00:07:44,418 --> 00:07:46,618 the whole amount of the money, 189 00:07:46,618 --> 00:07:48,784 and you want to get the title to the house, 190 00:07:48,784 --> 00:07:50,901 let's say you want to have it in two months, 191 00:07:50,901 --> 00:07:55,803 so 12/15/2015. 192 00:07:55,803 --> 00:07:58,784 And once again, from a seller's point of view, 193 00:07:58,784 --> 00:08:01,517 the closer in this closing date, the more that they 194 00:08:01,517 --> 00:08:04,683 feel good that this transaction is actually going to happen. 195 00:08:04,683 --> 00:08:07,571 So if you wanted to make a very tempting offer to a seller, 196 00:08:07,571 --> 00:08:10,668 you would have as few contingencies as possible, 197 00:08:10,668 --> 00:08:13,217 and you would make this closing date as soon as possible, 198 00:08:13,217 --> 00:08:15,967 but if it's not a super-hot real estate market, 199 00:08:15,967 --> 00:08:18,133 you don't need to go through all of that trouble, 200 00:08:18,133 --> 00:08:20,668 and it's fairly prudent to get inspections, 201 00:08:20,668 --> 00:08:22,551 and have contingencies on all of these, 202 00:08:22,551 --> 00:08:25,001 or things like this, not necessarily all of them, 203 00:08:25,001 --> 00:08:27,054 but things like this.