Making an offer on a home

- So let's say that this house

has been on the market
for a couple of weeks,

and the asking price is $310,000.

And you say, well, you
know this looks like

the type of house, and
you're in the market

to buy a house, you say, "Hey this is

"a type of house that I could imagine

"me and my family living in.

"I would like to buy this house."

But you think, you know this price

has been on the market
for a couple of weeks.

Maybe I think I could get
a better deal than this,

so you decide to make an offer.

You decide to make an offer for,

let's say, a little
bit less, for $300,000.

So the question is, how do you go,

or how does your agent go about

actually making an offer?

Well, the way it goes is, you don't just

walk up to the seller,
or the seller's agent,

and say, "Okay, we're
gonna offer you $300,000,"

because they don't know
whether you're serious.

They don't know whether you actually

have the money to do it, whether you are

in a position to do it,
or whether you're just

kind of playing around, or
just wasting their time.

And so, to prove that you're
not wasting their time,

you create, or you fill out,

an offer contract.

So let's think about what should go,

or what might go in an offer contract.

So, likely your agent,
if you're using an agent,

or even a real estate attorney,

or you could even find some
of these forms on the web,

you would create a contract,

and there's some basic
information that you would want.

You would obviously want info,

info on the property,

what's its address, the property,

who's buying, yourself,

so the buyer and the seller,

this is just to kind of know, hey,

what is this contract about?

It's about this property,

and who's getting into this contract,

and then you'd want to put some

information about the actual offer,

so, you would put your offer in.

You'd say, "Okay, I'm
going to offer $300,000."

And then you also want
to prove that, look,

you're not just playing around with them,

that you're serious about this.

This offer is made in
earnest, and so you will

give a deposit when you
make this offer contract,

or it's typical to give a deposit,

and it will vary.

The higher the deposit, the better,

because it shows the more earnest you are,

the more serious that
you are about actually

going through with this offer contract.

It's typical for these deposits
to be anywhere between,

I've seen one percent, two
percent, three percent,

four percent, five percent
of the actual home price.

Three percent is what
I'm most familiar with,

but it doesn't have to be three percent.

It's really, this is just
an indicator to the seller

that you're serious about this.

So you're gonna write a check right now,

along with the offer contract,

for let's just say three
percent of the offer price.

So three percent of $300,000

is $9,000, that's a $9,000 check.

Some places, it's not a percentage,

some people say, "Okay,
you just give $1,000,

"or give $2,000," whatever it is.

But this money, once
again, this is a check

that you're writing
with the offer contract.

This shows that you
are serious about this,

that if for whatever reason you don't meet

your end of the contract, then the seller

might be able to just keep this money,

so this shows that you are serious.

This shows that you
are serious right here,

that they should take you seriously,

and that they should
go through the process

of trying to close on this property,

and we'll talk in future videos
more about what closing is.

Now, you're probably
thinking, "Okay, look,

"I'm just not gonna buy this outright.

"I've toured the home, I like it.

"I like the neighborhood, it seems to be

"in good condition, but
I don't know for a fact

"that it's in good condition,

"unless I have a chance to inspect it,

"unless I have a chance to
get some experts in there

"and make sure that the
house is in good condition."

And to make sure of that, it's typical

to throw some contingencies
in your offer contract.

Now, the most typical contingencies

are things like inspections,
so you might want to

inspect for termites, you want
to inspect the foundation,

you want to inspect the
plumbing, the electrical,

and make sure that it's
all on the up and up.

If something comes up in the inspection

that makes this house not
what you thought it was,

it allows you to get out of this contract,

and hopefully get your deposit back.

Now, other things that you might want to

put a contingency on, well you think that

you're going to be able to get $300,000.

Maybe you have saved enough for a deposit.

You've saved, let's
say 20 percent of this,

so you have saved say, $60,000,

or maybe you've saved 70
or 80 thousand dollars,

'cause you also need some
extra money for closing costs,

and whatever else, and
we'll talk about that

in future videos, and
maybe to buy furniture,

whatever else, so you've saved
70 or 80 thousand dollars,

but the remainder of it,
you're going to need to borrow.

And you're going to need
to borrow it from a bank.

The bank has written a
letter to you saying,

"Hey, based on your income
and your credit score,

"we feel we have pre-approved your loan,

"we think you're going to get the loan."

But that's not the same thing
as actually getting the loan.

Something might happen,
the bank might realize

that they didn't notice
something about you,

or the financing conditions might change

in between the time that
you got your pre-approval

and the time that you
actually need your loan.

So another typical contingency
that you might have

is a financing contingency saying,

"Look, I really do want to buy this house,

"but I'm clearly not
going to be able to buy it

"unless I get some financing."

And then other things that might be there

are things like insurance.

Why would you need a
contingency on insurance?

Now this one's less typical,

so I'll put a little asterisk there.

Well, there might be a place
that has a lot of floods,

and the old owner had flood insurance

just because they already owned it,

but now the insurance
companies aren't issuing

new insurance, because
it's so prone to flooding,

or something like that,

so flooding insurance might be there.

There's a clear title,
is obviously something

that you would need if you
wanted to buy this house,

or that you probably should need,

and once again there's
other videos on that.

So these are all things that
if, for whatever reason,

if these things fall through,
it allows you to unwind it.

Now if you're in a really
hot real estate market,

where there's many, many people bidding

on the same property, and
some of them are coming

with really juicy offers,

where maybe they're
offering to pay it in cash,

or they're offering other things,

then it's not atypical to
have fewer contingencies,

because, remember, from
the seller's point of view,

they want the most serious buyer,

and if someone is willing to
waive their contingencies,

they're like, "Hey, look,
I know this is crazy,

"but I'm just willing to get the house

"in whatever condition it is,"

that's a lot more
attractive to the seller,

because the seller feels
good that the transaction

won't fall through because
of one of these things.

But that's in a very, very,
very hot real estate market.

In a more typical real estate market,

I suggest you talk to people, realtors,

other people in the industry,

to figure out what's
going on in your market.

It's more typical to have stuff like this,

especially the inspections,
the financing, and the title.

Now, the last part of it,

and I'm glazing over a lot of details,

in future videos, we
might actually look at

an actual offer contract,

you would want to throw
out the closing date.

So it may be this offer contract,

let's say it's made on

October 15th of 2015,

and let's say that you want to close,

so that you want all of
this stuff to get done,

and you actually want to get the seller

the whole amount of the money,

and you want to get
the title to the house,

let's say you want to
have it in two months,

so 12/15/2015.

And once again, from a
seller's point of view,

the closer in this closing
date, the more that they

feel good that this transaction
is actually going to happen.

So if you wanted to make a very
tempting offer to a seller,

you would have as few
contingencies as possible,

and you would make this closing
date as soon as possible,

but if it's not a super-hot
real estate market,

you don't need to go
through all of that trouble,

and it's fairly prudent
to get inspections,

and have contingencies on all of these,

or things like this, not
necessarily all of them,

but things like this.