Section 6 (a) and (b) of the offer to purchase:
This section is for your contingencies such as your financing (mortgage) amount and inspections. Section (a) of paragraph 6 is where your real estate agent will insert the amount you are financing and the date for which your mortgage commitment must be received. The mortgage commitment is the document your lender will issue once you have supplied them with any and all information they request. As you go through the underwriting process, the lender will require documentation for any questions they have and you must provide these documents. The appraisal should be in and reviewed and you are pretty much ready to close because by the bank issuing you a commitment letter, they are saying they’ve looked at all your profile and are making the commitment to provide you with a mortgage. This date is typically 30-35 days after you sign the Purchase & Sale Agreement or 45 days from the date the offer is signed by the seller. If necessary, this date CAN be extended by agreement of all the parties. But be aware that if you extend this date, the closing date may change because of the disclosure laws in our state. Check with your lender before deciding to extend this date. Another thing to be aware of that if this date goes past and you do not get an extension and the lender does not issues a commitment letter, you are in default and all the earnest money you put down is at risk. Never, ever assume that you will get the commitment letter, always extend if you do not receive it by 2:00 p.m. the date it’s due. Lenders will often say you will have it by 5 and it doesn’t come in. These dates, in this contract, are there for a reason and your earnest money is always at risk. Stay on top of your dates!
Section (b) of paragraph 6 is for your home inspection. This date is typically 10 days from the date the seller signed the offer if the home was built prior to 1978 (Lead Paint Law requires a buyer to have 10 full days to conduct any lead paint testing). Or 7 days if built after 1978 but generally everyone uses 10 days so that there is time to book an inspector. During this 10 day period, you have the right to inspect everything and anything. AS the paragraph states, you can inspect for lead, pests, radon, home inspection, water tests, energy, etc. As long as it is done within this 10 day period. Any and all issues discovered during this inspection period that you will want the seller to address must also be done during this period otherwise you are forfeiting your inspection period and negotiating ability. If you are planning on terminating the transaction because of an unsatisfactory home inspection, you MUST notify IN WRITING the sellers’ real estate agent or attorney by 5:00 p.m. the next calendar day after the 10 day period. Meaning by 5:00 p.m. on the 11th day regardless if it is a weekend or weekday. If you fail to terminate by the appointed day and time, you forfeit your initial down payment of $500 or $1000 or you must move forward with the transaction with the home in it’s present condition.
Section 7 – Representations/Acknowledgements:
This section is used for any statements made by the sellers’ representative either in the listing sheet, at an open house or on a showing. So if the listing states that the property is a 4 bedroom septic system, then that is a representation. If the listing says seller will be replacing hot water tank or roof or some other item, then this must be stated in this paragraph. This was an inducement to you, the buyer, to purchase the home and therefore you relied on the representation and that information must be inserted here.
Sections 8: Buyer’s Default
As the name implies, Section 8 is the penalty for defaulting on any of the terms of the offer to purchase. Note the language that any money the seller retains is the seller’s sole remedy and this language is usually carried over into the Purchase & Sale Agreement you sign. The Buyer’s Default section is not so cut and dry because of the escrow holder oftentimes will not release the money to a seller without a signed release but I’ll save that for a later blog post because that subject tends to get lengthy.
Section 9: Additional Terms
This is where your real estate agent will write in the appliances that are staying with the property or that you are requesting to stay at the property, if you are asking seller to contribute to your closing costs, and any other terms that aren’t listed in the listing sheet but that you are asking for. Please note, personal property such as lawn mowers, snow blowers, cars, furniture, etc. should NOT be placed in this section. Those are personal possessions and do not add value to the home and a lender will have an issue with this. Discussions for personal possessions should be made after your offer has been accepted or in a separate rider/addendum to the offer to purchase.
You will also then sign the offer with the terms you and your real estate agent discuss. You will then provide a check for the earnest money and a copy of your pre-approval letter. You should have already signed a Mandatory Agency Disclosure stating you are working with the real estate agent as a buyers agent. The offer is then presented to the sellers representative.
If the seller accepts your offer, they will check off (a) and set forth the day and time of acceptance. If they reject outright or are countering, they will check the appropriate box and sign the offer.
If your offer is accepted, MAKE SURE THE BOX IS CHECKED OFF that says it was accepted. Otherwise, this is not an enforceable contract!
The counter offer/negotiations are typically provided via email or text between the realtors, but the reality is that each and every counter offer, regardless of which side, should always be in writing. I have had it happen that a seller verbally accepted an offer after we went back and forth. We thought we had it when I received a call the next day from the sellers’ real estate agent stating that seller took another offer. Because we had nothing in writing (seller’s side delayed sending us the signed offer, likely because they knew a higher offer was coming in), we had no recourse. It was devastating to my buyers. So I strongly urge you to put all counter offers in writing (if time allows) so that it can be sent over ready for seller to sign. The more of a delay, the higher the chance someone else can come in an offer a higher amount. If it’s not in writing and signed, it didn’t happen!
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