# So,about making an offer...



## Lamama (Jan 31, 2013)

I'm considering making my first offer ever on a piece of property and I have a couple of questions. It is an owner finance situation through a realtor. They require that the buyer make the first offer and that it be in writing. If I make an offer, am I legally and/or morally obligated to buy the property if they accept the offer? (Not that don't plan to follow through, I just want to understand the process.) As part of the offer, I would be saying how much I want to put down, the total price and how many months I would want it financed for. I really don't know how many years the seller is thinking of financing for. As part of my offer, would I say anything about interest rates? And at how much below the price that I'm able to pay do I offer? Does anyone ever accept the first offer, or are there generally several counter offers? 

Thank you!


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## ozarkchaz (Feb 4, 2005)

> It is an owner finance situation through a realtor


A good Realtor, gets paid to answer these questions and concerns.


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## simi-steading (Sep 27, 2012)

Do they even have an asking price? The way it sounds the way you wrote it, is that they are taking bids... and letting the bidders work out their price and terms so they can take the best....

If you know what they want and they are asking how you want to pay, I'd walk... They are fishing too much... 

They need to set some minimum requirements..

It's one thing to say you will pay X dollars for the house and you have X% to put down, but they need to give you some terms too...


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## ChristieAcres (Apr 11, 2009)

Lamama said:


> I'm considering making my first offer ever on a piece of property and I have a couple of questions. It is an owner finance situation through a realtor. They require that the buyer make the first offer and that it be in writing. If I make an offer, am I legally and/or morally obligated to buy the property if they accept the offer? (Not that don't plan to follow through, I just want to understand the process.) As part of the offer, I would be saying how much I want to put down, the total price and how many months I would want it financed for. I really don't know how many years the seller is thinking of financing for. As part of my offer, would I say anything about interest rates? And at how much below the price that I'm able to pay do I offer? Does anyone ever accept the first offer, or are there generally several counter offers?
> 
> Thank you!


As a Licensed Realtor, I can also agree with Ozarkchaz. Why aren't you asking your Agent these questions? Do you have your own Buyers Agent or are you offering through the Listing Agent?



> And at how much below the price that I'm able to pay do I offer? Does anyone ever accept the first offer, or are there generally several counter offers?


You can offer any amount you wish. Yes, Sellers often accept the 1st Offer, but usually only if it is close to the amount they are asking. The amount of Counter Offers relies entirely on the First Offer Price! Offering Low can get you a good price or an actual Rejection without a Counter. Any Offer less than Asking should result in a Counter, but not all Sellers will choose to do that. Offer close to Asking and you usually get an Acceptance or a Counter. I seldom see more than 2 Counters, but that depends on the Parties involved. If you don't have your own Buyer's Agent, you need one.


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## Lamama (Jan 31, 2013)

Yes, there is an asking price. I'd be ok paying the asking price, and was just going to offer a few thousand below. The biggest question is how low of a down payment they'll accept, which is unstated. I can't afford a buyers agent :lookout: (although I can understand how one is a good idea for those who can). I just thought it might be helpful to get some input into the offering process.


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## ChristieAcres (Apr 11, 2009)

Lamama said:


> Yes, there is an asking price. I'd be ok paying the asking price, and was just going to offer a few thousand below. The biggest question is how low of a down payment they'll accept, which is unstated. I can't afford a buyers agent :lookout: (although I can understand how one is a good idea for those who can). I just thought it might be helpful to get some input into the offering process.


I am now a bit confused. In most of the Country, the Listing Commission pays for the Listing Agent and the Buyers Agent (paid for by the Seller, not the Buyer). You mentioned an Agent, already. Isn't this listed on the MLS? If you are unsure, I would recommend calling a local Real Estate Company, if there isn't any local friends/family who could refer you to one.


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## Lamama (Jan 31, 2013)

lorichristie said:


> I am now a bit confused. In most of the Country, the Listing Commission pays for the Listing Agent and the Buyers Agent (paid for by the Seller, not the Buyer).


Thank you. That's helpful to know.


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## Lamama (Jan 31, 2013)

Another question...does it look bad to request that the seller pay closing costs? I'm willing to offer the asking price, but would like to keep initial money-out-of-pocket as low as possible.


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## ChristieAcres (Apr 11, 2009)

You can ask for whatever terms you want. When I represent Buyers, I recommend they offer what they are comfortable with, but will include a letter with that if it is really low, but still write it up the way they want. In addition, I write offers asking for Closing Costs, furniture, and one time... Everything in the home and garage included. Best outcome? Acceptance. Next best? A Counter Offer you can be happy with. Next? A Counter you may or may not consider. Next? A Rejection. 

When Buyers want a lot (i.e. Closing Costs, Furniture, Equipment, etc...), I recommend they offer a reasonable price, but will still write it if they don't.

I recently wrote an offer for a couple that was wayyyyy too low. The Sellers were asking too much, but they included a $10k+ Generator System, all their lovely furniture, and very high end appliances. Their Offer was $64K less than asking ($30K less than I recommended they offer). Their low Offer wasn't even Countered, but Rejected.


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## Conhntr (Aug 7, 2010)

lorichristie said:


> I am now a bit confused. In most of the Country, the Listing Commission pays for the Listing Agent and the Buyers Agent (paid for by the Seller, not the Buyer). You mentioned an Agent, already. Isn't this listed on the MLS? If you are unsure, I would recommend calling a local Real Estate Company, if there isn't any local friends/family who could refer you to one.


Im always confused by this. Isnt all the money coming from the buyer? Just becuase the realtors fees are bundled into the sales price instead of being listed seperatly doesnt mean the buyer doesnt pay. They are the ones writting a check. 

I bet if the commisions of the agents in real estate transactions where required to be listed on the initial offer people would view things differently. Instead realtors have it set up that they are hidden in the sales price.


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## ChristieAcres (Apr 11, 2009)

Conhntr said:


> Im always confused by this. Isnt all the money coming from the buyer? Just becuase the realtors fees are bundled into the sales price instead of being listed seperatly doesnt mean the buyer doesnt pay. They are the ones writting a check.
> 
> I bet if the commisions of the agents in real estate transactions where required to be listed on the initial offer people would view things differently. Instead realtors have it set up that they are hidden in the sales price.


If the Seller signs an Exclusive Contract with the Listing Agent, it includes confirming the Commission % or fee, which will be paid out of the proceeds of the Closing. Who gets paid for the house? The Seller. Whose proceeds does the Commission get paid out of? The Seller's Net Proceeds. The Listing displays the Buyer's Agent Commission to be paid only through the MLS for other Agents to see.
*
The Contract between the Seller and the Listing Agent isn't public information. *

Any Buyer who doesn't want to buy a Home listed on the MLS, should buy a FSBO.


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## cc-rider (Jul 29, 2003)

Conhntr, the money to pay the real estate agents come from the seller's profits. Yes, the buyers "write the check", but it is only for the purchase price of the house and the normal closing costs. The agent isn't a closing cost. The agent's fee (usually 6% total here in Ohio) comes out of the money that the seller gets. He gets the purchase price of the house, minus property taxes due the next year, minus agents commission, and probably minus some other things that I can't remember at the moment.

Anyway....the buyer doesn't pay a CENT towards the agent...it isn't bundled or hidden in the costs.

If the seller thinks "I want $100K for my house, and it will cost me another $10K in expenses, so therefore I'm going to ask $110K for my house", and you offer $110K, then I guess you are technically paying the agent. But if you buy a house that is only worth $100K and you offer $110K then you deserve to be taken. LOL


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## simi-steading (Sep 27, 2012)

cc-rider said:


> But if you buy a house that is only worth $100K and you offer $110K then you deserve to be taken. LOL


I don't know... I had a friend in this area that got $120K more than he listed his place for 3 days after he listed it... Two people both wanted it really bad...


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## ChristieAcres (Apr 11, 2009)

simi-steading said:


> I don't know... I had a friend in this area that got $120K more than he listed his place for 3 days after he listed it... Two people both wanted it really bad...


Agent represented properties are typically sold for a lot more than FSBO's. This has been proven by stats, not my opinion. Properties listed on the MLS get a lot more exposure in the entire World...


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## ozarkchaz (Feb 4, 2005)

Your sales price offer may be absolutely whatever you'd like it to be. But when the comps and the lender appraisal come in, be prepared to dig into your own pocket for the difference. 

It's true that it's a sellers market now, in a lot of areas of the US, and multiple offers are the norm in most cases. Working with a competent Realtor as a buyers agent, is the key to a successful transaction.


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## ChristieAcres (Apr 11, 2009)

ozarkchaz said:


> Your sales price offer may be absolutely whatever you'd like it to be.
> 
> But when the comps and the lender appraisal come in, be prepared to dig into your own pocket for the difference. It's true that it's a sellers market now, in a lot of areas of the US, and multiple offers are the norm in most cases.


In WA State Real Estate Purchase and Sale Agreements? Here you go:

*Appraisal Less than Sales Price*

*Allows the Buyer to walk and keep Earnest Money*

*Allows the Buyer to re-submit for higher mortgage

Allows the Buyer to ask Seller to reduce the Selling Price

Seller can reject to lower price, thereby allowing Buyer to walk, keeping Earnest Money*

I could not post the text of the legal document, obviously, which is why I put the meaning in my own words. Also, wouldn't be surprised if this isn't the case in other States, but can only speak for mine.

Sellers market? Not here!


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## mountainwmn (Sep 11, 2009)

If you make an offer in writing, they take a deposit from you and if they accept your offer and you change your mind, you lose your deposit. You really can offer anything, I just use a little common sense. A property being sold at a good price with owner financing, that I really wanted...I would offer full asking if I was asking for help with closing costs. If it's been sitting on the market for a year, has some serious issues, is vacant, and I have cash...well I have had people take 55% of their asking price.


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## ozarkchaz (Feb 4, 2005)

> *Allows the Buyer to walk and keep Earnest Money*
> 
> *Allows the Buyer to re-submit for higher mortgage*
> 
> ...


Same appraisal contingency clause here in California too Lori. It's all about protecting the buyer.




> If you make an offer in writing, they take a deposit from you and if they accept your offer and you change your mind, you lose your deposit.


Um...not here in California, If you are within the 17 day inspection period. A contractual contingency that allows the buyer to cancel the contract for ANY reason whatsoever, and be entitled to their Earnest money / Deposit back in full.

Again, it's all about protecting the buyer in California.


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## cc-rider (Jul 29, 2003)

I'm not sure that I agree that it is a seller's market. Not in Ohio, anyway. It's really a buyer's market now with interest rates so low but houses still at a depressed price.


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## ozarkchaz (Feb 4, 2005)

It's all about supply and demand. Low inventory, is creating a seller's market in many areas of the US. 

Take a look:

http://www.mortgagenewsdaily.com/02212013_existing_home_sales.asp


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## Monica33 (Jul 11, 2012)

You need to get your own real estate agent, you can't afford not to. They get paid out of the pot at completion, it is not an added expense for you.

Their job is to help you make an offer and protect your interest. One of the things that your agent can help you with besides writing your offer with protection for you, is to do a market comparison. They can find recent sales of comparable quality properties to help you find the most recent sum that property is worth in your area. This can help set your first offer making sure its not overvalued.

Make any offer "subject to inspection" and "subject to insurance" That means that you can hire or take a knowledgeable friend (with a camera) to inspect the property making a list of the problems a quick look may not show. They may cost a few hundred bucks but can save you thousands if they spot the out of date plumbing that your insurance company won't cover until you replace it for example. Or the fact that the new shingles on the roof only cover up the rotten leaking roof underneath. To name a few. If the property fails to pass inspection then it gives you a bargaining tool to help negotiate a reduced price taking into account the repairs needed on the actual condition of the property. Or lets you out of a bad deal without risking your down payment.

Some agents will also hire out for a set fee to assist in the paperwork for a private sale.


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## Raven12 (Mar 5, 2011)

Depending on the state, you would need a lawyer for an owner financing purchase. The contract would need to be registered in order for it to be valid. 

Also, you want to check and see if there is a current mortgage on the property and any back taxes due. If the owner loses the property to a senior lender, then you would lose the house and any money you paid. You could end up homeless and wiped out 10 years down the road.


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## Lamama (Jan 31, 2013)

Is there any legal/technical reason a seller who is seller financing would need 20% down? Would getting less than 20% down make it more difficult for the seller to sell the note to another party down the road? Or any other reason?


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## ozarkchaz (Feb 4, 2005)

> Is there any legal/technical reason a seller who is seller financing would need 20% down?


No. In a seller finance purchase, the down payment can be whatever consideration the two parties agree upon.
The seller may ask for 20% down...or more, to potentially secure the buyers commitment to the terms of the agreement.


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## Nimrod (Jun 8, 2010)

When you make a written offer on a piece of property you add contingencies that void the offer of they are not met. Some have been listed in previous posts. You could say " offer contingent upon the buyer obtaining a mortage for $XXXXX at Y%" or " offer contingent on an appraisel of at least $XXXX" or " offer contingent upon the property passing a final inspection, by the buyer, on the day before the closing". You can put any contingencies on the offer you want. If the seller accepts the offer they also accept the contingencies. If the buyer cancels the purchase because any contingency is not met, they get their earnest money back. Note that the last contingency I listed allows the buyer to cancel the sale right up to a day before the closing. 

I would make any offer contingent on the seller paying closing costs. Closing costs can be thousands of dollars. IMHO the costs are jacked up with fees and other charges as a way to weasel more money out of your wallet. Many times the closing costs are rolled into the mortage and the buyer doesn't really notice that they are being charged way too much because they are fixated on the monthly payment. I bought a piece of property last summer where the closing company was affiliated in some way with the seller's realtor. I offered contingent on the seller paying closing costs and low and behold the closing costs were under $200. 

Start by offering a low price. Not insultingly low but low. Most sellers will counter offer unless your offer is for the full listing amount because they figure you will go higher. Sellers rarely expect an offer for the listed amount so don't give it to them unless the property is one you really really want and you are afraid you will be outbid.


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## Raven12 (Mar 5, 2011)

One more comment. Realize that the majority of Sale by Owner homes are ones that haven't sold. The owners want more than they are worth. They have usually sat on the market for ages because the owner doesn't a high enough offer.

Don't buy anthing without an inspection and sellers disclosure.


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## Lamama (Jan 31, 2013)

It's vacant land that's been on the market for a couple years. I'd really prefer not to put 20% down. But I also really want it.


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## Lazy J (Jan 2, 2008)

Lamama said:


> It's vacant land that's been on the market for a couple years. I'd really prefer not to put 20% down. But I also really want it.


The lenders I work with typically require between 25 aand 33% as a downpayment.


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## ozarkchaz (Feb 4, 2005)

> It's vacant land that's been on the market for a couple years.


IMO if a property has been for sale that long, it either has major defects, title issues, or it is WAY overpriced for the current market.

Caveat Emptor....Due diligence is key.


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## Joshie (Dec 8, 2008)

Conhntr said:


> Im always confused by this. Isnt all the money coming from the buyer? Just becuase the realtors fees are bundled into the sales price instead of being listed seperatly doesnt mean the buyer doesnt pay. They are the ones writting a check.
> 
> I bet if the commisions of the agents in real estate transactions where required to be listed on the initial offer people would view things differently. Instead realtors have it set up that they are hidden in the sales price.


Around her the listing agent sets the commission price. It's usually somewhere in the 8% range. That commission is split between the seller's agent and the buyer's agent. If you don't use a buyer's agent, you usually have to sign something saying that you don't object to using the same agent. I would think you'd be better off using your own agent. 

Usually, your written offer is a contract that legally obligates you to purchase the property. If the seller agrees to your terms without any changes, you're pretty much locked in. I would recommend making the sale contingent on inspections (well, house, termite, radon, etc.) and appraisal. Have you tried to get traditional financing? 

Your agent should have a fairly standard contract. 

If the property has been listed for several years it's probably overpriced or there's something really wrong with the place. I wouldn't pay anywhere near asking price for an empty property that's been for sale for years. This is just another reason you need an agent of your own. You might also need a lawyer.


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## ChristieAcres (Apr 11, 2009)

Update?


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## joshcheney (Feb 2, 2011)

I know I'm a little late on this, but might as well chime in.

Note: I'm licensed in real estate in Maine, and this information is accurate for my area. Yours may be different, which is why you need to:

1 - Get a *good* buyer's agent. Not just someone to help you purchase this property, but someone who will tell you if this doesn't look like a good deal for you. They should ideally have the heart of a teacher, and you should always learn something from them. If they are only interested in selling you something, don't be afraid to tell them to get lost, and find someone else.

2 - Have your attorney review the deed, mortgage, and any final paperwork. Don't just let the seller's lawyer do everything. Owner financing is an area that seems to attract dishonest sellers (who often have questionable attorneys), so get a recommendation from your agent, and talk to one.

3 - Do your homework. Obviously, knowing the land, the zoning (if any), permitting rules, etc, are all crucial, but in this situation, you also need to know the difference between the different forms of owner financing available, along with the potential problems associated with each. The most common form (around here) is a Land Contract, which is fine as long as it is only land for the duration of the contract, but if you start making improvements, you are taking a significant amount of risk. Your lawyer and your agent should be able to help you navigate these challenges.

4 - Be able to afford it. If you can't afford to take the necessary precautions (hiring a lawyer, possibly paying for an agent, doing the right testing/inspections), you can't afford to buy the property. All of these expenses are part of owning property, in the same way that taxes and/or insurance are, and if you can't afford $100 in lawyer's fees to ensure that you aren't getting yourself into a mess, then you can't afford to buy this property.


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