The seller might not respond right away. Particularly if you're offering to buy a house sold in a "short sale" (requiring bank approval) or making an offer on a bank-owned property, it could be weeks or even months before you hear back from the seller. If you're patient, you can wait for the response and maybe get a good deal. If you're in a hurry to move, however, you may have to withdraw your offer and look elsewhere. Particularly if you're offering to buy a house sold in a "short sale" (requiring bank approval) or making an offer on a bank-owned property, it could be weeks or even months before you hear back from the seller. If you're patient, you can wait for the response and maybe get a good deal. If you're in a hurry to move, however, you may have to withdraw your offer and look elsewhere.

The Seller Accepts Your Offer

If the seller accepts your offer in writing, you have a contract. You and the seller can begin to perform all the tasks that take you up to the closing, as described in Chapter 11.

The Seller Rejects Your Offer

Sometimes, the seller will flatly reject your offer, usually because someone else made a better offer, and yours simply didn't rise to the top of the stack. The seller's agent should contact your agent with the bad news.

You Might Make the B-Team Instead of rejecting your offer outright, a seller may suggest that you make a backup offer to purchase the house if the chosen deal falls through. Your backup gives the seller a little extra security and saves the hassle of readvertising.If you submit a backup offer, ask the seller to give you a final yes or no within a few days or to specify that the exact terms of the agreement are to follow. This protects you in case you find another property, lose interest, or want to renegotiate terms with the seller.

The Seller Counteroffers

The seller may decide that your offer is okay but needs improvement (usually a higher price). The seller may then give you a counteroffer, with an expiration date for your reply. A counteroffer is a good sign-it means the seller is interested in negotiating with you. But Massachusetts broker Nancy Atwood warns, "Sometimes the buyer and seller forget that they have the same goal in mind, which is the purchase of the home. I was once involved in a transaction where the buyer and seller were fighting over a couple thousand dollars, on an $800,000 property! Eventually they did relent and split the difference, but it caused some unnecessary stress on both sides of the table."

The counteroffer may be structured like a whole stand alone-contract, or it may incorporate your original offer, essentially saying, "I agree to the terms of the offer, except with these changes." If the new terms are satisfactory-for example, you're willing to pay a higher price or give the seller extra time to move out-you can accept the seller's counteroffer.

When a seller receives multiple offers, the seller may return multiple counteroffers, asking people to submit new, better offers. It's kind of like being outbid on eBay: You can then decide whether you want to put in a new offer, but your competitors will be doing the same thing.

If the seller gives you a counteroffer that you don't like, you can reject it and simply walk away, or you can counter the counteroffer.

You and the Seller Negotiate

You and the seller can continue to exchange counteroffers until you reach agreement or give up. Each time, you'll include expiration dates for your counteroffers. If an expiration date passes, negotiations are over-no deal. If, however, one of you accepts the other's counteroffer, you'll put that agreement down on paper, as described next.

Mel: Which reminds me, where's your report card? Which reminds me, where's your report card?Cher: It's not ready yet. It's not ready yet.Mel: What do you mean, It's not ready yet? What do you mean, It's not ready yet?Cher: Well, some teachers are trying to low-ball me, Daddy. And I know how you say, Never accept a first offer, so I figure these grades are just a jumping-off point to start negotiations. Well, some teachers are trying to low-ball me, Daddy. And I know how you say, Never accept a first offer, so I figure these grades are just a jumping-off point to start negotiations.From the movie Clueless Clueless, 1995

More Than Words: What's in the Standard Purchase Contract

When you and the seller agree and write a contract, it will probably look like pages and pages of a legal document-which it is! Luckily, you'll probably be spared creating it from scratch. Your state's Realtor association may provide a standard preprinted form for your use, called something like "Contract to Purchase" or "Offfer to Purchase." These fill-in-the-blanks forms contain state-specific legal language so you won't forget to deal with important issues. But they usually leave space for you to customize, too. If you're using an attorney, he or she may start with some boilerplate and customize it to your purchase.

To form a legal contract, your final agreement must be in writing and signed by both you and the seller. So if the seller or the seller's agent calls you and says, "We accept your offer," wait for that signed agreement before taking further action.

Whether you use a standard form or a fully customized document, certain key terms and phrases are likely to be in it (though these, too, vary by state). Read it carefully, using the summary of common terms below for both decoding and making sure it contains the protections you want. We'll discuss many of these terms further in this and later chapters.

TIP.

Ask questions. If you don't understand the meaning of a term or document, don't hesitate to ask your real estate agent or attorney for a plain-English explanation. If you don't understand the meaning of a term or document, don't hesitate to ask your real estate agent or attorney for a plain-English explanation.

* Parties. Parties. The names of the buyer and seller. The names of the buyer and seller.* Property description. Property description. The property address and a simple physical description ("a single family house"). The property address and a simple physical description ("a single family house").* Offer or purchase amount. Offer or purchase amount. The price you'll pay, as long as the seller agrees and all the other terms are met. The price you'll pay, as long as the seller agrees and all the other terms are met.* Earnest money amount. Earnest money amount. How much you'll deposit when the transaction begins but forfeit to the seller if you back out of the transaction for a reason not allowed in the contract. How much you'll deposit when the transaction begins but forfeit to the seller if you back out of the transaction for a reason not allowed in the contract.* Down payment amount. Down payment amount. How much you'll pay in cash toward the purchase price (unless your agreement simply includes a contingency that you qualify to finance a certain percentage of the purchase price). How much you'll pay in cash toward the purchase price (unless your agreement simply includes a contingency that you qualify to finance a certain percentage of the purchase price).* Contingencies. Contingencies. Conditions that must be met for the sale to be finalized. Conditions that must be met for the sale to be finalized.* Loan amount and conditions. Loan amount and conditions. How much you'll borrow, and on what terms and with what restrictions, to finance the purchase. How much you'll borrow, and on what terms and with what restrictions, to finance the purchase.* Title. Title. The seller promises to be in a legal position to sell you the property, without any outstanding debts. The seller promises to be in a legal position to sell you the property, without any outstanding debts.* Seller representations. Seller representations. You may require the seller to make certain promises about the property, for example, that to the seller's knowledge, the roof is free of defects or, in a condo or co-op, that the seller knows of no mold or pest problems in the building. You may require the seller to make certain promises about the property, for example, that to the seller's knowledge, the roof is free of defects or, in a condo or co-op, that the seller knows of no mold or pest problems in the building.* Fixtures and personal property. Fixtures and personal property. Fixtures (items permanently attached to the property, like built-in appliances or fences) stay with the house unless you or the seller specify otherwise, while personal property leaves, unless you and the seller agree otherwise. Fixtures (items permanently attached to the property, like built-in appliances or fences) stay with the house unless you or the seller specify otherwise, while personal property leaves, unless you and the seller agree otherwise.* Rights of use. Rights of use. If you're buying a condo, co-op, or townhouse, you may have the right to use portions of the property that you either don't own yourself or that you own jointly with others, such as a specific parking space. If you're buying a condo, co-op, or townhouse, you may have the right to use portions of the property that you either don't own yourself or that you own jointly with others, such as a specific parking space.* Possession. Possession. The date you can possess (move into) the property. The date you can possess (move into) the property.

TIP.

Your lender may require you to occupy the home within 30 days after closing. That's to make sure you're using the property as a home, not an investment. (Mortgage interest rates on investment properties are normally higher and have special qualification requirements.) That's to make sure you're using the property as a home, not an investment. (Mortgage interest rates on investment properties are normally higher and have special qualification requirements.) * Prorations and assessments. Prorations and assessments. How you and the seller will split recent and upcoming fees like mortgage interest, property taxes, and community association fees. How you and the seller will split recent and upcoming fees like mortgage interest, property taxes, and community association fees.* Closing agent (or "escrow holder"). Closing agent (or "escrow holder"). Who will act as intermediary, assisting with preclosing tasks and holding onto any money that you or the seller deposit in advance. This may be a title company, escrow company, or attorney(s). Who will act as intermediary, assisting with preclosing tasks and holding onto any money that you or the seller deposit in advance. This may be a title company, escrow company, or attorney(s).* Fees. Fees. A list of the various fees to be paid before and during the closing-including escrow fees, title search fees, deed preparation fees, notary fees, and transfer taxes-and who will pay them. A list of the various fees to be paid before and during the closing-including escrow fees, title search fees, deed preparation fees, notary fees, and transfer taxes-and who will pay them.* Expiration date. Expiration date. The time limit for the seller to accept your offer. The time limit for the seller to accept your offer.* Closing date. Closing date. The date the transaction finalizes and the house is legally yours. In some states, instead of an actual date, the contract will give a certain time window or say "on or before" or "on or after" a certain date. The date the transaction finalizes and the house is legally yours. In some states, instead of an actual date, the contract will give a certain time window or say "on or before" or "on or after" a certain date.* Agent payment or commissions. Agent payment or commissions. What payment will be made to the real estate agents representing you and the seller. What payment will be made to the real estate agents representing you and the seller.* Damage to property. Damage to property. How damage to the property during escrow (such as a fire) will affect the agreement. How damage to the property during escrow (such as a fire) will affect the agreement.* Resolving disputes. Resolving disputes. How you and the seller will resolve any legal disputes, and whether you'll use alternative methods before going to court (such as mediation or arbitration). How you and the seller will resolve any legal disputes, and whether you'll use alternative methods before going to court (such as mediation or arbitration).* Entire agreement. Entire agreement. A statement that you and the seller don't have any other agreement and that if you want to alter the one you have, you'll do it in writing and both sign it. A statement that you and the seller don't have any other agreement and that if you want to alter the one you have, you'll do it in writing and both sign it.* Time is of the essence. Time is of the essence. This confirms that if a date was important enough for you to write into the agreement-for example, the closing date-it's a fundamental part of it, and if either you or the seller don't make the date (or modify the agreement), then you'll have breached the contract. This confirms that if a date was important enough for you to write into the agreement-for example, the closing date-it's a fundamental part of it, and if either you or the seller don't make the date (or modify the agreement), then you'll have breached the contract.* Signatures. Signatures. No matter who goes first, you don't have a contract until both of you have signed. No matter who goes first, you don't have a contract until both of you have signed.

CAUTION.

Put co-op agreements in writing. When buying stock in a co-op, your state's laws may not require a written agreement. But to prevent any "he said, she said" disputes, get it in writing, anyway. When buying stock in a co-op, your state's laws may not require a written agreement. But to prevent any "he said, she said" disputes, get it in writing, anyway.

Your agent or attorney can tell you of any special contract requirements in your state. Your contract may also include other terms-for example, it may address an existing lease if the property is being rented to a tenant or may specify whether all documents must be transmitted in person, by fax, or by email.

Too Much? Not Enough? How Much to Offer

The most important, and visible, term of an offer is the price. If you offer far less than a seller thinks the house is worth, your offer might be rejected outright. But if your offer is very high, the seller might snatch it up quickly-and you might overpay. To find a balance, look at: * whether the market is hot or cold* the amount that comparable properties have sold for* your agent's opinion* the seller's position (confident or desperate?), and* your own state of mind.

Whether the Market Is Hot or Cold

Part of what determines a house's relative worth is how hot or cold the market is. In very hot markets, some sellers set prices deliberately low, and you'll have to decide on a price that will outdo the competition without going overboard. In a cold market, many sellers accept offers below the asking price.

CAUTION.

Stick to your budget. If a house costs more than you can afford, it's not the house for you-even if it's a great deal. You don't want to land in dire financial straits. If a house costs more than you can afford, it's not the house for you-even if it's a great deal. You don't want to land in dire financial straits.

Unless you're in a really hot market or facing multiple bidders on a hot property, it's best to offer less than you're ultimately willing to pay, because the seller will probably counteroffer. If you leave room for that, you may get a better deal than you'd hoped for. If you can't reach a compromise, you can walk away.

EXAMPLE: Soledad tours a home and decides to make an offer. The asking price is $385,000, but she thinks it's worth between $365,000 and $375,000. Soledad offers $360,000. The seller counteroffers for $367,000, which Soledad accepts. Soledad tours a home and decides to make an offer. The asking price is $385,000, but she thinks it's worth between $365,000 and $375,000. Soledad offers $360,000. The seller counteroffers for $367,000, which Soledad accepts.

That being said, don't offer an amount so far below market value that you insult the seller: You might not even get a response. Or the seller may push right back, resisting compromise on the asking price or other terms. Of course, "insultingly low" depends on market conditions, too. In many markets throughout the country of late, where prices have dropped dramatically and there's lots of competition, motivated sellers may be more willing than ever to accept, or at least negotiate, a very low offer.

How Much Comps Have Sold For

To gauge a property's worth, you'll want to know how much houses with similar features have sold for in the area in the last six months. Your real estate agent should provide you with a list of comparables. Make sure the comps really are comparable-for example, an older home with an original kitchen isn't worth the same amount as a similar home with a remodeled, state-of-the-art kitchen in the same neighborhood.

If you spend several months searching and your agent gave you a list of comps at the beginning, ask for an updated list.

CAUTION.

Offering too much may get you nowhere. If you offer more for a house than it's worth, either because you don't know any better or because you desperately love the place, it could cost you the deal. Your lender will eventually require you to have the house appraised and won't lend you more than its appraised value. If you offer more for a house than it's worth, either because you don't know any better or because you desperately love the place, it could cost you the deal. Your lender will eventually require you to have the house appraised and won't lend you more than its appraised value.

Your Agent's Opinion

Ask your agent about the value of the home you're interested in and what a reasonable offer price is. Your agent should be experienced enough, and familiar enough with the market, to express a helpful opinion. The agent will also know how to take other variables into account-for instance, the seller's eagerness to get rid of the place.

Of course, this assumes you're working with your own agent. A dual or seller's agent is obligated to get the most money possible for the seller and might encourage you to bid more aggressively than is necessary.

The Seller's Position

When you make an offer, think about what the seller wants from the deal. For example, if you know that the seller has rejected several offers, the seller may be holding out for top dollar-but if the house is overpriced, you can possibly get around this by asking for other concessions, like payment of closing costs. Or if you know the seller has already put in an offer on another home but needs money from the current sale in order to proceed, you might get away with offering less.

Clues That a Seller Might Accept a Lower Price Here are some signs that a seller may be motivated to unload a house:* The house has been on the market a long time, with no real interest.* The seller has put in an offer on a new home that's contingent on the sale of the current home.* The MLS or other listing describes the seller as "motivated" or says "seller will consider all offers."* The seller has already moved out.* The seller has dropped the price at least once.* The seller has changed real estate agents at least once.* A previous offer on the house recently fell through.* The house is being sold in winter, when buyer interest is generally low.* The seller plans to move out of the area by a specific date.* The seller has a major life change on the horizon (getting married, having a child, divorcing, or retiring).* The seller inherited the house but doesn't live in it.* The house is an investment property and rents are falling.

TIP.

Find out all you can about the seller. Your real estate agent may know some information-like why the seller put the house on the market, how long it's been for sale, and whether the seller is particularly motivated to sell. Your real estate agent may know some information-like why the seller put the house on the market, how long it's been for sale, and whether the seller is particularly motivated to sell.

Your State of Mind

Fatigue ("I'm so tired of looking at houses"), anxiety ("If we don't get this house, real estate prices will go up"), and excitement ("I love this house!") may all affect the terms you're willing to offer. Don't let your emotions control the process. Instead, focus on the externals: the objective value of the house based on market conditions and comparable properties, your agent's opinion, and the seller's position. Remember, if this house doesn't work out, another one will come along.

Sleep on it. Ross and Yasmin found an okay house for sale on the fringes of a great neighborhood. Ross says, "We liked the place, but we weren't sure we wanted to make an offer. Then we discovered that another buyer was writing up an offer that night. 'We're going to lose it!' we thought, and drafted our own offer, submitting it that very day. The counteroffer from the seller came back to us with less-than-thrilling terms, including the full asking price. We decided to sleep on it this time. The next morning, both of us realized that we'd worked ourselves into a frenzy over a house we didn't love, just because we were so anxious that someone else was going to get it. We walked away and have since bought a home we like much better." Ross and Yasmin found an okay house for sale on the fringes of a great neighborhood. Ross says, "We liked the place, but we weren't sure we wanted to make an offer. Then we discovered that another buyer was writing up an offer that night. 'We're going to lose it!' we thought, and drafted our own offer, submitting it that very day. The counteroffer from the seller came back to us with less-than-thrilling terms, including the full asking price. We decided to sleep on it this time. The next morning, both of us realized that we'd worked ourselves into a frenzy over a house we didn't love, just because we were so anxious that someone else was going to get it. We walked away and have since bought a home we like much better."

Keeping Your Exit Routes Open: Contingencies

Let's say you agree to purchase a house with a beautifully remodeled bathroom. But then you learn that underneath the shiny exterior, old pipes are leaking and rusting-an expensive repair job. Suddenly, you feel like you're overpaying.

You can avoid this trap, and others like it, by including a list of contingencies contingencies in your offer: conditions that must be met before the deal will be finalized. For example, to protect against the above situation, you'd make your offer contingent on a professional inspection of the property and your satisfaction with the results. in your offer: conditions that must be met before the deal will be finalized. For example, to protect against the above situation, you'd make your offer contingent on a professional inspection of the property and your satisfaction with the results.

Most offers include a set of standard contingencies that protect either you or the seller. You and the seller will agree on a date by which each contingency must be met. They're a big part of the reason that most house purchase agreements allow several weeks before the closing.