What You Should Know Before Putting An Offer On A Home

Written by: Alan Nochumson

Q: What are some things we should know about before submitting a written offer to purchase our first house?

– Stephanie Ann, Yardley

A. As the saying goes, “the devil is in the details.” Before submitting an offer, be sure to consider the following:


1. Purchase price.

First, you should find out how much the house was sold for last, as well as the price of similar properties in the neighborhood. By getting this information, you will not only have a good idea as to how much the house is potentially worth, but you will also make sure that this amount is sufficient for the seller to pay his or her own mortgage against the house.

2. Security deposit.

In order to convince the seller to take the property off the market, you must generally agree to pay a security deposit, which will be held in escrow by a third party pending settlement. The more money that a buyer places in escrow prior to settlement, the more that buyer has “invested” in the real estate transaction. Although the security deposit will be held in escrow, most escrow agreements specifically prohibit the escrow agent from releasing the deposit monies to either the seller or buyer without mutual consent.

Another factor in determining the strength of the security deposit is when it is due. In many situations, the security deposit is paid in installments. The first deposit is typically due upon execution of the agreement of sale. The next installment, if any, is due after certain contingencies under the agreement of sale are either met or waived by the buyer. Clearly, the more money placed in escrow at execution of the agreement of sale, the stronger the offer is for the seller.

3. Settlement date. 

Any seller wants settlement to occur as quickly as possible in order to reap the financial benefits of the real estate transaction and to lessen the time frame that the transaction can simply fall apart. However, unless this is a cash transaction where you are taking the property in “as-is” condition, you will need at least a month to close on a residential property due to the amount of time it will take to obtain financing to purchase the property and to perform a property inspection.

4. Mortgage financing. 

Unless the property is being purchased for cash or being financed by the seller, you will need to get a loan to make the purchase. Most, if not all, buyers will include a provision in the agreement of sale making it contingent upon them obtaining such financing. The clause should include the amount to be financed, the interest rate of the mortgage loan, the type of the loan, a date certain that the buyer must apply for the loan, and a date certain that the buyer must obtain the mortgage commitment from the lender.

During the mortgage application process, your mortgage lender will obtain a monetary appraisal of the house. The agreement of sale should include a provision confirming that the buyer’s obligation to purchase the house is contingent upon the house appraising for an amount equal to or in excess of the purchase price.

If you cannot afford the costs associated with a settlement or want to make improvements to the house after settlement, you may also consider including what is called a seller’s assist as part of your offer.

Most mortgage lenders will allow you to obtain a “seller’s assist” of up to 3 percent of the purchase price. For example, if you obtain a 3 percent seller’s assist on a house with a purchase price of $100,000, you will receive $3,000 from the seller at settlement from the net sales proceeds.

5. Property disclosures and inspections.

In Pennsylvania, a seller of a residential property is required to disclose any material defects with the property that the seller knows of by completing a written property disclosure statement to you.

You should carefully review the property disclosure statement to determine if there are any disclosed material defects with the property and, if the offer is accepted, the buyer should provide it to the property inspector.

After the offer is accepted, you should make sure you are given a small window of opportunity to perform a property inspection. During that window of opportunity, buyers typically have the option of accepting the property in “as is” condition, enter into a mutually agreeable written agreement with the seller to either remedy the defects with the property or accept a credit therefor, or terminate the agreement of sale.