Before Submitting a Home Offer, Make Sure All Your Bases Are Covered

Ready to make an offer on the home of your dreams? Keep in mind that a written and signed (ratified) purchase offer can bind both you and the seller. Whether it's called a contract-to-purchase, an offer, binder, or earnest-money agreement, you can be held to your offer once it's signed by the seller. If you leave anything out and the seller accepts and signs the contract, you're out of luck. That's why your purchase offer must include every minute detail and aspect of the sale. Here are some important points that it should cover:

1. The date and amount of deposit (earnest money).

2.Your name as buyer and the property owner's name as seller.

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3. The total purchase price.

4. Full legal description and street address of the property.

5. The lawyers, brokers and others involved in the sale, as well as the terms and conditions of their compensation.

6. The options available to both buyer and seller should either party default.

Key Clauses

Your offer contract should also contain important protective and escape clauses making the entire agreement subject to, or contingent on, their fulfillment. Here are some key "subject to" clauses and useful contingencies to consider:

Earnest money. Ensure that your earnest money (a check you give to the seller or seller's agent to show you're serious about buying) will be deposited in a trust account or with a neutral third party, such as a title company, escrow service or attorney acting as an escrow agent. If you're putting up a large earnest-money payment, stipulate that it be held in an interest-bearing account and that interest earned will be credited to your side of the ledger at settlement.

Returning earnest money. Set out any conditions for return of your money, including how quickly you'll get it back if the offer expires or you withdraw it, or if for some reason the seller decides not to sell.

Deed and title condition. Your offer should state the type of deed and condition of title you'll accept from the seller. Your contract should also make clear what actions the seller must take to deliver a good title by settlement, and what recourse you have should that not occur.

Financing. Make your offer contingent on getting a written loan commitment within a specified time and at terms agreeable to you.

Seller financing. The terms and conditions of any seller financing should be fully and exactly set out in the contract.

Settlement date and possession. The sale should be made subject to a settlement date and when you will be entitled to take physical possession of your new home. Settlement usually correlates with the length of time that's required for a title search and mortgage approval -- typically 45 days to 60 days. Possession usually occurs immediately after settlement.

Settlement agent. The contract usually specifies the attorney or title company that will perform final settlement services.

Prorating. The contract should state that property taxes (among other things) will be prorated to the closing date.

Sale of current residence. If your purchase of this house is contingent on the sale of another, this should be carefully stated.

Response time limit. Your contract should require the seller to accept the offer in writing within a certain time -- usually no more than 48 hours -- or the offer will be void.

Home inspection. This contingency clause gives you the right to have the property inspected (this will cost you about $300 to $500) and to withdraw your offer if the inspection report isn't satisfactory to you for any reason. It may also allow for price adjustments to pay for any necessary repairs.

Environmental tests. You may want to include a clause requiring that the property be tested for radon, lead paint, asbestos, or ureaformaldehyde insulation.

Termite inspection. Many contracts require the seller to order and pay for a termite inspection. If yours doesn't, insert language to that effect.

What goes with the house. Specify what furnishings -- such as curtains, rugs, chandelier, and so on -- are included in the sale.

Condition of house at settlement. Specify what must be in demonstrable working order at the time of settlement, as verified during a walk-through of the premises a day or so before settlement.

Other conditions. The list could go on, but every additional condition runs the risk of making your offer more complicated and less appealing.