You Get an Offer on Your House- What Next?

You Get An Offer on Your House – Now What?

This article is one of a series of 8 covering the entire sales process; from listing the house, to closing on it. See my Homes Selling Page for links to all.

Your house has been on the market for a while and you get an offer. Now what? In Houston the offer comes in the form of a a 9 page contract,  1-4 Family Residential Contract (Resale). As it implies there are other forms for other types of property: vacant lots, multifamily, condos, etc. This contract is promulgated by the state of Texas. The buyer’s agent just fills in the blanks.

Offer on your house

You Have an Offer on Your House

Some of the contract items covered (and to be negotiated) include:

  • Offer Price
  • Down payment
  • Earnest money
  • Title Company & who pays for title policy
  • Survey, who pays for it
  • Residential Service contract (we’re not supposed to call this a home warranty)
  • Closing date
  • Date of possession
  • Special provisions
  • Non-Realty Items
  • Amount (if any) of buyer costs to be paid by seller
  • Termination option; $ amount and time period

Offer price: Rarely does someone expect their first offer to be accepted, unless it is a full price offer. They expect you to come back with a counter offer. If the offer is ridiculously low (~10% or more off list) I generally recommend that we thank them for their offer, but ask that they please come back with something reasonable to begin negotiations. Otherwise you are essentially dropping your asking price before they make a real offer.

Down payment and earnest money: These help tell you about their financial abilities. Minimum down & Minimum earnest money may mean they are borderline able to buy the home.

Title policy is typically paid for by the seller. The choice of title company is negotiable. Get your Realtor’s advice on this. You can’t afford to have this bumbled.

Survey: If the seller has an existing survey, it may work for the buyer. There are a lot of variables here though. If it doesn’t work, the buyer’s lender will insist on a new one, so this should be a buyer’s cost.

Home warranty (I know we’re not supposed to call it that): This is always asked for by the buyer and normally paid for by the seller ($400-450 typical). This makes the buyer more comfortable that repair costs in the first year might be ameliorated by this coverage. Rarely is anyone happy by what is actually covered, but I won’t go into that here.

Closing date and date of possession: These are important, and in fact may be critical for one party or the other. This can be a strong bargaining point if one party needs quick possession, or to lease the property back for a period, or otherwise has a critical date.

Special Provisions: This can be anything not covered in contact. I.e. must respond by date/time, etc. It shouldn’t be, but often is used for non-realty items (there is a separate form for this) such as washer/dryer to convey with house.

Buyer costs to be paid by seller: This is a tricky one. Used by buyers who want to (or have to) purchase house with minimum up-front costs. Sometimes the sales price can be bumped up to compensate for some of this. Be careful of appraised value though. Sometimes a neighborhood is known to have predominantly first-time buyers. These buyers want/need all the help they can get.

Option fee:  This is the amount paid to seller for the unrestricted right to terminate a contract without cause. It is typically $100 for 10 days. It is the period for the buyers to do all their inspections (structural, termite, slab, are most common) and to negotiate any repairs.

Anyway, find out all you can about the buyers to determine their true needs, then negotiate all of these points at once. Don’t negotiate price alone then come back to other points. They all fit together.

Sorry, but this takes to much space to cover in more detail. It definitely can’t cover negotiating tactics….way too complicated…ask your Realtor.  You have the basics and know what to expect, and what the offer will look like. Go forth and come to an amiable result for all.

After you come to terms, the next step will be the Option Period and Inspections.

Mid 2014 update: In this crazy seller’s market, if you priced your home properly you have a good chance of getting multiple offers at or above asking price. Talk to your Realtor about this, but you have all kinds of options as to how to reply. You may give a counter to a single offer; you may ask them all to give their “highest and best” offer, etc. Each one of these has pluses and minuses.