We’re seeing many properties receive offers, counter offers, contingencies, and due diligence periods. What to do and what not to do. If you are a seller, that means at one time you were a buyer that went through the entire process of making offers, counter offers, mortgage applications, inspections and closing. You do have some experience, but probably not a lot. Plus if it was several years ago, things have changed. If you are a buyer for the first time, you may feel overwhelmed by all of the paperwork required to write a purchase agreement and all of the mortgage documents needed to be signed. Sellers and buyers, the first thing to remember is that all agreements need to be in writing. Verbal offers, verbal negotiations, and verbal agreements mean nothing when it comes to a real estate transaction. You can get contracts, counter offer forms and amendment forms on the Internet, your local office supply store or your attorney/title company. Sometimes the mortgage broker can help you with this. Here is how the transaction normally goes. The buyer looks at the property, discusses a few items with the seller (possibly agreeing to the terms of sale), then the buyer get a purchase agreement and fills in the blanks. The buyer signs and then presents it to the seller. The seller at that point has three options. Either Accept, Reject or Counter Offers. A Counter Offer means the initial offer is Rejected and a new Offer is delivered from Seller to Buyer. At this point, the Buyer has three options: Accept, Reject or Counter Offer. This can go back and forth several times until all terms are agreed upon and both buyer and seller sign accepting. At this time a Binding Date/time is also filled in. The Binding Date/time is very important. This means the property is no longer available to any other buyers. It also establishes the starting time needed for any due diligence period, mortgage applications, etc which have a set time to get things done prior to closing. Here are a few items to keep in mind.
Seller, if you receive offers from two or more parties, never ever send a counter offer to both parties. The worst thing that can happen is that both buyers Accept your counter offer and you have now sold the same property to two different people. This possibly can lead to a law suit, attorney expenses and not selling your property to anybody waiting months for a judge to decide who gets it. Instead, in writing, inform all parties that you have received multiple offers and set a deadline (normally two days), such as: Tuesday, July 25, 2014 at 5pm, for them to send you their ‘highest and best’ offer. Once the deadline passes, pick the single best offer and either Accept, Reject or Counter Offer with just one party.
Seller and Buyer: always put an exact date and time limit on all offers and counter offers.
Buyer: make sure a third party, such as an attorney, title company, etc holds your deposit. Also, make sure you have enough time for a Due Diligence period. Your home inspector and mortgage broker can help you determine this.
One last comment, if any thing seems out of the ordinary or you are not sure exactly what to do, contact a real estate attorney for help.