When a potential buyer hands you an offer:
You may get one offer. Or you might be lucky enough to receive multiple offers! The "offer" is a sale contract. Offers come in the form of a contract, and there are different versions. However, the included terms within these contracts (offers) are mostly the same. For instance, it must include both the Seller and Buyer (parties) names. It must list the property address and should include the legal description and folio number.
Just remember, until you sign something, it's just an "offer" to buy. But once you do sign, that becomes an executed contract and is legally binding. You want to make sure you accept an offer (contract) you understand, and are happy with. As the seller you can certainly change any of the terms in the offer to your liking BEFORE signing and returning to the buyer. So it's very important you understand what you're signing. Don't bind yourself to a contract that could waste your time and money, or make you very unhappy at the end of the process.
Accepting a Sales Contract
If you have been presented an offer that you like, make sure to consider the other key terms carefully in addition to the proposed purchase price BEFORE accepting a contract! They are as important! Pay close attention to how much escrow (deposit) the buyer is committing to and when they will pay. Make sure any inspection is done as soon as possible after signing the contract, because the inspection results can often kill the contract. Consider carefully, the type of financing the buyer plans to use (cash, conventional, FHA, VA?). Each type brings strengths and weaknesses, you should know which will lead to the most viable closing.
Most common contract pitfalls
The most common contract pitfalls include:
- escrow not paid in time
- inspection results not accepted by the buyer
- the appraisal comes in lower than the purchase price
- financing declined
Other less common issues include condo approval declined, buyer not accepting condo or HOA financials (shaky financial state, too many foreclosures in the community, not enough money in reserves, not enough parking spots, won't allow company vehicles, open permits, type of deed, etc).
Make sure to read the contract thoroughly, and consider all of the terms very carefully. Sellers have the ability to change any of the terms to strengthen the contract, make sure you are fully aware of how strong the offer is, and if there is anything you need to change to strengthen it.
Lastly, before accepting a contract, make sure to get a copy of a buyer's prequalification or preapproval if financing is involved. This shows that the buyer is serious, has already begun working on financing, and a lender initially thinks this buyer will meet a bank's qualifications (income, debt, credit score etc) for obtaining a loan, for the amount on the offer/contract.
A prequalification or preapproval is not a 100% guarantee the buyer will obtain the loan they are seeking, but it is a strong step in the right direction. Accepting an offer from a buyer that hasn't started trying to obtain a mortgage (if they aren't paying all cash) is never a good idea. You've done your part by fixing up curb appeal and home staging, and prepping for a property inspection. Your buyer should do his prep work by starting the process of getting financing.