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I have an offer, now what?

 

Most buyer's expect to be countered so why let them down? Seriously, it is rare to make a counter offer and have the buyer just walk. Most buyers expect to be countered. Usually the offer / counter offer will go back and forth a few times until you can either come to terms or not come to terms.

It's a poker game trying to determine how far up we can get the buyer but in the end it has to be a win-win for both parties so keep that in mind.

HOW TO MAKE THE COUNTER OFFER

  • Typically, there is no counter offer form. You simply make changes to the offer. WHEN YOU MAKE ANY CHANGE TO AN OFFER IT BECOMES A COUNTER OFFER. REMEMBER THAT PLEASE!
  • Draw a line through things you disagree with, make the change you desire (counter offer) then initial that change.
  • Initial the bottom of each page of the offer form.
  • Sign and date the last page of the offer.
  • At the end of the offer or where there is space put a time period for your counter offer, typically 2 days. Something like, "This counter offer is good through...."  This way your counter offer is not hanging out there and it protects you in case another offer comes in.
     

WHICH ITEMS ARE GENERALLY WORTH COUNTERING?

  1. Price: Again, draw a line through the price, put in the price you're countering then initial the change.
  2. Occupancy: Many times the buyer will request occupancy at closing. If you want to remain in the home after closing for a short period put that period in there. If you remain in the home after closing for say 10 days you become a "Tenant" and will typically be obligated to pay rent. The rental amount is whatever the buyer's mortgage payment is divided by 30 days to arrive at a daily rate, this is known as "1/30th PITI (principal, interest, taxes & insurance or tier total payment).
  3. Pre approval contingency: This is a big one as far as I am concerned. Most offers will contain a clause telling us when the buyer will be pre approved. Many times this pre approval is 30 days which is a long time to tie up your home in case something goes wrong! It should be 10-15 days. NOTE, MOST PRE APPROVALS ARE ABOUT AS GOOD AS TOILET PAPER SO BE AWARE! ALSO, MOST CONTRACTS DO NOT DEFINE PRE APPROVAL, THIS COULD MEAN ANYTHING, PRE APPROVED ON CREDIT, PRE APPROVED WHEN THE FINAL APPROVAL IS DONE WHICH IS NOT UNTIL THE APPRAISAL IS DONE JUST BEFORE CLOSING!
  4. So, be aware and hang tough on approvals. The last thing you needs as a seller is to wake up with a "Denial" a week before closing. You just lost 5 weeks of on market time when the buyer may not have had a strong (real) approval in the first place!

A WORD ON PRE APPROVALS / PRE QUALIFICATIONS: Most offers have a pre approval time period of 30 to 40 days. This means your home is "Off the market, pending" because there is a signed offer. Therefore, if something goes wrong with the buyer's mortgage approval during that time frame you have essentially lost that "On market" time.  It is wise to verify the "Mortgage approval" is actually a good one and not just toilet paper... I've seen too many bogus pre approvals...

Here is a clause I like to insert in the offer from (somewhere under additional conditions).  

 (I am not an attorney, have your attorney review this clause!) 

"Buyer agrees to provide a full Credit Approval" within 15 days of acceptance of this offer. Credit approval means the lender has reviewed all income, bank statements, tax returns and other financial information and has approved the buyer.    

Now, granted, this may be a little tough but it takes the risk out for sure!

This may eliminate approval issues as the file progresses. The only thing remaining for the lender to review would be the appraisal.

 

  1. The buyer will almost always hire an inspector. You should be contacted by the buyer's agent to schedule an inspection on your home. The inspection generally lasts 3-4 hours. While it is your right to be there as owner it would be uncomfortable and few owners are there. However, it is not a bad idea to show up at the end and meet them outside to address any initial concerns if you wish.
  2. Appraisal is next.  Assuming the inspection goes ok then the buyer's mortgage company will hire the appraiser to appraise your home. This may take a week or so after the inspection.
  3. Title insurance needs to be ordered. Although you as seller may have title, you have to provide "Clear Title" for the purchaser.  Title insurance confirms you are the owner and there are no other liens against the home. Title insurance is a set rate per thousand by Michigan Law.  We can order it for you or you can choose a company you wish. Many times the buyer's agent will order title for the buyer. This is a separate order for the buyer only. We can still choose any title company you wish and do not need to order it from the same company.
  4. How much can I expect to walk away with or what are my net proceeds?  Here is a great calculator you can use for just that! See http://www.libertytitle.com/sellers-net-calculator/
  5. After the appraisal is done it should be clear sailing to closing.
  6. You'll need to order a mortgage payoff if you owe on your home and a final water bill.

  7. The buyer's mortgage company gets all of their information and costs to the title company. Generally, this is not done until a day or two prior to the closing date.
  8. The Closing:  The title company acts like a big pot. Everyone dumps their stuff in the pot and the title company divides it up and produces a closing statement commonly referred to as a HUD-1.  The closing statement is generally not available until a day or so prior to closing because the buyer's mortgage company has to get their numbers to the title company first.
  9. You should be paid at closing. You can have the title company issue you a check or you can have it wired to your bank account.

I hope this helps explain the process.

Jeff Kermath