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Making an Offer on a Home

Once you have found the property that best fits your needs, you will want to make an "offer" to the seller. In Vermont, an offer is typically presented in the form of a Purchase and Sale Contract.

• In order for an offer for the sale of land to be legally enforceable it must: (1) be in writing; (2) be signed by the parties; and, (3) provide sufficient details to identify the property involved and the essential terms of the transaction such as price.

• While there are standard forms used by real estate agents in Vermont, there is no legal requirement for a buyer to use a "standard form" contract. A buyer is free to have their agent or attorney draft up a contract, or they can utilize the standard forms and alter them to fit the terms of the transaction.

• For most buyers, the most important question is, "How much do I offer the seller?" Unfortunately only the seller and their agent know exactly how much money the seller is willing to take to sell the property. In some cases, the seller will not be willing to sell the home for less than their asking price. However, in most cases the seller will accept some amount less than their asking price to sell the home.

• Buyers should focus their analysis and efforts more on what comparable homes have sold for recently than on how much the seller is willing to accept. Ultimately, a buyer does not want to pay more than fair market value. Also, for any buyer obtaining a loan, the bank will require an appraisal of the property and the appraisal will be based almost entirely on what comparable homes have sold for in the area.

• The best way to determine comparable sales is to look for recent sales (within the last 6-12 months) in the same neighborhood. Your agent can do this or you can use our site and search the Sold Properties database.

• In most cases the comparable sales will be only comparable and not identical to the home you are looking at. Thus, we tend to look at how much per square foot the other homes have sold for recently. To determine this value, you would divide the overall finished square footage by the sales price. Once you determine what the other homes have sold for, you can determine the approximate fair market value of the home you are interested in by multiplying the finished square footage by the per square foot sales price of the other homes.

• There is no one correct strategy for negotiating an offer with a seller. The most common strategy is to figure out how much you believe the home is worth and then present an initial offer that is below that. The hope with this strategy is to have the seller make a counteroffer that is less than your valuation of the home so that you end up buying the home for below what you believe to be its fair market value.

• Another less utilized strategy is to present your final and best offer first. This is more commonly used if another buyer is also presenting an offer on the property. Some buyers prefer this more straightforward approach, but you may end up paying more than necessary.

• Once you decide which negotiating strategy to utilize, you will present your offer to the seller. Despite some agents believing to the contrary, there is no formality required in presenting an offer to a seller. The offer can be sent via email, fax or handed to them.

• In most cases you will want to put an expiration date on the offer. Also, legally you can revoke your offer at anytime before the seller accepts it. Thus, even if you put an expiration date of the following day, you can contact the seller (in writing) and revoke the offer before the expiration date so long as they have not already accepted it.

• Once the seller receives your offer, they can do one of three things: They can accept it, they can reject it, or they can make a counteroffer. A counteroffer is technically a rejection of your offer first and then a new offer being made by the seller. Thus, once the counteroffer is made, your offer is considered legally dead. The seller cannot change their mind after making a counteroffer and simply say they will accept your original offer. From a purely technical perspective you would have to revive your original offer for the seller to accept it.

• In many cases, the legal requirements do not coincide with the practical realities of our technological age. Despite the legal requirement that all offers be in writing to be enforceable, from a practical perspective it is usually only the initial offer that is presented in writing. The parties or their agents usually then conduct negotiations by phone or email until an agreement is reached. Once the agreement is reached the parties then put the final agreement in writing and sign the documents.

• You will often see agents use the original documents and just have any changes that were made as a result of the negotiations initialed by the buyer and seller. This can be more efficient than writing up a new document. However, some prefer to have a new document drafted.

• While price is the most common area for negotiations, it is not the only area that is open to negotiation. You can use items such as contingencies to make your offer stronger. The most common contract contingencies in Vermont are financing and inspection.

• The financing contingency typically says that the buyer has a set period of time from the day the contract is signed to obtain a written loan commitment from a bank. Most financing contingencies are 30-45 days and state the interest rate and amount of the downpayment of the buyer's desired loan program. The contingency allows the buyer to terminate if they cannot secure the written loan commitment within the allotted time period. The buyer must terminate the contract in writing and the dates are important.

• Inspection contingencies vary depending upon the contract. Most buyers prefer an inspection contingency that is worded broadly to allow the buyer to terminate should they not be happy with any aspect of the inspection. Sellers on the other hand would like to limit the buyer's ability to terminate so they look for contingencies that only allow the buyer to terminate if there is a violation of safety code or there are repairs that amount to $500 or more. Again these contingencies will vary, but from the buyer's perspective it is better to have a subjective broadly worded contingency.

• Other common contingencies in Vermont include appraisal, radon inspection, well water inspection, septic inspection, and Seller Property Information Report review.

• In the event the home was built before 1978, sellers must also include a Lead Based Paint Addendum. Buyers have a right to conduct a lead based paint assessment of the home, but most buyers in Vermont do not opt to do the assessment. You should consult your attorney, agent or the State of Vermont for more information regarding Lead Based Paint requirements.

• Once you and the seller agree to the terms and sign the contract, you will provide the seller's agent or some other third party with the deposit check. The party holding the deposit check will be the "escrow agent" for purposes of holding the check and cannot release the funds to either party without instructions from both parties or a court of law. The deposit will be credited towards your purchase price at the closing.

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