Making an Offer

Once you have identified the home you want to buy, you will be making a written offer on the property.  Your Buyer’s Best agent will be filling out and you will be signing a number of documents (totaling 30 – 60 pages), that constitute the offer to purchase.  This will become the contract of sale once all parties have agreed in writing to all the terms.

We will start with the Maryland Association of Realtors (MAR) Contract of Sale.  This document has evolved over the years to be an extremely fair and unambiguous contract, intended to cover the standard issues that Buyers and Sellers need to be in agreement on when purchasing a home.  There will also be documents provided by the seller containing information about the property which will be reviewed by you and become part of the offer.

The basic 10-page MAR contract is then modified to fit your particular circumstances by specific addenda that address individual issues.  These addenda are different depending on you, the location of the property, its age, your mortgage, etc.  Some of these are:

• The First-Time Maryland Homebuyer Addendum exempts you from the state transfer tax if you are a first-time homebuyer in Maryland.  It also reiterates who is paying the Recordation and local Transfer taxes (if any).
• Loan-specific addenda such as the VA or FHA Addendum, which spell out certain terms and conditions necessary for that particular loan.
• County- and/or city-specific addenda, necessary in most counties and some cities in Maryland. These will usually contain notices or disclosures, such as a Master Plan notice, (requiring you to take the responsibility to review the applicable Master Plan(s)),  airport locations, Fair Housing information,  and any other issues that the county or city feels are important for you to know when purchasing a home in that jurisdiction.
• Homeowner’s and/or Condo or Co-op Association Addendum, which will specify the requirements of the exact documents and information that the seller must provide to the buyer regarding the association if the home you are buying is in a Homeowner’s, Co-op or Condo Association.  You will have a specified length of time (5 days for an HOA, 7 days for a co-op or condo) to review these documents and will then have the right to decide whether to continue with the purchase.
• The Financing Addendum will contain terms associated with your purchase and your loan, such as any money you may be asking the seller to contribute to your closing costs, or the fact that a relative is giving you money to help buy the house, or any of many other financial factors.
• The Appraisal Addendum – Used with conventional mortgages and cash sales, the appraisal addendum protects you in the event that the property isn’t valued for at least the purchase price.
• Property Disclosures will give you information about the home, the roof and basement, utilities and appliances, etc.
• The Inspection Addendum will contain the choices for the most  common inspections.  Whether you do any of these depends on your comfort level and on the house you’re buying.

There will be a deposit that will accompany the offer, typically $1,000 to as much as 5% of the offer price, depending on the area, list price and other factors.  The deposit is intended to show the seller that you are serious about buying the house, and is referred to as the “Good Faith” deposit.  Once there is agreement on all terms of the contract, the deposit check will go into an escrow account and that money will be returned to you at settlement to go toward your costs.

Once the offer is ready, your agent will register it with the listing company or agent and arrange for presentation to the seller.  Remember that an offer-to-purchase is a living document; you are making an offer containing terms and conditions that you like but every single term you like may not be what the sellers want.  If the seller proposes any changes, you will have an opportunity to agree or not, or to make a counter-offer.  There may be a lot of back-and-forth negotiating at this point, or it may go very quickly.  Once buyers and sellers have agreed in writing on all the terms and both agents have received complete copies of the final product, you have a ratified contract.  At this time there are a number of things that have to happen within a specific time:

• The home inspection must be scheduled; this is the only inspection that you should attend.
• Any other inspections must be scheduled.  A well and/or septic test and termite inspection will be scheduled within 30 days of settlement.
• You need to get any missing information to your loan officer so the loan can be processed as quickly as possible to meet the loan commitment deadline.
• You’ll usually pay your lender for the appraisal (usually $4-500.00) and credit report ($14-50), if you haven’t already paid for them.

The Home Inspection will usually be completed and the written response sent to the seller’s agent within 7 – 10 days.  There may be a great deal of discussion between buyers and their agent and between both agents over the results of the Home Inspection, but here too, all parties must agree in writing to any changes.  Some of the addenda, such as the financing or inspection addendum will have a contingency, such as: “this contract is contingent on Buyer obtaining financing for the above property.”  There are also typically “drop-dead” time frames on the inspection reply times:  “if response is not received by buyers from sellers within ____ days, this contingency shall be deemed waived.”

Any changes that alter the initial contract must always be in writing and must be signed or initialed by all parties before they become part of the contract.  This is an on-going process from the time the offer is first written, sometimes until the day of settlement as circumstances change.  Keep in mind that there are a number of built-in protections for the homebuyer throughout this process, so that if something turns up that doesn’t meet certain standards, such as with the Radon Addendum,  or isn’t agreeable to you, such as the review of the Homeowner’s Association documents, you are not forced to continue with the transaction.

If you’d like to review a complete set of the contract package that will be used for your transaction, just let your agent know and one can be printed for you.