How To Write An Offer To Buy A Home

This article looks at how home buyers and/or their real estate agents should be filling out the Contract to Purchase a home document.  Even though this focuses on the contract adopted by the Cincinnati and Dayton Area Boards of Realtors a lot of the terms are common to many contracts used to buy a home around the US.  As with anything that is outside one’s area of expertise it is highly recommended that one consult with a local real estate agent or real estate attorney to make sure the contract they are using is filled out correctly and in accordance with local requirements.

Location and Money

Probably the two most important areas of the contract include the specific location of the property and the price being offered.  Sometimes an address is not enough especially if the real estate being sold includes more than one parcel in the sale.  So while an address is highly recommended, additional information like parcel identification number (PID), property description, or some other type of identification used by the local governing agency would be important to include in the contract to purchase.  

How much is being offered is also important and the sellers will be paying close attention to that number.  When using computer-based forms one only need enter in digits the amount being offered and the computer will write out the purchase price in words so as to limit confusion.  $300,000.00 with a decimal point or comma in the wrong place can lead to some confusing numbers being thrown around.  The written words three hundred thousand dollars with “$300,000.00” typed out means less confusion as to the offer price.  Along with the purchase price amount the buyers should be entering home much they will be putting down as earnest money.  While legally not required, earnest money is highly recommended for all offers as it represents a good faith deposit and a show of interest in the property.  Depending on one’s location earnest money can vary from $1000 per hundred thousand dollars of purchase price, to a percentage of the total purchase price.  Some buyers may opt to put down a sizable amount of earnest money to show their seriousness whereas other buyers who may not be as liquid with their cash prefer a smaller amount down.

The earnest money is refundable in certain circumstances and when certain timelines are adhered to.  If the buyer does not like the condition of the home after the home inspection reveals certain issues they can cancel the purchase and request the earnest money be returned.  If the home does not appraise for the purchase price and both the buyer and seller cannot agree on the next steps then the buyer can cancel the purchase contract and ask for their money back.  If at any time the mortgage lender states they cannot provide a mortgage (even at the closing table), the buyer can cancel the purchase contract and ask for their earnest money back. 

Financing or Cash

The next most important section is how the buyers will be paying for the home.  Cash offers are generally seen as more favorable since there is one less approving step in the purchase process.  With a mortgage the lender will go through a couple of levels of review, from the initial credit approval process to underwriting looking at the loan application prior to agreeing to fund the loan.  With a cash offer the buyer may even be willing to waive the appraisal contingency which means even another step being closer to closing without a third party putting a stop to the whole deal.

A majority of home buyers need the use of a mortgage to buy their home.  Within the financing section of the contract to purchase the home buyer is able to set out terms that could allow them to walk away from the deal if the loan does not meet their requirements.  Requirements such as a the term of the loan (15 year, 20 year, 30 year), a particular interest rate and how much they have to put down towards the purchase.  Where interest rates are stable this might not matter as much, but where interest rates are moving up and down frequently capping the interest rate in a purchase contract means the buyer can cancel the purchase contract if the interest rate is above their specified limit.

Sale Inclusions

Other than the land and house what else might buyers add into their contract to come along with the house?  The usual appliances like refrigerator, stove/oven, dishwasher, built in microwave, and other built-in appliances may automatically be listed out as included with the home in certain standard contracts.  In other situations, the buyer must specifically ask for those items.  If they don’t ask for those items they may not be there on move in day.  Things like fixtures (attached lights, built in appliances, built in bookcases, etc.) generally stay with the home.  Things that are not attached to the home like free standing dining tables, movable islands, TVs generally go with the seller unless they are wanting to leave those things behind and the buyer wants them as well.  It is still strongly recommended that buyers put in writing those items that are not fixtures and they want to stay (like major appliances).  When in doubt the home buyer should be consulting with their real estate agent and/or their real estate attorney on how they should address a certain item.  It is better to have those items specifically listed as coming with the house upon sale than to assume they will be there when one moves in.

Seller Statements About House and Location

Certain seller statements about the home and whether it is part of a Home Owners Association (HOA) or is located in a historic district are important information buyers should learn about before buying.  HOAs can control what colors a home is painted, what types of landscaping and fencing are allowed, and even when holiday decorations should be put up and taken down.  Living in a home with historical designations also limits what can be done with the home when it comes to remodeling or decorating.  If a homeowner wants more flexibility and control over what they do with their home then they need to pay attention to information disclosed in this section.

Maintenance, Home Warranty and Insurance Sections

The maintenance section of the contract may or may not contain any fill-in sections but does specify that the seller should be keeping the home in good condition until closing.  If anything happens to the house (fire damage, water damage, etc.) the buyer then has the option to continue as planned with the purchase or to cancel the purchase all together in the Cincinnati Contract to Purchase.

The home warranty section is just that, the section that allows the buyer to choose to buy a warranty.  The home buyer can ask the seller to pay for the warranty and that is a negotiable aspect of any offer to buy a home.

The insurance clause when buying real estate basically states that if the home is not insurable then the buyer can cancel the purchase contract.  In the Cincinnati contract to purchase document the buyer has to find out the insurability during the inspection contingency period.  The one possible workaround of the that requirement is that if the home buyer cannot get insurance on the property the mortgage lender will not provide a loan to buy the home and as mentioned above if the loan is denied the buyer can walk away from the purchase.

Property Disclosure Form, Off-Site Condition, Inspection Sections

The property disclosure form is an important document where the home seller is sharing the condition of the home they are selling.  Home sellers should be preparing a property disclosure form and providing that form to potential buyers even if the home is being sold in as-is condition.  The as-is status does not exempt the home seller from filling out the disclosure form.  There are some exemptions for those who don’t have to fill out the form in Ohio, such as someone who inherited the home and never lived in it, banked owned homes and a few more.

Off-site conditions refer to what is happening around the property.  Whether the home is next to a farm, airport, which school district is it in, whether there are registered sex offenders close by and more are generally the responsibility of the buyer to research and know about.  Some external conditions may be required to be disclosed by the seller under law, for those things not required to be disclosed this section puts on the buyer the need to discover those conditions or situations and buy the property understanding that.

Within the inspection section the home buyer will have some fill-in options such as how long do they need to inspect the property.  The amount of time needed for inspecting is a negotiable point that the seller can push back on and offer different time frames.  Generally if a seller is sticking within what is custom to their area there should be no pushback on the inspection period.  In the Greater Cincinnati area home buyers should be expected to complete inspections within 7-10 days.  Sometimes more time is needed because sales are happening so fast that home inspectors are booked out far in advance and the inspector one wants to work with may not be available.  While buyer and seller may have agreed to a certain time front upon initial contract acceptance, the seller and buyer can both agree to extend that time frame to allow for more time.  Generally a seller does not want an endless inspection period, but allowing the buyer a few more days to sort out issues can be beneficial since the buyer has already paid money out to get the home inspected and has some investment in continuing with the purchase.  In addition to the inspection period this section also has input for the time frame the buyer and seller have to agree to what repairs if any are to be made after the initial inspections have been done.

Buyers have the ability to inspect pretty much anything physically related to the home such as the roof, plumbing, HVAC system, windows, the presence of radon and lead paint (for homes built prior to 1978).  Older homes may still have lead paint present since the traditional custom for painting is to paint over old coats of paint.  A lead paint test allows buyers to check where there is still lead paint in a home.  Lead paint is highly toxic to children who are more at risk since they are likely to put things like paint chips in their mouth and are still developing physically.  Dust from lead paint can also be inhaled by both adults and children which can result in long term negative health effects.  Radon is another concern due to it being an odorless and colorless gas that can cause cancer with prolonged exposure.  

Open Fill In Section

Many offer documents contain a section where the buyer can enter some custom terms that are to be part of the contract.  For instance asking that the seller provide financial documents if the property being purchased is an investment property that produces income.  Buyers can put other language in the fill in section that is custom to some specific need they have that is not covered by other language found in the document.  Sometimes rather than using the fill-in section buyers will include addendums to the purchase contract.  Addendums for back-up offers, escalating offers, and more can be added on to a purchase contract and enforced as part of the overall contract.  Buyer’s need to beware though that improperly crafted language can cause problems, so if there is a need for custom language a real estate attorney should be consulted.

Title insurance

Title insurance is one of those things that if you need it you are glad you have it.  Title insurance covers the homeowner in the situation where there may be undiscovered ownership interest or undiscovered liens on the real estate they just bought.  When buying a home with a mortgage the lender will require title insurance as part of the loan requirements.  Home buyers can add title insurance to cover their equity in the home in case a claim does get raised, they will have some insurance coverage.

Tax, Tax Proration and Assessment Sections

While there may not be that many fill-in provisions in these sections they are still important sections to read and understand.  When buying or selling a home there will be transfer taxes, proration of property taxes and possible assessments that need to be dealt with upon closing.  The homeowner will be responsible for paying the property taxes up until the time of closing and all property taxes after that are the responsibility of the buyer.  The title company will prorate those taxes and note how much the buyer is responsible for and how much the seller is responsible for on the closing disclosure form.  If the property is a rental property there may be proration of rents and transfer of security deposits as well.

Closing, Possession, and Offer Expiration

Within the closing section of the offer document the buyer can enter in the name of the title company that will prepare everything for closing including obtaining the mortgage payoff for the seller, calculating tax prorations, calculating fees and charges for each party and more.  Often times buyers and sellers really don’t know much about local title companies and can go with some recommendations from their lender or their real estate agent.  The closing section also allows the buyer to set the closing date as well and the closing date should be based on guidance from the mortgage lender.  Mortgage lenders generally need 30-60 days to get the entire loan processed through to closing.

With regards to possession this means when the buyer actually gets to move into the home.  In most cases the best situation is for the buyer to get access to the home on the day of closing.  Sometimes seller’s do ask for more time if they have not closed on the purchase of their new home or they just want extra time to pack and get things out of the house.  This is a date that is negotiable between the buyer and seller.  Closing can be rescheduled to a later date rather than allowing the seller to stay in the home after closing as another option.

The offer expiration is another important aspect of the entire process.  Within this section the buyer is saying their offer is only good for a certain amount of time and after that time it is no longer valid.  Reasons for this include allowing the buyer to not be “stuck” waiting for one home, putting time pressure on the seller to decide, or limiting the time a seller has to solicit other buyers where a multiple offer situation could arise.  Offering too little a time like one to two hours is rarely in anyone’s interest as sometimes sellers are simply not available or do not have access to a computer to give a response in time.  As a result the buyer should give adequate time for the seller to respond.

Final Thoughts

An offer to purchase a home is a serious undertaking with many different terms and conditions controlling how the sale will proceed.  The terms and conditions need to be met within certain time frames that are also set by the contract.  Failing to stick to the terms and the time frames can me a buyer gets stuck buying a house with problems.  As a result working with a professional real estate agent or real estate attorney can be very helpful and save the buyer a lot of unneeded stress.

Additional Resources

• Smart Inspection Tips For Home Buyers - The home inspection is one of the most important actions for a buyer to perform when buying a home and this article provides some insight as to why.
• Understanding The Steps For Buying A Home - Buying a home involves quite a few steps in order to be successful.  Miss any steps or trying to take shortcuts can lead to failure and this article explores what home buyers should be doing and in what order.
• Things That Are and Are Not Included With The Sale Of A House - What goes with the sellers and what stays has been the source of conflict in many real estate deals.  This articles explores what typically stays with the home and what does not after the sale has closed.

About the author: The above article “How To Write An Offer To Buy A Home” was provided by Luxury Real Estate Specialist Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you.  Contact me today!

I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Adams, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.