Beginning 2005, the Georgia Association of REALTORS® issued their latest version of the standard contracts that we use throughout the state as members of the GAR.  These contracts are specially constructed to serve both the Buyers and Sellers in the sales transaction and has now been revised from 5 pages to 7 page.

First of all, when your agent receives an offer for your property, it is his/her responsibility to inform you of this offer as soon as possible.  If there are multiple offers on your property, then they must all be presented as soon as possible.

Most likely, your agent will call you to tell you she has an offer.  The first thing most people will want to know is the offering price.  Sure that's important, but hold on!  There's a lot more to getting a good offer than just the price. 

Let's take a closer look at the different elements that make up an offer as outlines by the GAR Purchase & Sale Agreement:

• Purchase Price
• Earnest money
• Closing Cost contribution
• Closing Date and Possession
• Length of Due Diligence Period
• Special Stipulations

In evaluating the quality of an offer, you need to work with your REALTOR® to assess the best options for you.  Take a look at the following scenarios and decide for yourself which may be the best offer to accept:

It is April 15 and you have a home for sale and it's list price is $300,000.

These offers say something about both buyers.  It is your responsibility to evaluate these offers.  Having an experienced real estate professional also helps.  Technically, they are both viable offers.  It is up to you to decide which one to accept or counter, but understanding a few things helps.

First of all, don't get too caught up in the offer price.  Look at it in conjunction with the overall contract. While Offer #1 is full-price, look at the closing date.  Now look at the price and closing date of Offer #2.  Consider how much four more months of payments will cost you in relation to Offer #1.  It may actually be a wash compared to the lower offer price of Offer #2 who can close at the end of this month.  Right?

Now, look at the financing.  The buyer in Offer #1 is planning on financing 95% of the purchase and is intending on finding a 5% interest loan.  So technically, if interest rates are running higher than 5% and if this buyer can't get a loan at 5%, then the deal can fall apart.  Meanwhile, Offer #2 is not contingent on any financing.

Lastly, check out the special stipulations.  Both buyers need to sell their house before they can close on yours.  Offer #1 merely states that the home is on the market.  When will it sell?  Will it sell?  Your guess is as good as mine.  However, Offer #2 states that the home is under contract and scheduled to close at the end of the month.  Obviously, the buyers are planning to take the proceeds from this sale to use towards the purchase of your home.

And let's not forget that second stipulation on Offer #2.  Does this contingency on appraisal make this contract less attractive?  It could if you know you're home is listed for much higher than market value.  But if that is the case, don't be fooled just because Offer #1 doesn't have this same contingency.  Offer #1 is being financed by a lender.  That lender will have an appraisal conducted on the property for their own safety.  What do you think happens if the home fails to appraise for the amount of the loan requested by the Buyer?  Do you think they will make a loan higher than the value of the home?

There are a lot to consider, based on your own specific needs and time frame.  Work with your REALTOR® to help sift through the pros and cons of each offer you may receive to help determine how you should proceed.

 

Once you've thought about any offer presented to you, you have several options before you.  You can: Accept the offer as-is:  If everything on the contract looks acceptable to you then you can simply sign the bottom of the contract, date the acceptance box, and get this copy back to your agent.  Your agent will then deliver it back to the Buyer or Buyer's agent and you have a binding agreement! Counter-Offer: If you want to make any changes to the offer presented, you must do so on a Counter-Offer form.  On this contract, you simply state that you accept all the terms of the original offer "with the exception of:" and then you get to list your terms, anything from offer price, closing date, what will or will not stay, etc. Once submitted, you are now the offeror and the Buyer is now the offeree. Now, the Buyer has the exact same right as you did, as noted here, having the right to accept your offer, counter-offer or reject it. If the Buyer chooses to counter offer, then it goes back to you and so forth until you reach a mutual agreement.  This can turn into a regular ping-pong match, going back and forth between buyer and seller repeatedly over a long period of time. Do nothing at all:  Offers usually have time limits attached to them.  If you find the offer unacceptable and you don't want to counter-offer, then you can simply do nothing and allow the offer to lapse.  Often, this happens when an offer is so low or unreasonable that the Seller doesn't even want to acknowledge it.  Personally, I think it's always in the Seller's best interest to counter-offer on all offers.  Don't take the low-ball personally.  Just counter-offer at a more reasonable price or reasonable term and see what the Buyer does.  If they were simply 'fishing' for your bottom line price, then they will know that you are not biting.  Other times, it can happen if the Seller is in a multiple offer position.  He accepts or counters the best one and allows the others to lapse. Once the contract is accepted by both parties, signed and delivered to both parties, you have a BINDING AGREEMENT! This means that both Buyer and Seller are legally and contractually obligated to fulfill the terms of the contract they've just signed. For more on the Binding Agreement, continue to the next page!

Home Inspection:  This is probably the most stressful and contentious part of the Purchase Process for both the Buyers and Sellers.  In the couple of years since the introduction of "Right to Terminate" option in the GAR Purchase & Sale Agreement, it can still be confusing to a lot of people.  Today, it's now called the "Subject to Due Diligence." Those of you in other states or those of you involved in commercial real estate are probably already familiar with this concept.  At first glance, it sounds like you're holding your home off the market for a given number of days for no good reason since the Buyer can walk away for any reason at all.  There doesn't appear to be much benefit to the Seller.  But this isn't so!  Here's how it can work in a nutshell... In a traditional Purchase & Sale process, the buyer would request, say, 10 days to inspect your house and then provide 4 more days after that to resolve any requests for repairs.  Once that's done, the two parties remove the home inspection contingency and everything is set towards closing... But what if the Buyer was having second thoughts on buying your house?  It happens, you know.  It happens a lot.  So what does this buyer with cold feet do?  They rely on this Home Inspection to provide them a way out... so they nitpick on the home inspection, often times asking a home inspector to find every little thing wrong with your home.  They submit an unreasonable request for repairs to you and wait for you to balk - which you will do because we're all human and that's just what humans do...right?  As soon as that happens, the Buyers walk happily away from the contract leaving you holding the bag.  Then, here's the real kicker.... now that this 'nitpicked' home inspection has been conducted, you now must disclose all this in a revised Seller's Disclosure (remember that from the Listing Agreement?) and you are now going to be permanently penalized because the first Buyer wanted to walk. Now, here's the scenario from the "Due Diligence" standpoint.  In this clause, the Buyer requests a certain amount of days in which to inspect, poke and prod, measure, analyze and anything else they want to do.  Let's say 10 days. They also have the right to request any repairs the Home Inspector may find.  If you cannot mutually agree on a resolution of the Buyer's request, then, within the 10 days, the Buyer can terminate the contract.  But!  If the 10 days pass and nothing is done, all contingencies are removed and nothing stands in the way to closing. So what's so great about that?  Well, essentially, this arrangement brings more honesty to the negotiation table.  Rather than go to extreme measures (at your expense) to get out of the contract, the Buyers can simply walk.  So the home inspection and any other points raised will tend to be more reasonable and truthful.   This also tends to reduce the time period during which to get these issues resolved rather than dragging it out for weeks.  It's a very simple, clean and effective way to address issues with your home. Statistics from other states using this same clause reveals that contracts entered into under the "Due Diligence" system have a higher rate of closing once the free look period has passed than in the traditional method.  It is also favored by both Buyers and Sellers as the primary way to address the home inspection issue. If you're still unsure how this new system works, please talk with a REALTOR® or give me a call and I'll be happy to explain it further!