You’ve been pre-qualified, searched for homes and found what you believe could be the home of your dreams. It’s time to act – it’s time to make an offer.
In New Jersey, Realtors prepare offers via a Purchase Agreement. The Purchase Agreement is prepared by the Buyer’s agent, then submitted to the seller via the Listing Agent.
The key components of an offer are:
- The offer price – how much you are offering to purchase the home
- The earnest money deposit – how much you are putting in escrow to take the property off the market
- The down payment and mortgage amount (this will vary based on the type of loan)
- The inspection contingencies
- The closing date
Let’s start with the offer price. How much should you offer? That is not necessarily based on what the property is listed for. In most markets, it is common for there to be a negotiation between the seller and buyer. The list price, or asking price, is usually an indicator of what the home is worth, but not all homes are listed properly. Some homes are overpriced, and some are underpriced. So, it’s important to work with your agent to review comparable sales data to help you value the home and make your offer.
The earnest money deposit is an actual check you will need to bring with you when you prepare the offer. The deposit will be given to the buyer’s agent and made payable to the Realtor’s trust account. If the offer is accepted, the check will be deposited, and will be applied as part of your down payment at closing. If the offer is rejected, the earnest money will be returned. The earnest money deposit will often be broken into two parts; one at the signing of the purchase agreement, and a second, more substantial deposit upon some other milestone (i.e. offer acceptance, conclusion of attorney review, etc.).
The down payment and mortgage amount will also be written into your offer. You should have the percentage you are putting down calculated by now based on the loan type. For example, if you are using an FHA loan, you are putting down at least 3.5% and financing the remainder. A conventional mortgage would require 20% down. This information would also be available in your pre-qualification letter.
The inspection contingencies refer to the buyer’s rights to a home inspection, and when they must be completed. Generally home inspections occur immediately after attorney review is concluded, up to about 10 days later. A quick inspection benefits all parties, but the Buyer may want a longer inspection period to ensure they are able to book the inspector of their choice.
Closing date is the date the settlement will occur on. This is the day that you will become the new owner of the home! You will sign all your mortgage documents, receive keys and title and a deed to the property and become the owner of record. You should speak with your loan officer about this date ahead of time. Generally closings will occur within about 30-60 days of signing a contract.
Keep in mind, all of the dates set forth in the offer will run from the time that attorney review is concluded. Some dates may be pushed up, some may slide. It is important to stay focused on your milestone dates while also being flexible within reason.