ABA Family Legal Guide

Buying and Selling a Home

The Steps of Buying and Selling a Home

Making an Offer: The Purchase Contract

How do I begin negotiations to buy a home?

Negotiations are handled in various ways in different parts of the country. Typically, transactions begin with negotiations over price, although other items such as date of possession may also be negotiated. The real estate agent will provide a formal offer form, which will convey the terms of your offer in writing to the seller. Once signed by both parties, the offer becomes a contract.

If you intend to have the home inspected, the offer should include an inspection contingency; if you intend to apply for a mortgage, it should include a mortgage-contingency clause; if your lawyer has not reviewed the form, it should include a lawyer-approval contingency. In other words, it should cover the basics. Remember, once both parties sign this document, it is legally binding.

The offer should specify that it expires if the seller has not accepted it by a specified date. This date may be upon presentation of the offer to the seller or as little as twenty-four hours from the time the seller or the seller's agent receives it. Also, the offer to purchase is usually valid only if both the buyer and the seller sign it within a certain time period. As a general rule, a deposit of perhaps $500 or $1,000, called earnest money, accompanies the offer to purchase. This is refundable if the offer is rejected; however, if the seller accepts the offer but the buyer backs out of the deal, it may be forfeited.

Often this is the start of negotiations. The offer to purchase may be passed back and forth between the buyer and seller before both accept all of the terms. Remember, however, that both parties must initial any changes agreed to during negotiations. Once you have agreed on terms, you will want to arrange for a home inspection and review the document with your lawyer if, as noted above, you included these contingencies in your offer. In most cases, you will not want to apply for a specific loan on the property until the home inspection and lawyer review are completed and satisfactory.

In some areas, the purchase contract will include all provisions of the transaction. In other areas, another document will be drawn up by the buyer or the seller that covers such items as conveyance of title and provision for insurance. In either case, you will want your lawyer to make sure, before you sign, that the final document covers all aspects of the sale.