Real Estate 105 – Making an Offer (Alabama Version)

You have down the basics and now have a property on which you would like to make an offer.

How exciting!!! We know you are likely drowning in information at this point, but we kept this in mind when creating this course. We want you to be able to go back through everything at your own pace when you forget part of the process. It is very likely to happen, we are all human! But now we will get into the meat and potatoes. If you need to remind yourself of definitions, now is the time to revisit Real Estate 101.

Offer? Contract? Agreement? What do all of these really mean and does it matter?

Yes. It is important to know the differences or similarities of these terms. An offer doesn't become and "accepted agreement/contract" until all parties have signed. If any changes were made, all parties are required to sign regardless of the change. It is important to note this because this is the date which all of the timelines agreed to in the contract for inspections.

Speaking of inspections...

Why is it so important to get a home inspection? Simply put, you need to know what you're buying. The state of Alabama only requires sellers to disclose health and safety issues (all homes but have to be known by the seller to be disclosed) or the potential of lead based paint (which only applies to homes built prior to 1979). Alabama does not require seller disclosures to be provided to potential buyers as other states typically do. Once you close on a property, it becomes yours with all faults and defects. These inspections will come back with AT LEAST one item 99.9% of the time. No home is perfect. The major items are what you should consider, not wobbly toilets that can easily be fixed. Potential large cost items such as roofs, HVAC, plumbing, electrical, etc. are what you need to keep in mind when reviewing reports. If you expect to get a perfect home, you'll be disappointed even buying a new construction home. And yes, it is smart to get a home inspection on new construction homes regardless if inspections have been done by the city. You will get a one year builder warranty, but it's best to find the issues that need to be addressed prior to closing if there's anything major. Do you have to get a professional to inspect? No. You don't have to get any inspections done unless required by the lender. You can also inspect it yourself if you are comfortable doing so. Keep in mind, there is a timeline required for inspections and repair requests in the contract. Put those dates on your calendar as soon as the offer turns into a contract. The home inspection is different than WIR, septic inspection, fireplace inspection, well inspection, etc. These may be required for your loan or they may be completed for your peace of mind even if not required by your loan. Inspections are an important factor in decision making, so we wanted to be sure to dedicate a whole section to this topic.

Other things to consider when making an offer….

Who will be on the mortgage? This will need to be the only person on the contract itself. You can add spouses or family to the deed at closing, but they do not have to be included on the sales contract. They will need to sign at closing. If paying cash, you can have everyone that will be on the deed included on the contract.

What purchase price do you have in mind? Have you spoken with your lender yet about what a payment estimate would look like? If not, now would be a great time to stop reading and pick up the phone!

Can you offer earnest money? Though it is not required, most sellers will ask that you put the earnest money up in good faith. If you back out just to back out because of cold feet, they have taken their home off the market and passed by other potential buyers while you had the contract. This means another month's interest payment, utilities, insurance, and taxes for them to consider. Sellers like to see buyers have some "skin in the game."

Does your loan type require anything specific? Do you have to sell another home you're selling before closing on the one you're buying? These are VERY important factors to consider prior to making an offer. They affect the entire process and if everyone isn't prepared up front, it could cause major issues down the line.

How much money do you have at your disposal to be able to put towards all of the expenses you will incur? You might need to consider asking the seller to pay for some items to offset your out of pocket expenses. It doesn't mean they have to say yes, but it's better than agreeing to an obligation you cannot execute.

Do you want a survey? Surveys are not typically required unless there is a previous deed discrepancy in the legal description, or if the property is being divided off of a larger parcel. If the legal description is correct for the title company to use from previous deeds, you could ask for just a boundary marker field survey. This would give you a visual of your lot lines if you plan to install a fence or have plans for the yard and are unsure where your lot lines are.

Do you want owner's title insurance? Refer back to 101 if needed.

Is there a certain deadline you need for closing? Many factors can influence this, but you have to know to be able to write the offer.

Are you going to ask for a home warranty? Refer back to 101 if needed.

Are you buying the home as-is or asking for an inspection? Just because you ask for an inspection does not mean you have to ask the sellers for repairs. It is smart to at least know what you're buying even if you know you plan to do work on the property down the road. That way there are no surprises. If you do not ask for a repair limit, keep in mind this means you're not asking for appraisal required OR home inspection related repairs. If your loan requires repairs, the cost may be on you. If you only ask for appraisal required repairs and the home inspection comes back with repairs you would like fixed, keep in mind you agreed to specific terms in your contract that relate back to this. That is why it is important to think of everything BEFORE submitting your offer. If major unexpected items come back, terms can be renegotiated if your contract is contingent on your satisfaction of inspection results, but keep in mind a failing roof joist is a major issue compared to an interior door that doesn't latch properly.

Do you want a sewer/septic inspection? Sewer inspections are rare but can be done if buyers would like. Septic inspections are very common and are typically around $400-500. Some loans require septic inspections under certain conditions.

Do you want to ask for the seller to pay for a WIR? If not, do you want to have one completed and pay yourself? Typically this is under $100 for the report. This is NOT a bond. Refer back to 101 if needed.

Are there any additional provisions you would like to add to the offer? This may be situation specific, so this is an open ended set of blanks on the contract.

Do you want any items to remain with the property? There will be standard items mentioned in the contract already, but if you're asking for appliances then it is best to note those. Washers/dryers/refrigerators/countertop microwaves do not typically convey if you do not include them in items you wish to remain. This is also a contract involving real property. Your lender will not like it if you include personal items that you want the seller to leave with the home.

Is there anything that needs to be excluded from the sale? Your appraiser would need to know this if it were of importance and gives value to the house. A stand alone hot tub would be an example. This needs to be noted if it is included or excluded from the sale.

Once everything is squared away, you're ready to move into Real Estate 106 – Contract Period. It feels like we've covered everything at this point, but there are still a few things you need to keep in mind. Continue on if you're ready to keep learning, or keep an eye out for our next email! Your next set of course material will be emailed to you once you have an accepted agreement and move into the contract phase. You are welcome to read ahead if you want to get a jump on things!