How to Write an Offer on a House

The Offer Process & What to Expect

Mariko Baerg Realtor Headshot
Written By: Mariko Baerg, REALTOR of Bridgewell Real Estate Group
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Regardless of how many times you’ve bought or sold real estate, the offer/subject removal process is often times the most stressful part of buying a home. Between bidding wars, subject free offers, your own emotions, and the seller’s motives, it all makes for a very busy, fast-paced, and overwhelming process. So, to help you out, here’s everything you need to know about making an offer to make the process just a little more familiar, and hopefully calm those nerves.

The Agreement (Contract) of Purchase and Sale: How to write an offer on a house

There’s a ton of paperwork to sign

  • You’ll need to work out the price, terms, dates, subjects, included items, and the deposit among other things with your realtor. This will be done in the contract of purchase and sale. You may also need to sign the property disclosure statement and the title search up front as well.
    • If your offer is accepted, you’ll be signing or completing the disclosure of remuneration, a working with a realtor document, the FINTRAC document, and the addendum to the contract, in addition to any bank or notary documents required. Make sure to have your realtor go through these documents both prior to and post having your offer accepted so you understand what you’re signing and feel comfortable.

TERMS

  • Price: the price you are offering.
  • Terms: additions to the contract, like warranting that all appliances will be in working order upon possession, or that the home has never been a marijuana grow-op.
  • Dates: completion date (the day the money and title are transferred), the possession date (the day you move in), and the adjustment date (the day things like property taxes and strata fees are adjusted for by your notary/lawyer).
  • Included items: fridge, stove, dishwasher, microwave, washer, dryer, all drapes and window coverings, and any other agreed items or fixtures.
  • Deposit: amount of money held in trust by the buyer’s brokerage. Typically 5% of the purchase price, forms a part of your down payment. Due within 24 hours of an accepted offer unless otherwise put in the contract. (we always put within 24 hours of subject removal to avoid you losing any money if you do not remove subjects)*** very important

SUBJECTS

  • Would include subjects such as Property Disclosure Statement (PDS), title, financing, strata documents (if applicable), inspection.
  • Property disclosure statement is often reviewed in advance along with the title search prior to making the offer. Make sure to have your realtor incorporate the property disclosure statement and title search in to the contract, given that subjects are removed. This is especially important if you are writing a subject free offer. These documents acknowledge history of the property, including any defects, as well as confirmation of registered owners. You’ll definitely want to choose a realtor that has a deep understanding of the real estate contract and how to write an offer.
  • The inspection: The purpose of the home inspection is to identify any major problems with the house and give you a better idea of what the process (and cost) will be to remediate these issues. The inspector will anticipate upcoming expenses in the next 2,5, or 10 years and onwards which will be required to maintain the general safety and health of the home. In all my years in real estate, I’ve never had an inspection with 0 issues come up – this just isn’t realistic. You’re probably buying a home that’s been lived in, and your new home is not going to be in perfect condition. With that being said, the inspector is a great tool to make sure you know how to maintain your home and what to anticipate so that you can save accordingly.

how to write an offer on a house

The negotiation process and how to set a price

The listing price is just a strategy

Do not freak out if you’re paying $50,000 over asking, and don’t necessarily rejoice if you paid $25,000 under asking. The important thing to look at is what previous comparable homes sold for recently. The listing price is just a strategy, and a number of sellers price well below market value to generate a multiple offer scenario. So, just because they listed that 2 bed 2 bath condo at $298,000 doesn’t mean they’re going to sell for that price. Have your realtor review the comparables with you to determine an appropriate strategy upon the offer presentation date.

If you’re in a bidding war …

Make sure to find out from your mortgage broker your ceiling price based on the specific property that you are bidding on. They will need to assess the strata fees and the property taxes to give you an accurate number.

Irrevocable period: time that the seller has to give you an answer by

Your offer expires after a certain amount of time – this is called the irrevocable period. All negotiations, including counter offers (if any), need to be completed by this time unless otherwise agreed to, or else your offer is no longer valid. The irrevocable period varies, but in a hot market like Vancouver it can open only be a few hours or until 11PM. Therefore the whole process happens extremely quickly once the original offer is signed and submitted. With that being said, we’ve seen everything from 1 hour to 72 hours.

Countering: previous is void 

It is extremely important to understand that every time that you or the seller creates a counter offer, the previous offer is no longer in effect. A number of buyers and sellers make the mistake of countering an offer without really thinking about the consequeneces, the opposite party rejects it, they try to go back to the previous offer, and realize that’s not how it works. Then the whole negotiation falls apart because one party was just trying to strong arm the other. Before you counter, really think to yourself if it’s worth potentially losing the entire deal. Try to think from the opposing party’s perspective, and rationally reach a conclusion whether where you’re at is acceptable or not.

Try to figure out how many offers the seller has

If the seller has no offers other than yours, or has 7 other offers, the price you offer is going to be much different. If you know it’s a multiple offer scenario, it is always helpful to wait approximately 15-30 minutes prior to the offer submission deadline to get a final number on the amount of offer’s the seller has received.

How the seller can respond to your offer

The seller can do three things: 

  1. Accept the offer as is
    They agree to the terms and conditions that you’ve offered originally and signed off on it. No countering – congrats!
  2. Counter your offer
    Sign back the offer with different proposed terms (for example, they want different dates, or exclude certain items, or want a higher asking price). This now becomes a counter-offer from the Seller back to the Buyer. This is the most common scenario–usually about 2 or 3 counter offers are negotiated until hopefully a mutual agreement is settled. Every change that is made needs to be initialled off on in order for the contract to be valid, and it all needs to be done before the expiry of the contract. (i.e. irrevocable period)
  3. Decline your offer
    If your offer is a complete low ball, with no other comparables to stand on, and the seller finds your offer completely unacceptable, they have the option of simply declining it. Meaning, they won’t even bother to negotiate with you. We’ve seen this happen before because If your offer is totally unacceptable to the Seller, they have the option of simply declining it–no negotiation, no anything. We’ve seen Sellers decline low-ball first offers, and we’ve seen offers declined mid-negotiation.

Strategies to Bring The Price Down

Write a letter to the sellers telling them how much you love their home

Some sellers are really emotionally attached to their home. Maybe they’re not ready to move, but they’re being re-located for their job, or there’s a family situation, or they need the money for personal or business reasons. You don’t always know the scenario. Another way to have an upper hand is to write the sellers an “I’m so in love with your home letter” highlighting the reasons why you see yourself living in their home and that you can really tell they put a lot of love and care in to it.

Have your realtor present in person (given the listing realtor approves) Although a number of offers are emailed to the listing realtor from the buyer’s realtor, there is most certainly a benefit of presenting in person. Your offer will be communicated more clearly and with more emotion, and all of the benefits can highlighted to ensure that nothing is missed. By presenting in person, your realtor is able to pick up on the body language of the seller’s as they go through your offer point by point, to hopefully bring back intel for negotiation purposes if and when the seller counters your offer.

Subject free This is a “put your money where your mouth is” tactic and in our experience is very aggressive and in turn successful. If you can remove the financing subject it is as good as cash, just don’t do it unless you’re sure that you can qualify for a mortgage. Talk to your mortgage broker or bank, make sure you’re well within your limit, send them the feature sheet for the property, confirm the property is not a grow op, have them review/pre-appraise the property and run the comparables, and then get the approval. Make sure your mortgage broker and your realtor work actively together if this is the route you’re going to go, as the realtor will most likely be the one performing the pre-appraisal.

Shorten your subject removal period If you are going to keep the financing clause in for safety reasons (and we get that, you never know what will go wrong), try to shorten your subject removal period. Depending on how fast your mortgage broker works and whether you’ve already been pre-approved, your financing should only take a day or two, so try to shorten your subject removal period to 4-5 days away to show your confidence in your ability to obtain a mortgage.

Have the deposit ready to go – take a copy of the deposit, increase it from the standard Another strategy that may help to win an offer is to increase your deposit amount to 10 or 15% which will show that you’re confident in your offer. Have the deposit ready to go, and bring it to the offer presentation to show that you’re prepared and motivated. You don’t necessarily need to give it to them until the deal is firm and subjects are removed, but at least show you have it ready.

Try to find out the sellers motivation and be flexible with your terms The majority of seller’s number one priority will be netting the most amount of profit, thus putting the most money in their pocket at the end of the day. With that being said, many sellers are also buyers, and they’ve bought their new home already and have “perfect dates” in mind to match their purchase. Have your realtor ask the listing agent what the seller’s preferred dates are. Try to find out their motivation for selling, or if they have to sell, or if they’ve already bought. If you’re having a tough time pulling it out of the realtor (the sellers may have asked them not to disclose for negotiation reasons), then your best bet will be to leave the dates blank and have the sellers fill them in. The difference between 1st and 2nd place for price may be $5000 or it may be $50, you don’t know. If you’re in second place by a few dollars but your dates are more flexible, the sellers may be willing to pay for the cost of convenience. Are there other terms the seller wants? Leave it to them and try to be as flexible as possible.

Have a pre-approval letter to show that you’re solid for financing

A pre-approval letter will show that you’ve talked to the lender, they’ve received your documents (i.e. income), and that they don’t foresee any issues arising with regards to financing and subject removal. Essentially it shows that you are ready and able to buy the home, and will assure the sellers that you are a reliable buyer that has actively taken the steps before the offer to get qualified.

Subject Removal

What is subject removal?

The subject removal period works as a great safety net. It includes “subjects” which are essentially conditions that must be met in order for the deal to become official. These subjects might include: subject to financing, inspection, property disclosure statement, title search, or strata documents – to name a few. These are listed in the terms and conditions section of the contract of purchase and sale. Subject removal period is typically 7 days long (i.e. if you put an offer in Monday, subject removal would be due by the following Monday) and allows you to organize all of your affairs, such as making sure your financing is in place and an inspection on the property or building has been done.

Decisions, decisions – get your emotions out of the way and think logically

The subject removal process is often the most stressful time in the real estate transaction. You’ll be asked for a ton of documents and additional confirmation from your mortgage broker or bank (if you haven’t been pre-approved already), you’ll have to look at a number of documents related to the property and make big decisions. (i.e the PDS and title, strata documents, depreciation reports, inspection reports, etc.) It is stressful for every one, including your realtor and the listing agent. But stay strong – acknowledge that these emotions come up for every one, but this is the MOST important time to stay level headed and think rationally. Every time you start to freak out, take a deep breath, and remember that feeling overwhelmed is normal and this happens to everyone. Try to calm down or call your realtor for extra assurance.

Negotiating during subject removal

When you begin a re-negotiation, the seller still has the right to say no. For example, let’s say the roof has a leak and it absolutely needs to be re-roofed. You go to the seller and say that you need to reduce the price by $20,000 as this is a necessary expense. The seller says no. Well, now you have to revisit your budget and decide whether you still want the home, or whether you’re going to walk away. Thus, whenever you’re adding terms or changing the price, the seller still needs to agree.

Can I still look for homes during subject removal?

The purpose of subject removal is to remove subjects, and this should be your sole focus during the time. Legally, if you do not remove subjects, you have to provide a reason as to why you did not remove that is directly related to the subjects initially written in the contract. “Found another home” doesn’t relate in any way to subject removal, meaning you could run in to some legal trouble if the sellers discover the real reason for you backing out and call you out on it. At the end of the day, if you’re still looking for other homes then you probably don’t like your accepted offer home enough to really live in it.  Looking around is not really helping your scenario so we recommend that you put your time where it’s most needed: subject removal.

I want to remove subjects, I just need a bit more time – subject removal extensions

Asking for an extension is the same as re-negotiating the contract. You can ask for an extension, but that doesn’t mean it’s guaranteed. In order to extend a deal, the seller(s) and buyer(s) both have to sign an addendum to the contract stating that the subject removal date has been extended, with the date included. The seller does have the option to reject the buyer’s request to extend, and in this case the buyer can choose to remove the subjects by the date and time originally agreed to despite previous reasons to ask for an extension, or the buyer does not remove subjects and the deal collapses. Again, keep in mind that if you are not going to remove subjects then the reason you give the sellers has to relate directly to the inability to complete the subject(s), or dissatisfaction with the subject(s), otherwise you are at risk for being sued.

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Making an offer on a house or condo is a mix of excitement and stress. We’re here to help reduce the stress by prepping you for potential scenarios beforehand, talking through your emotions, helping you to decide on the best strategy, and advising you of your options and the possible outcomes of each road you may take. It is quite possibly the biggest purchase you will ever make, and is of course a huge milestone in your life, but just remember – we do this every day! We know how to write an offer, and can help you feel comfortable with it too! Our familiarities, education, and experience with this process will help to make you that much stronger, and essentially, ensure you get in to your dream home!

If you have any questions about part two of our series, please feel free to contact us by text, emaildirect message, or just by calling us.

Make the home buying process straight-forward from the start. Talk to one of our realtors today.

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