What every good offers needs
Sam Schneiderman, broker owner of Great Boston Home Team is our Monday guy. Today he discusses how to make an offer a good offer.
Whether you’re buying or selling, you probably want an offer that binds the other party to the deal.
Massachusetts real estate contracts must be written and signed by both buyer(s) and seller(s) to be enforceable. Otherwise, buyers could back out for any reason or sellers could sell the property to someone else with a better offer.
Since the offer is used as the basis for the Purchase & Sale agreement, a good offer contains all of the ingredients needed to keep the transaction on track through closing without exposing either side to unnecessary risks.
The basics of a good offer are:
1. Property identification.
2. Price to be paid.
3. Time that the transaction will take place.
4. Place that the transaction will take place.
5. Consideration being paid to bind the agreement.
A basic offer or Purchase & Sale agreement could be as simple as:
I, Sam Schneiderman (include Sam’s address), hereby agree to sell 123 Main Street, Anytown, MA to Rona Fischman (include Rona’s address) for the sum of one hundred thousand dollars. The delivery of the deed will take place at 3pm on June 1, 2011 at the Moon County Registry of Deeds. A deposit of $100 is paid herewith to bind this offer.
I’ve been advised that if any of those items are missing, the offer would be unenforceable.
While a basic offer might work for a cash deal, it may not address all of the buyer’s or seller’s other concerns. If they are not addressed in the offer, the buyer or seller might not get a second chance to add them later.
If the buyer wants to inspect the property and get out of the deal if the property has unexpected flaws, the buyer would need to add an inspection clause with those details. If the seller wants to clarify how long she’ll keep the property off the market for the buyer to complete inspections, a deadline for the inspections must be added.
If the buyer needs financing and wants to be able to back out if he can’t get it, a financing clause should be added to protect the buyer. Since the seller wants to know how long she will keep the property off the market for the buyer to get financing, a deadline needs to be included. (That deadline should allow the lender enough time to process the loan and issue a commitment. Buyer’s or their agents need to know that before they write their financing clause.)
If the buyer wants his deposit back if he backs out, that needs to be in the agreement. The same holds true for any other concerns that either party may have.
Sloppy offers or Purchase & Sale agreements that don’t address all concerns expose buyer’s deposits to possible loss and expose sellers to the possibility that the sale may not close. At the very least, the parties will run up legal fees while figuring out what went wrong.
