Overview of the Home Buying Process & The Legal Steps
Once you have found the home of your choice, you will want to make an offer to the seller. This is often just the first step in the process of crafting the agreement for the purchase of the home, which can involve many terms and contingencies. Before you make an offer on a home, moreover, you should make sure that the house passes initial inspections without raising red flags. Assuming that this phase unfolds smoothly, this is an overview of what to expect in negotiating your contract with the seller and completing the purchase.
Making an Offer
Either your agent or you probably will prepare the offer, although some states require an attorney to handle it. It often contains many details beyond the price, such as the contingencies that must be satisfied to complete the deal and who is responsible for paying certain fees. You will want to provide a suggestion for how you will resolve disputes with the seller. Some buyers will provide an earnest money deposit to show good faith.
In some states, however, the buyer will simply communicate to the seller that they want to buy the house, and then the seller may write the first draft of the agreement. You should carefully review this draft and make sure that you understand its terms.
If the initial written offer comes from the buyer’s side, your agent will probably present it to the seller’s agent in person. They will emphasize the strengths of the offer and explain how its advantages outweigh any disadvantages or terms that the seller may have wanted that may be absent from the agreement.
Response by the Seller
The seller has three options when they receive an offer from a potential buyer. They can accept the offer, they can reject it, or they can make a counteroffer, which is an offer to sell the home for terms that are different from those in the offer. Depending on the state, you may have a contract already if the seller accepts your offer in writing. If the acceptance is verbal or consists of only an agreement to negotiate, this is not yet a purchase and sale agreement. Nothing is finalized until both sides have signed the purchase and sale agreement.
Most commonly, when a seller makes a counteroffer, they are seeking a higher price. Counteroffers are often the start of a negotiation period, but they usually come with an expiration date that you should make sure to heed. Some counteroffers are written from scratch, while others are written as revisions to the buyer’s offer. If several buyers are submitting offers simultaneously, the seller can respond with counteroffers to each of them. You should feel free to reject a counteroffer if you are uncomfortable with it. If you choose to counter the counteroffer with another offer of your own, you can continue to exchange counteroffers with the seller, each with its own expiration date. Negotiations will continue until one side accepts the other’s offer in its entirety or until the most recent offer expires.
Finalizing the Purchase
If you reach an understanding with the seller, you will finalize the purchase agreement and prepare for closing. However, if any contingencies in the contract are not met, the deal will not go through, and possession will not be transferred unless a new arrangement is made to resolve the contingencies. If the closing does proceed smoothly, you will want to record your title to the property in a deed to prevent future disputes. (If disputes over title arise based on misrepresentations by the seller, they likely will be accountable for resolving them, as provided in the purchase agreement.)
