Buying a Home

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The Home Buying Process

A step-by-step guide to negotiating the sale.

Once you've found the home you want to buy, you'll make what's commonly known as an offer to purchase. This is a written document

stating the price you're willing to pay for the property, as well as any contingencies, or conditions, you want to include. Some common contingencies are that the offer is subject to a satisfactory termite inspection and radon test, the buyer's ability to obtain financing, and the buyer's ability to sell his or her current home. The buyer attaches a check for an amount of money (usually from $100 to $500) that shows the sincerity of the offer and delivers it to the seller. The offer gives the seller a time limit of a up to a few days to consider the offer. If the seller doesn't accept the offer within this time limit, it expires, and the buyer's check is returned to him.

The seller has the choice of accepting the offer, rejecting it, or making a counteroffer. For example, a seller's counteroffer to a buyer's offer of $150,000 for the house in question might be $170,000, rather than the $180,000 the house was listed at. The buyer then has the choice of accepting or rejecting the counteroffer or making another counteroffer. (In this example, perhaps by raising the offer to $155,000.) This step may be repeated several times in the process of arriving at a final agreement.

Once an agreement is reached, buyer and seller will execute what's known as a binder. The binder is a document that locks in the agreed upon price and keeps the seller from selling the property to anyone else. It's also accompanied by an earnest money deposit, which serves as the seller's consideration for taking the house off the market.

The binder is not the final contract for the transfer of ownership of the property. Most binders contain a provision that requires the parties to sign a contract for sale within a specified period of time, or cancel the agreement. If the contract isn't drawn up on schedule, the buyer is entitled to the return of his earnest money deposit.

After the binder is signed, the actual real estate purchase contract is drawn up. In this contract, all of the details of the sale are included, as well as the contingencies that must be met before the sale is completed. For example, if the buyer requires a termite inspection, the contract should provide that the seller will make any necessary repairs revealed by the inspection up to a specified dollar amount. If the damage exceeds this amount, the buyer may have the option of making the extra repairs or backing out of the contract.

The contract should also contain a clause requiring that the earnest money deposit be placed in an escrow account. With an escrow account, the earnest money isn't delivered to the seller until all the provisions of the contract are met and the escrow holder (usually a bank) receives notice that the deal is complete and the money can be released. Never give an earnest money deposit directly to the seller, since you may have to file suit to get it returned if your deal goes sour.

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