Crafting Your Home Purchase Offer

The most important factor to getting what you want

… is to know what you want
… and to prioritize if you have a list of wants.

Your home buying offer … a few home sale/purchase deals are rather simple transactions requiring only the most basic agent knowledge to establish and manage to closing. There are far more toward the other end of the spectrum of complexity … sometimes requiring genuine “artist-type” Realtors® on both sides to establish the agreement, and then the patience of a saint by both to get it closed.

The terms and conditions of the Purchase contract are definitely a factor in determining where the transaction fits in the spectrum of difficulty, but the BINSR seems to be the more common source of exceptionally difficult issues. Click this link for a comprehensive discussion of this very complex process.

For the best chance for success, you should put yourself in the seller’s shoes and consider his/her reaction to every aspect of the contract. The discussions herein are largely about anticipating that reaction and “crafting” a contract that gets the results that both you and the seller find acceptable. Win-win is the best situation.

Constructive  vs.  Adversarial Agents

By the way, the more difficult “deals” are not possible with adversarial agents. In fact, there is never a need for adversarial agents. A client’s best interests are far better served when agents are entirely constructive and seeking the best possible win-win situation. If you have an agent who seems always “at war” with the other side, you need a different agent.

The Offer

Your “offer” to purchase residential real estate will be a complete and fully executed Purchase-Contract. Anything else is just “talk”.

This form is appropriately biased in favor of the buyer, who has many escape contingencies while the seller has none, but is designed to be fair considering the property knowledge of each party. But how this form is filled in can result in an agreement that is definitely not “fair”.

The seller could simply “accept” your offer, but in the bulk of cases that will not happen. The offer will be just the first step in negotiations.

Below is a list of just a few of the issues that may be subject to “negotiation”. These are discussed following.

Close Date
Condition & Features
Earnest Money Deposit
 Financing Impacts
Pre-Qualification Issues

What does the seller want?

The price, or close, of course, but there are always other factors. Below is a list of near-universal seller wants, but the best approach is to ask the listing agent about the seller’s priorities even before starting to write an offer. For negotiating reasons, the list agent might not be entirely candid, but there will always be at least some hints.

  • Low probability of deal “falling out” and wasting the marketing time in escrow
  • Offer reflecting a “motivated” buyer
  • Price
  • Close date that matches his/her needs
  •  Offer reflecting the MLS listing for terms, conditions, personal property, etc.
  • Simple financing contingency – cash is King
  • Low probability of repair requirements
  • Higher net cash from sale


Contract Contingencies – Basic

What if some aspect of the escrow/closing process does not go as anticipated? Of course, you would want to cancel the transaction without penalty. Provisions within the contract allowing for this are called “contingencies”, which protect you in case you cannot, or choose not, to complete purchase of the property. If you cancel a contract without having an applicable contingency, you could find yourself forfeiting your earnest money deposit, or worse.

There are several “basic” contingencies written into the AAR contract, such as related to financing, physical condition of the property, restrictions on use or appearance, and title/ownership issues.

For example, if during escrow you learn that you cannot get acceptable financing, or the property is not in good condition, or there are restrictions prohibiting the changes you want to make to the property, you could cancel the sale and not lose your earnest deposit.

Contract Contingencies – Unique

Unique contingencies can be written into the contract. For a common example, you may be relocating and want to set up the purchase the next home before completing the sale of your current home, so as not to be “homeless” but you definitely do not want two homes and two mortgage payments. You would make closing of your current home sale a condition to completion of your purchase offer. Unless your current home is a “pending” sale and well into the escrow process, the seller is not likely to accept your offer with this contingency. In fact, most “unique” contingencies are likely to not be well received.

Earnest Money Deposit – EMD

The money the buyer has “at risk” during the escrow process … but how much risk is there, really?

Not much! The numerous contingencies provide buyer many penalty-free exits for the first 10 days after Contract acceptance. The contingencies regarding title insurance and the HOA can possibly extend even well beyond that. The amount of the earnest money deposit is more for perceptions than for actual commitment, but sellers are usually favorably impressed by a greater amount here.

Eventually, when the transaction closes, the earnest deposit becomes part of the down payment for a purchase with financing. During a hot market there may be multiple offers on the property that interests you. A large deposit may impress a seller enough so they will accept your offer instead of someone else’s. With a cash offer, 5% of the price is about the minimum, and 10% is more common.

Although significant problems are the exception and not the rule, they do occur. “Just in case” there is a nasty or prolonged dispute between you and the seller, the less money you have tied up in the EMD, the better.

Since the circumstances of the transaction and the other aspects of your offer have such an important bearing here, let your buyer’s agent be your guide for what your earnest deposit should be.

Closing Date – Close of Escrow – COE

For many possible reasons, it is NOT true that sellers always want to close ASAP. This is one of the most important questions your buyer’s agent should ask of the listing agent prior to writing the offer. If possible and convenient, specify for COE the exact date the seller wants. This is often an easy and effective way to get the seller headed toward every “yes” that you want.

But let’s back up … what is COE? As specified in the AAR purchase contract, “… COE shall occur when the deed is recorded at the appropriate county recorder’s office.” … not when docs are signed, not when money is delivered … both of which must have occurred, of course, prior to the recording event … which is done electronically by the escrow service. At the instant the deed is recorded, the buyer “owns” the property. In most cases, the buyer gets possession of the property at COE, and this is, by far, best, as discussed below regarding “Possession”.

But there may be good reasons to try to get a specific COE. For example, if you are renting and need to give the landlord notice that you are moving out, you may want to own the home prior to your rental move-out date to allow some flexibility to ensure you are not homeless and to allow for a more casual move.


“Possession” is the right of exclusive access irrespective of physical occupancy. It is far best if the seller is moved out and the buyer has yet to move in as of COE, so that “possession” is effective simultaneous to the COE event. There are some reasons why a seller may want post-COE-possession, or you may want pre-COE-possession. Both of these are very bad situations. As stated in the AAR contract, “Brokers recommend that the parties seek counsel from insurance, legal, tax and accounting professionals regarding the risks of pre-possession and post-possession …”.

Financing Impacts

There are many “types” of financing … conventional, FHA, VA, and seller carryback just to name a few. Within the AAR contract, you specify the type of financing you intend to acquire for the purchase.

A “conventional” loan is one for which the first-lien amount is 80% or less of the purchase price. This type of loan with this amount of down payment usually involves less strenuous requirements, so is usually better received by a seller.

VA and FHA loans impose greater financial and performance obligations on the seller and are not so well received by a seller. For VA loans buyers are prohibited from paying certain types of fees that are often charged by lenders, escrow companies, settlement agents, and title companies. They are called “non-allowable” fees. They get charged anyway, but as the buyer, you are “not allowed” to pay them. The result is that the seller usually ends up paying them instead of you.

Most of these “non-allowable” fees come from your lender. By the time you are making an offer you should have already been pre-qualified by a loan officer, so you should know what the lender’s non-allowable fees will be. Your agent can also get the info for the amounts of non-allowable fees to be charged by the escrow/title insurance company.

Also, appraisals for FHA and VA loans are a more detailed than for conventional loans. The appraisers are required to perform a minimum sort of inspection, as well as evaluate the market value of the property, and sometimes specify that repairs are required prior to COE and funding of the loan. Such repair items are very likely to be also reported by a professional inspection, but these reports are usually not provided to the lender and the repairs are subject to negotiation between you and the seller.

Because of the additional fees and appraisal issues, if you specify a VA or FHA loan as the type of financing, the seller will likely be less willing to negotiate on the price.

If you are limited on cash or beyond the limits for qualifying ratios, you could specify that the seller is to pay all or a portion of your closing costs, or buy down your interest rate for the first year or two, or even that the seller “carry back” as a second mortgage part of the cost of the home. In cases where the seller does not need all the proceeds from the sale, this is a possibility. The advantage of a carry-back to you is not only less cash for the purchase, but you may also be able to avoid paying mortgage insurance.

Whenever you ask for incentives such as these, you will probably find the seller less willing to negotiate on price, or more likely to reject the offer entirely. After all, what you are really asking for is to have the seller to give you some money to help you buy their house. You get the benefit of paying less cash in the beginning by paying a bit more in the long run.

Financing Terms Impacts

Since your offer is contingent on you obtaining a loan to finance the purchase, the seller is going to carefully consider the details you specify for that loan. A greater down payment percentage usually means the loan is more likely to be approved. A higher interest rate limit relative to current prevailing rates means there is less probability that rates will increase beyond that limit. An adjustable rate loan is usually has more flexibility for a change in conditions that a fixed rate loan.

Condition & Features

Sellers universally want to sell the property “as-is”. You want the property to be perfect. Usually, neither of these conditions apply, especially the “perfect” part. Even if the seller is willing to make “repairs”, these are usually just to make the structure, systems and/or equipment properly functional. A property that is generally in poor condition is not going to be much improved during escrow. The other extreme is a property in exceptionally good condition. Your offer price should reflect the condition of the property relative to other properties in the area.

Homes directly next door, having exactly the floor plan, being exactly the same age, in comparable condition and having exactly the same “location” factors (neither being a corner lot, for example) can have a true market value different by 25%, or more. A pool, tile roof, upgraded systems, granite counters, upgraded flooring, and larger lot size are just some of the features that would produce a very significant difference in value to otherwise near-identical properties. Your offer should reflect the presence or absence of such features relative to previous “comparable” sales of other home in the community.


You may be tempted to forgo inspections to make your offer more attractive … a very bad idea. Even if you have specified in the contract that you are willing to purchase the property as-is, you should still have a professional physical inspection performed, and you should inspect HOA and title commitment documents, and any other inspections that appear warranted … to find out if the “as-is” condition is acceptable to you. If not, cancel the transaction.


For a financed purchase, most sellers will require that you submit an AAR Pre-Qualification form prepared by the lender of your choice to indicate the type of loan that you have applied for and, most important, the steps the lender has taken to determine that you are qualified to make the purchase. The boxes checked on this form can reflect minimum investigation by the lender – not good. Even if the “Pre-qual” reflects extensive investigation, a good listing agent is going to call that lender and ask some questions to get a “feel” for the true quality and extensiveness of that work. A weak “pre-qual” almost assures a declined offer. Have your lender do the work and be prepared to give you a solid, honest report.


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