For first time home buyers, making an offer on your first house can be a scary and intimidating thing and there are many of you out there may not be aware of how the process works. It may seem like you’re signing your life away and there is no way out, but on the contrary there are quite a number of items that the contract is contingent upon. The standard contracts for buying real estate are designed to protect the YOU the buyer. If everyone that put an offer on a house was not allowed to terminate the contract under any circumstances what-so-ever, even if the inspection report revealed the roof was about to cave in, then no one would buy houses because they’d be too horrified to enter into such a strictly binding contract.
Submitting an offer to purchase a home is contingent upon a number of things highlighted below:
Alternative Earnest Money: A pre-determined earnest money amount is usually due within 1 to 3 days after the offer is accepted. If you make an offer on a house and for some reason completely regret the decision the next morning, just don’t submit the earnest money by the Alternative Earnest Money Deadline and there ya go. An unlikely circumstance, but the option exists.
CIC Document Objection: If you are buying a condo or townhome or a house in a Planned Unit Development (PUD), there will most be a HOA (Home Owner’s Association). It is the Seller’s responsibility to provide you with the CIC (Common Interest Community) Docs by the deadline. If you have any objections to any rules or regulations in the CIC Docs, you can object to the documents by the CIC Document Objection Deadline and the contract will be terminated.
Loan Conditions: Prior to submitting an offer, the buyer should work with a lender to determine exactly what loan amount they qualify for. This includes monthly payments, interest rate, terms and conditions. If any of these things are not satisfactory to the you the buyer, you can notify the seller by the Loan Conditions Deadline to terminate the contract. If you do not notify the Seller before the Loan Conditions Deadline, you lose your earnest money.
Appraisal Objection: After your offer is accepted, you have a couple weeks to order an appraisal. If the appraiser determines that the property’s value does not meet or exceed the purchase price, you the buyer must terminate the contract by the Appraisal Objection Deadline. The lender will not even give you a loan if the house appraises for less than the purchase price.
Survey Objection: Although not required and not very common, the buyer can pay for a land survey or Improvement Location Certificate (ILC) to be done on the property. This might be done if the buyer plans to remodel or add on to the existing house. If you the buyer find the survey or ILC to be unsatisfactory for any certain reason, you can terminate the contract by the Survey Objection Deadline.
Inspection Objection: Within a week or so of the offer being accepted, you will get an inspection done by a Certified Home Inspector. If expensive or complicated issues are uncovered, you will put these items in writing on the Inspection Notice form. Some buyers make their lives harder by using every minor defect in the inspection as a way to chip away at the asking price, but this isn’t recommend as it is considered by all sellers to be completely annoying, and could cause the buyer to lose the house altogether. After receiving the Notice Form, the seller may not agree to resolve any issues in which case the contract will automatically terminate shortly after. They may agree to only do a portion of what you requested. If this is unsatisfactory to you, you can either counter their proposal or terminate the contract at this point. And more importantly, if they do not agree to fix anything at all, you can definitely terminate the contract at that point as well. It is recommended you get estimates for the items you want fixed so that you can try to negotiate a lower asking price since you will need to pay for those items yourself. But keep in mind the contract terminates 24 hours after the Inspection Resolution deadline passes if no agreement has been made.
Some buyers may insist on getting home inspections before even making an offer on a house, and they might end up losing out on the house all together. Just remember that it is currently a SELLER’S MARKET and INVENTORY IS LOW, meaning that there are multiple offers being made on homes again. So if you’re serious about a buying a house, get your offer in and then get your inspections and questions answered. As mentioned above, your offer is contingent upon a number of things so don’t be scared.
*Refer to the Contract to Buy and Sell Real Estate and Colorado Real Estate Commission for all contract deadlines and conditions.