The Basics of Making an Offer

A written proposal is the foundation of a real estate transaction. Oral promises are not legally enforceable when it comes to the sale of real estate. Therefore, you need to enter into a written contract, which starts with your written proposal. This proposal not only specifies price, but also all the terms and conditions of the purchase. For example, if the seller offered to help with $2,000 toward your closing costs, make sure that’s included in your written offer and in the final completed contract, or you won’t have grounds for collecting it later.

REALTORS ^® have standard purchase agreements and will help you put together a written, legally binding offer that reflects the price as well as terms and conditions that are right for you.   Your REALTOR ^® will guide you through the offer, counteroffer, negotiating and closing processes. In many states certain disclosure laws must be complied with by the seller, and the REALTOR ^® will ensure that this takes place.

If you are not working with a real estate agent, keep in mind that you must draw up a purchase offer or contract that conforms to state and local laws and that incorporates all of the key items. State laws vary, and certain provisions may be required in your area.

After the offer is drawn up and signed, it is usually presented to the seller by your real estate agent, by the seller’s real estate agent, if that’s a different agent, or often by the two together. In a few areas, sales contracts are drawn up by the parties’ lawyers.

What is in an Offer?

The purchase offer you submit, if accepted as it stands, will become a binding sales contract (known in some areas as a purchase agreement, earnest money agreement or deposit receipt). So it’s important that the purchase offer contains all the items that will serve as a “blueprint for the final sale.” The purchase offer includes items such as:

• address and the legal description of the property
• sale price
• terms: for example, all cash or subject to you obtaining a mortgage for a given amount
• seller’s promise to provide clear title (ownership)
• target date for closing (the actual sale)
• amount of earnest money deposit accompanying the offer, whether it’s a check, cash or promissory note, and how it’s to be returned to you if the offer is rejected – or kept as damages if you later back out for no good reason
• method by which real estate taxes, rents, fuel, water bills and utilities payments are to be adjusted (prorated) between buyer and seller
• provisions about who will pay for title insurance, survey, termite inspections, etc.
• type of deed to be given
• other requirements specific to your state, which might include a chance for an attorney to review the contract, disclosure of specific environmental hazards or other state-specific clauses
• a provision that the buyer may make a last-minute walkthrough inspection of the property just before the closing
• a time limit (preferably short) after which the offer will expire
• contingencies, which are an extremely important matter and that are discussed in detail below

Contingencies – œSubject to Clauses

If your offer says “this offer is contingent upon (or subject to) a certain event,” you’re saying that you will only go through with the purchase if that event occurs. Here are two common contingencies contained in a purchase offer:

• The buyer obtaining specific financing from a lending institution: If the loan can’t be found, the buyer won’t be bound by the contract.
• A satisfactory report by a home inspector: for example, “within 10 days after acceptance of the offer.” The seller must wait 10 days to see if the inspector submits a report that satisfies the buyer. If not, the contract would become void. Again, make sure that all the details are explicitly stated in the written contract.

Negotiating Tips

You’re in a strong bargaining position, that is, you look particularly welcome to a seller, if:

• you’re an all-cash buyer
• you’re already have a preapproved mortgage and you don’t have a present house that has to be sold before you can afford to buy
• you™re able to close and take possession at a time that is especially convenient for the seller

In these circumstances, you may be able to negotiate some discount from the listed price.

On the other hand, in a “hot” seller’s market, if the perfect house comes on the market, you may want to offer the list price (or more) to beat out other early offers.

It’s very helpful to find out why the house is being sold and whether the seller is under pressure. Keep the following considerations in mind:

• every month a vacant house remains unsold represents considerable extra expense for the seller
• if the sellers are divorcing, they may want to sell quickly
• estate sales often yield a bargain in return for a prompt deal

Earnest Money

This is a deposit that you give when making an offer on a house. A seller is understandably suspicious of a written offer that is not accompanied by a cash deposit to show “good faith.” A real estate agent or an attorney usually holds the deposit, the amount of which varies from community to community. This will become part of your down payment.

Buyers: the Seller’s Response to Your Offer

You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that – the sellers could not later change their minds and hold you to it.

If the seller likes everything except the sale price, or the proposed closing date, or the basement pool table you want left with the property, you may receive a written counteroffer including the changes the seller prefers. You are then free to accept it, reject it or even make your own counteroffer. For example, “We accept the counteroffer with the higher price, except that we still insist on having the pool table.”

Each time either party makes any change in the terms, the other side is free to accept, reject or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side’s proposal.

Buyers: Withdrawing an Offer

Can you take back an offer? In most cases the answer is yes, right up until the moment it is accepted, or even in some cases, if you haven’t yet been notified of acceptance. If you do want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don’t want to lose your earnest money deposit or find yourself being sued for damages the seller may have suffered by relying on your actions.

Sellers: Calculating Your Net Proceeds

When an offer comes in, you can accept it exactly as it stands, refuse it (seldom a useful response) or make a counteroffer to the buyers with the changes you want. In evaluating a purchase offer, you should estimate the amount of cash you’ll walk away with when the transaction is complete. For example, when you’re presented with two offers at the same time, you may discover you’re better off accepting the one with the lower sale price if the other asks you to pay points to the buyer’s lending institution.

Once you have a specific proposal before you, calculating net proceeds becomes simple. From the proposed purchase price you can subtract the following costs:

• payoff amount on present mortgage
• any other liens (equity loan, judgments)
• broker’s commission
• legal costs of selling (attorney, escrow agent)
• transfer taxes
• unpaid property taxes and water and other utility bills
• if required by the contract: cost of survey, termite inspection, buyer’s closing costs, repairs, etc.

Your present mortgage lender may maintain an escrow account into which you deposit money to be used for property tax bills and homeowner’s insurance. In that case, remember that you will receive a refund of money left in that account, which will add to your proceeds.

Sellers: Counteroffers

When you receive a purchase offer from a would-be buyer, remember that unless you accept it exactly as it stands, unconditionally, the buyer is free to walk away. Any change you make in a counteroffer puts you at risk of losing that chance to sell.

Who pays for what items is often determined by local custom. You can, however, negotiate with the buyer any agreement you want about who pays for the following costs:

• termite inspection
• survey
• buyer’s closing costs
• points paid to the buyer’s lender
• buyer’s broker fees
• repairs required by the lender
• home protection policy

You may feel some of these costs are none of your business, but many buyers – particularly first-timer buyers – are short of cash. Helping them may be the best way to get your home sold.

The Basics of Making an Offer

A written proposal is the foundation of a real estate transaction. Oral promises are not legally enforceable when it comes to the sale of real estate. Therefore, you need to enter into a written contract, which starts with your written proposal. This proposal not only specifies price, but also all the terms and conditions of the purchase. For example, if the seller offered to help with $2,000 toward your closing costs, make sure that’s included in your written offer and in the final completed contract, or you won’t have grounds for collecting it later.

REALTORS ^® have standard purchase agreements and will help you put together a written, legally binding offer that reflects the price as well as terms and conditions that are right for you.   Your REALTOR ^® will guide you through the offer, counteroffer, negotiating and closing processes. In many states certain disclosure laws must be complied with by the seller, and the REALTOR ^® will ensure that this takes place.

If you are not working with a real estate agent, keep in mind that you must draw up a purchase offer or contract that conforms to state and local laws and that incorporates all of the key items. State laws vary, and certain provisions may be required in your area.

After the offer is drawn up and signed, it is usually presented to the seller by your real estate agent, by the seller’s real estate agent, if that’s a different agent, or often by the two together. In a few areas, sales contracts are drawn up by the parties’ lawyers.

What is in an Offer?

The purchase offer you submit, if accepted as it stands, will become a binding sales contract (known in some areas as a purchase agreement, earnest money agreement or deposit receipt). So it’s important that the purchase offer contains all the items that will serve as a “blueprint for the final sale.” The purchase offer includes items such as:

• address and the legal description of the property
• sale price
• terms: for example, all cash or subject to you obtaining a mortgage for a given amount
• seller’s promise to provide clear title (ownership)
• target date for closing (the actual sale)
• amount of earnest money deposit accompanying the offer, whether it’s a check, cash or promissory note, and how it’s to be returned to you if the offer is rejected – or kept as damages if you later back out for no good reason
• method by which real estate taxes, rents, fuel, water bills and utilities payments are to be adjusted (prorated) between buyer and seller
• provisions about who will pay for title insurance, survey, termite inspections, etc.
• type of deed to be given
• other requirements specific to your state, which might include a chance for an attorney to review the contract, disclosure of specific environmental hazards or other state-specific clauses
• a provision that the buyer may make a last-minute walkthrough inspection of the property just before the closing
• a time limit (preferably short) after which the offer will expire
• contingencies, which are an extremely important matter and that are discussed in detail below

Contingencies – œSubject to Clauses

If your offer says “this offer is contingent upon (or subject to) a certain event,” you’re saying that you will only go through with the purchase if that event occurs. Here are two common contingencies contained in a purchase offer:

• The buyer obtaining specific financing from a lending institution: If the loan can’t be found, the buyer won’t be bound by the contract.
• A satisfactory report by a home inspector: for example, “within 10 days after acceptance of the offer.” The seller must wait 10 days to see if the inspector submits a report that satisfies the buyer. If not, the contract would become void. Again, make sure that all the details are explicitly stated in the written contract.

Negotiating Tips

You’re in a strong bargaining position, that is, you look particularly welcome to a seller, if:

• you’re an all-cash buyer
• you’re already have a preapproved mortgage and you don’t have a present house that has to be sold before you can afford to buy
• you™re able to close and take possession at a time that is especially convenient for the seller

In these circumstances, you may be able to negotiate some discount from the listed price.

On the other hand, in a “hot” seller’s market, if the perfect house comes on the market, you may want to offer the list price (or more) to beat out other early offers.

It’s very helpful to find out why the house is being sold and whether the seller is under pressure. Keep the following considerations in mind:

• every month a vacant house remains unsold represents considerable extra expense for the seller
• if the sellers are divorcing, they may want to sell quickly
• estate sales often yield a bargain in return for a prompt deal

Earnest Money

This is a deposit that you give when making an offer on a house. A seller is understandably suspicious of a written offer that is not accompanied by a cash deposit to show “good faith.” A real estate agent or an attorney usually holds the deposit, the amount of which varies from community to community. This will become part of your down payment.

Buyers: the Seller’s Response to Your Offer

You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that – the sellers could not later change their minds and hold you to it.

If the seller likes everything except the sale price, or the proposed closing date, or the basement pool table you want left with the property, you may receive a written counteroffer including the changes the seller prefers. You are then free to accept it, reject it or even make your own counteroffer. For example, “We accept the counteroffer with the higher price, except that we still insist on having the pool table.”

Each time either party makes any change in the terms, the other side is free to accept, reject or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side’s proposal.

Buyers: Withdrawing an Offer

Can you take back an offer? In most cases the answer is yes, right up until the moment it is accepted, or even in some cases, if you haven’t yet been notified of acceptance. If you do want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don’t want to lose your earnest money deposit or find yourself being sued for damages the seller may have suffered by relying on your actions.

Sellers: Calculating Your Net Proceeds

When an offer comes in, you can accept it exactly as it stands, refuse it (seldom a useful response) or make a counteroffer to the buyers with the changes you want. In evaluating a purchase offer, you should estimate the amount of cash you’ll walk away with when the transaction is complete. For example, when you’re presented with two offers at the same time, you may discover you’re better off accepting the one with the lower sale price if the other asks you to pay points to the buyer’s lending institution.

Once you have a specific proposal before you, calculating net proceeds becomes simple. From the proposed purchase price you can subtract the following costs:

• payoff amount on present mortgage
• any other liens (equity loan, judgments)
• broker’s commission
• legal costs of selling (attorney, escrow agent)
• transfer taxes
• unpaid property taxes and water and other utility bills
• if required by the contract: cost of survey, termite inspection, buyer’s closing costs, repairs, etc.

Your present mortgage lender may maintain an escrow account into which you deposit money to be used for property tax bills and homeowner’s insurance. In that case, remember that you will receive a refund of money left in that account, which will add to your proceeds.

Sellers: Counteroffers

When you receive a purchase offer from a would-be buyer, remember that unless you accept it exactly as it stands, unconditionally, the buyer is free to walk away. Any change you make in a counteroffer puts you at risk of losing that chance to sell.

Who pays for what items is often determined by local custom. You can, however, negotiate with the buyer any agreement you want about who pays for the following costs:

• termite inspection
• survey
• buyer’s closing costs
• points paid to the buyer’s lender
• buyer’s broker fees
• repairs required by the lender
• home protection policy

You may feel some of these costs are none of your business, but many buyers – particularly first-timer buyers – are short of cash. Helping them may be the best way to get your home sold.

Real Estate Market Update

Things are looking up according to Realty Times.   It is reported that the three key indicators show that  the real estate market may have hit bottom and is on its way up.    According to the Standard & Poor’s price index, in 12 out of 20 markets, prices have gone up.    Other indicators  are  the number of Mortgage Applications processed and  Consumer Confidence which are both up.  

Market Update for Hawaii Kai

According to the Honolulu Board of Realtors, year to date as of March of 2010 compared to year to date as of March 2009, Single Family Homes closed sales are up 15.2% with a Median Sales Price up 4%.   Condominium sales are up 3% with a Median Sales Price up5%.   The Average Sales Price for Single Family Homes was down 13.5% with Condominium Averages Sales Price up 10%.

For more Real Estate Information please visit http://www.karlacasey.com  

Karla Casey, Principal Broker, Casey & Associates

Representing the Islands of Oahu (Honolulu) and Maui

Real Estate  News This Week

Things are looking up according to Realty Times.   This week’s outlook is very positive.   Three indicators show that  the real estate market may have hit bottom and is on its way up.    According to the Standard & Poor’s price index, in 12 out of 20 markets, prices have gone up.    Other indicators  are  that the number of Mortgage Applications are up and  Consumer Confidence is up.   If buyer’s are looking at the perfect time to get into the market – - this may be it!

For those Buyers that are looking to get an FHA mortgage, please note that there is  talk of increasing the costs of getting an FHA mortgage and implementing tougher requirements.   Also, the First Time Homebuyer’s credit and Repeat/Move-up Homebuyer Federal Tax Credits end soon.   Qualifying homebuyers must have a signed purchase contract in effect by April 30, 2010 and must close the transaction on or before June 30, 2010.

For Real Estate Information in Hawaii (Honolulu/Oahu and Maui), please contact my office.   We are here to help you with your Real Estate needs.

Aloha,

Karla Casey, Principal Broker, Casey  & Associates

Hawaii Kai, Honolulu, Hawaii – Lifestyle and Real Estate

Hawaii Kai is a residential area located in Honolulu on the east side of the Island of Oahu (East Oahu). In 1959, the area was dredged creating a marina and channels.   Neighborhoods in the Hawaii Kai area include Kalama Valley, Mariners Ridge, Mariners Valley, Koko Head Terrace, Queens Gate, Portlock, Triangle, Koko Kai, Koko Villas, Anchorage, West Marina, the Peninsula and others.

In the Shopping Centers of Hawaii Kai  (Koko Marina Center, Hawaii Kai Towne Center, Hawaii Kai Shopping Center and Hahaione Center) you will find stores such as Costco, Foodland, Safeway, 24 Hour Fitness, and more.   Visitors and residents of Hawaii Kai enjoy fine dining from the many restaurants (Roy’s, Outback, Assagio’s, Kona Brew) and participate in water sports on the marina as well as the ocean (water skiing, boating, fishing, stand up paddling, surfing, kayaking, snorkeling, body boarding).   Hawaii Kai is also the home of the Hawaii Kai Golf Course which is a public course.

Hawaii Kai and the surrounding areas have the highest amount of residential and second home owners in all of Oahu.   East Oahu area is also known as having the highest percentage of households earning more than $100,000 per year.

Single Family home prices in Hawaii Kai range from the high $500,000′s and upwards of $15 Million for waterfront homes.   There are also many condominiums and townhomes to choose from.   Most real estate in Hawaii Kai is fee simple, however, there are some that are still leasehold.

According to the Honolulu Board of REALTORS, the medium price of homes in the Hawaii Kai area for the 2^nd quarter of 2009 was $747,500.   For condominiums it was $451,000.

Casey & Associates is conveniently located in the Koko Marina Shopping Center in Hawaii Kai.   The address is 7192 Kalanianaole Hwy, C-121, Honolulu, Hawaii.   For more information on real estate in Hawaii Kai, please contact me. (808-366-4306 or Karla@KCAloha.com)

Karla Casey, Principal Broker, Casey & Associates

Karla Casey, Principal Broker, Casey & Associates

Representing the Islands of Oahu (Honolulu) and Maui

Do you own Real Estate in Hawaii (Maui or Oahu/Honolulu) and are you Facing Foreclosure? There may be Alternatives for you.

Many homeowners in Hawaii are facing foreclosure or are in default on their mortgages. The current state of our economy has affected even “Paradise.”    It may be a primary residence, second/vacation home or investment property.   There are alternatives to foreclosure that may be better for you and possibly not damage your credit as much as a foreclosure or bankruptcy.   When viewing your alternatives, it is advised that you also speak with an attorney and/or accountant to see how each will affect you either legally and/or financially.

Alternatives to Foreclosure:

Short Sale.

A short sale is when a servicer/lender allows the borrower to list and sell their property with the understanding that the net proceeds from the sale may be less than the total amount owed on the mortgage or mortgages.

Deed in Lieu Of.

In a deed-in-lieu of foreclosure, the homeowner voluntarily transfers ownership of the property to the lender/servicer in full satisfaction of the total amount due on the first mortgage. The servicer/lender must agree to the transfer and, in most cases, the lender/servicer may require the homeowner to first make an effort to sell the property through a short sale.

In either a Short Sale or Deed in Lieu of, the servicer/lender will require the homeowner to submit documentation much like what is required for a modification, such as, tax returns, income and expense statement, letter explaining the hardship, bank statements, W-2, etc.

Both procedures can take several months, and in some of my experiences, up to a year.   In the meantime, the homeowner may stay in their home.   These alternatives to foreclosure are for homeowners that are in distress or will soon be in distress.

Loan Modification.

You may also be eligible for a Loan Modification.   Most Loan Modifications apply to real estate that is being used as a primary residence.   Contact your lender’s Loss Mitigation Department.   They will advise you as to what programs they have that you may be eligible for.   Most lender’s will not offer principal reductions.   You may be eligible for the Make Home Affordable Program (HAMP).   Lenders that I have worked with do not allow you to work towards a loan modification and a short sale at the same time.   You have to choose one or the other.

If you have a property in Hawaii (Maui or Oahu/Honolulu) and would like more information or need assistance with a Short Sale, please contact me at 808 366 4306 or Karla@KCAloha.com

Best wishes and lots of Aloha,

Karla Casey, Principal Broker, Casey & Associates

www.KarlaCasey.com

If you own a property on Maui or Oahu (Honolulu) and need to do a Short Sale, I can help you.   Also, for those of you who qualified for the government HAMP Program (Make Affordable Program) and are no longer able to make your payments and would like to do a Short Sale, the HAFA program begins April 5, 2010.   You may be eligible.   Contact me for more information.

Aloha,

Karla@KCAloha.com

Direct: 808 366 4306

Karla Casey, Principal Broker, Casey & Associates

Representing the Islands of Oahu (Honolulu) and Maui

It is said that it  takes just a quick glance – -  possibly the first  2 to 3 seconds that  someone meets you for the first time  for them to form an opinion about you.   We have all heard that many, many times.   This also applies to homes.

SELLERS AND LISTING AGENTS, it does matter, in any type of real estate market, whether its a seller’s market or a buyer’s market, that the property is at its best at all showings and open houses.   A good first impression is  crucial if you want the property sold quickly and at its value.  

I  have had sellers who wanted us to list their homes and show them at a Broker’s Open before the home  has been  de-cluttered and cleaned.   They think that Agents are able  to look pass the clutter, the dirty windows, and  in our case here in the islands – the gecko poo on the walls.   We are all human.   Even if we as agents can look past all of that, we remember the clutter and the dirt and are not sure that  our buyers can.

As I tell my sellers, we want the agents and prospective buyers to remember your home for its  special qualities and features.

Karla Casey, Principal Broker, Casey & Associates

Representing the Islands of Oahu (Honolulu) and Maui

Welcome to Karla Casey’s Blog! This blog will provide you with valuable information, tips, and general insight into the real estate market in Honolulu. Visit my website at http://www.KarlaCasey.com.