Some key terms many new homebuyers don’t know that carry significance can endanger you in a heated bidding situation if you’re unaware of what options you have. You must strategize your ‘Terms’ offering just as much as your Price offering when putting it in context. Here are a few important:
Offer Review Date
In a competitive market where a multiple offer situation will be taking place, the ‘listing agent’ (representing the home seller) will have established a specific date to review offers at their client’s request. Let’s say this is next Tuesday by 1pm, offers are due. Simply means your offer must be in by this time to be considered and have any elements and signatures prepared by this time, no exceptions. During these situations we carefully consult and consider your options, best practices and scenarios to determine what will be the best offer for you and have a competitive chance to win.
Best and Highest Offer
This simply means the ‘best’ (terms) AND ‘highest’ (price) offer you can put together with your agent. Sometimes there are a variety of things that will make for the perfect recipe the seller is looking for. Many times in multiple offer situations the price is nearly identical, however, the terms are better in one of the offers (sometimes significantly) and this will ultimately make the difference.
Escalation Clause
This is a separate addendum that is included with your offer that specifically states not only how much higher you are willing to ‘escalate’ your offer above a competing offer, but what your highest limit is. For example: Let’s say for this example that the home we’re looking into is listed at $400k and your offer is $400k with an escalation clause of $1500 increments escalating up to $430k. A competing offer comes in for $410k, which means your ‘escalator’ takes you immediately to $411,500 and you’re now higher than the competing offer.
Seller Reserves Right to Accept Offer Sooner
Although many homes in competitive neighborhoods will feature an ‘Offer Review Date’, the seller legally has the right to accept an offer before this review date and may not honor the review date. This is where communication with the listing agent is essential. Sometimes a great offer will arrive for the seller before the review date that has everything they want and they can sometimes be inclined to accept. This is rare but is always a possibility.
Earnest Money
This is essentially like a ‘deposit’ on the home you’re pursuing. Within 48 hours of getting under contract and reaching ‘mutual acceptance’ you’ll be required to deposit your earnest money into escrow where it will remain until the end of the closing period. The entire amount is applied to your down payment and/or closing costs. Funds can be deposited typically by check, cashier’s check or a wire transfer, of which the escrow team will provide specific instructions to avoid fraud. Earnest money in the Seattle and Eastside core is typically around 3% of the offer amount. Outside of this area in Western Washington it’s closer to 1%.
Inspection
This is conducted by a licensed inspector you’ll hire to come on-site to the home. They average around two hours in length typically, sometimes longer when the home has more details and is larger, and usually shorter when a condominium or smaller home. These can be completed prior to submitting an offer or after submitting an offer depending on the situation. Expect to pay between $275-450 depending on several factors.
Appraisal
Your lender will hire a third party appraisal firm to conduct an assessment of what value they can lend money based on the value the appraiser reports. There is usually an appraisal fee provided by the lender to have this completed.
