Understanding What’s In An Offer

Whether you received an offer or are making an offer, understanding the various elements and implications of this offer is crucial. Here, we detail key terms and factors you should be aware of when reviewing it:

1. Price: The proposed purchase price is important, but so are the additional terms contained within the contract.

2. Seller Subsidy: This is a credit from you, deducted from your sales price at closing. It's used to assist buyers with closing costs, reducing your net sales price. Not always applicable. 

3. Down Payment: The buyer's contribution towards the purchase, typically from savings and not financed. Down payments usually range between 0-20%, with higher down payments indicating a more financially stable buyer.

4. Financing Type: The type of loan the buyer is using. This could be a Conventional Loan (not government-backed, indicating a buyer with good credit and financial stability), an FHA Loan (insured by the Federal Housing Administration, popular with first-time buyers), or a VA Loan (guaranteed by the Department of Veterans Affairs, offering favorable terms to veterans and active-duty service members).

5. Earnest Money Deposit: This good faith deposit demonstrates the buyer's serious intent to purchase. Typically, it ranges from 1-5% of the purchase price.

6. Settlement Date: The date when ownership transfers from you to the buyer. Funds are usually distributed to the seller within 48 business hours.

7. Home Inspection Contingency: Allows the buyer to cancel the contract if they're dissatisfied with inspection results or negotiate repairs and credits based on findings.

8. Financing Contingency: Gives the buyer a set timeframe to secure home financing. If the buyer's financing is rejected during this period, they can void the contract without penalty.

9. Appraisal Contingency: If the home's appraised value is less than the sales price, the buyer may cancel the contract unless the seller agrees to reduce the sales price to the appraised value.

10. Home Warranty: A buyer may request this warranty, which offers discounted repair and replacement service on a home's major components for up to one year after settlement.

11. Post Settlement Occupancy Agreement: An agreement that allows the seller to stay in the home for a specified amount of time, generally calculated at the buyers carrying cost, for upwards of 60 days. 
12. Escalation Clause: An escalation clause is a provision in a real estate offer that allows a buyer to increase their bid to outbid other offers, up to a specified maximum amount, in competitive property markets. It automatically raises the buyer's offer in increments against competing bids, but could also reveal the buyer's maximum budget to the seller.