Step 6: Making an offer.

You have found the perfect home! You want to avoid any costly mistakes. Now What? Ask a lot of questions. The more you know, the more confident you will be in making the right decision. The information bellow is not an exhaustive list but it will help you before you sign on the dotted line.

• Review the Seller's Disclosure form.
• Review the Lead Paint Disclosure and more.
• Title V and Septic System.
• Review the Condominium Documents and rules.
• Review sales of comparable properties.
• Calculate the costs of updates and repairs.
• Make an appealing offer and include any contingencies.
• The negotiating phase.
• Escrow Accounts and the Initial Deposit.

Review the Seller's Disclosure form.

A seller's disclosure form provides written documentation of the seller's knowledge about the condition of the property. Massachusetts and New Hampshire does not require seller property disclosure forms. However, you may want to request that the seller fill one out as a contingency of your offer. A seller's disclosure form is not a warranty. A home warranty can be purchased separately.

The following are some details to pay attention to as you review the seller's disclosure form. It is a good idea to have your home inspector review the form.

• Did all involved in the ownership of the property sign the disclosure?
• Has every question been answered on the form?
• How long has the seller had possession of the property?
• Has the seller disclosed any problems on the form? If yes, let the home inspector know.
• Have the problems been addressed?
• How old is the roof?
• How old is the heating system, hot water heater, air-conditioning, plumbing, electrical etc?
• Any pest infestations (mice, termites, ants etc.)?
• Does the home contain lead paint, radon gas, water in the basement, etc.?

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Review the Lead Paint Disclosure and more

In Massachusetts and New Hampshire it is required by law that the sellers fill out a Lead Paint Disclosure Form for all homes built before 1978. Lead paint may be present in a homes built prior to 1978. If ingested, it can be very harmful to children, causing brain damage and even death. If you have or are planing on having children under the age of six it would be important to have a lead paint inspection on a home built before 1978. If any paint should be found it should be removed.

For further information on lead paint and other toxins see the links bellow:

• MA Government "Checklist for a Hazard-Free Home"
• EPA Lead paint
• MA Lead paint
• Safe and Sanitary Housing for Massachusetts Residents
• MA Lead Paint Removal Assistance
• MA Lead paint information
• Childhood Lead Poisoning Prevention Program
• GAO Report
• Lead safe yard
• EPA to Rule on Removal of Lead-Based House Paint
• Mold resource
• Radon Gas resource
• Under ground storage tanks
• Asbestos resource
• Paint information
• Hazardous waste resource
• Super fund resource
• Clean water resource

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Title V and Septic System.

Massachusetts law as of March 31, 1995 updated the state environmental code known as Title 5 regulations. The new regulations requires inspections of septic systems and cesspools before a home is sold or enlarged. Any system that fails an inspection must meet compliance (upgraded/repaired) within two years. Any inspection that passes will be granted a certificate of compliance or Title 5 certificate. This certificate is good for two years. If the system, once given the Title V certificate, is pumped once in each of the first two years, then the Title V certificate will be good for three years. It is the responsibility of the current owner or seller of a property for compliance with Title 5. However, a seller or a buyer and the buyer's mortgage lender shall decide who will pay for the costs of compliance (upgrade/repair), which can be negotiated as part of the offer agreement. Most mortgage lenders will require compliance to Title 5 before the closing date or that funds for compliance be place in escrow before the closing date. Usually one and half times the estimated cost of compliance from one or more cost estimates from one or more authorized contractors.

As a buyer, if a septic system needs to be repaired, for a home you wish to make an offer, make sure there is a contingency in an offer for your review and approval of, the local Board of Health 'approved', septic plans. It is recommended that you seek legal counsel in drafting up an offer for a home that has a Title 5 non-compliant septic system. Especially if the seller has not made any effort towards compliance. Getting a new septic system can be a costly, lengthy and a complicated process.

Here are some links to Title 5 information:

• Massachusetts Septic Testing Law
• The Septic Systems Information Website - Inspecting, Testing, Designing, & Maintaining Residential Septic Systems  
• Septic System Title 5

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Review the Condominium Documents and rules.

When a condominium community is established, a condo association is formed. This association then elects the board. As a member of the condominium community, you can vote (usually one vote per unit) for board members and other issues. Once a board is created, it establishes a budget and assumes the responsibility of collecting fees, enforcing rules, deciding which repairs and improvements to make, and overseeing these repairs and improvements. The board is, in effect a mini-government. It may create guidelines for anything you do with your unit like any changes or upgrades to your unit, allowing pets, and so forth. If you don't make your payments on time , the board can put a lien against your unit. Point is, before you buy a condo, be sure you understand the authority of the board and you are comfortable with this structure. Be sure you understand all the financial obligations that come with owning a condominium.

Here are some points to consider:

Before making an offer on a condominium, you should review the master deed, the condo bylaws, and condo rules and restrictions. You need to make sure that any offer contains a contingency that it is subject to your review and acceptance of these documents.

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Review sales of comparable properties.

You will have to determine fair price of the home you want before you make an offer for it. This is defined as the highest price a ready, willing, and able buyer will pay and the lowest a ready, willing and able seller will accept. You can make your market evaluation by comparing the property you want to buy with similar properties that have sold in the surrounding area in the past 3 to 6 months. When you are ready to start negotiating, we will show you 'comparables' or listing sheets that describe properties that have recently sold. These sheets will contain all the pertinent information on the properties, including the original asking price, all price reductions, the actual selling price, the date of the closing, and the date of the original listing contract.

After you have seen the comparables, we will help you compare and rate each property against the house you want to make an offer on. You will know what other buyers in the area have had to pay for certain amount of house in the same area. Once you have determined what you think is a fair selling price for the property, compare it with what the sellers are asking. If the sellers are asking for less than you had estimated, you may have found a very good investment, i.e. built-in equity. If the seller is asking for more than your estimate then this where the negotiating begins. However put yourself in the seller's shoes for a moment. Is the seller adding some buffer for negotiating? Have they installed new carpets, remodeled the bathroom or kitchen, finished the basement? Take the position that the amenities or upgrades do not always add value to a home.

Remember there is maintenance and there is improvements. Maintenance is what needs to be done, much like a new roof, repainting, routine maintenance, new furnace etc. Improvements are anything that adds a new feature to the home like a new addition, adding a new garage, finishing a basement, upgrading carpet floors to hardwood floors etc. Usually improvements will add some value and maintenance does not. Maintenance will make the home more appealing to buyers.

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Calculate the costs of updates and repairs.

If you plan to buy a resale home, you'll most likely want to make changes like changing the color of the walls, removing wall paper, install hard wood floors, update the kitchen, and so forth. There may even be structural issues or damage that needs to be repaired. You may be able to live with certain items the way they are, however the best time to work on your new home is before you move in. You will be motivated, and there is no furniture to work around. You will need some reserve cash after closing to do this. So how much do you need? Try and obtain estimates for work before you make an offer. At the very least, take detailed measurements and visit a local home center to get estimated costs for materials and labor.

Later you will have a home inspection and the list of deficiencies may increase. If some deficiencies are significant you may renegotiate the price you offered the sellers or ask the sellers to make right the deficiencies before the closing.

Here are some areas to think about:

• Paint
• Roof
• Landscaping
• Gutters
• Foundation cracks
• Siding
• Windows
• Driveway
• Deck, patio, porch
• Outside air conditioning unit
• Room addition
• Drywall and walls
• Wall paper
• Electrical
• Plumbing
• Flooring
• Carpeting
• Tile walls and floors
• Lighting fixtures
• Ceiling fans
• Kitchen cabinets
• Kitchen appliances
• Kitchen counter tops
• Bathroom fixtures
• Heating system
• Built ins
• Curtains
• Driveway
• Cable TV
• Computer network
• Pool
• Hot tub
• Sheds
• Lead paint
• Septic system
• Garage doors

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Make an appealing offer and include any contingencies.

Each and every piece of property is unique, and so is each selling situation. So there are no generic rules to making an appealing offer. However, any offer should be reasonably low without insulting the seller and it will have to be set so that your first offer is not quickly snapped up because it was higher than the seller thought he would get for the property. Also all good offers have the following things in common:

When making an offer, find out all you can about the property and the sellers so that you are in the strongest negotiating position. Doing so can help you evaluate your situation and then select an appropriate offer strategy:

• The lowball offer: If it is a buyer's market, and you are not emotionally committed to having the home you can offer way bellow the asking price (or low-ball). You may succeed if the seller is desperate.
• The anxious offer: If you feel you must have the home, you may want to make your best offer first. This strategy leaves no room for negotiations but might be necessary in a hot seller's market in which homes are not on the market for very long.
• The bidding war: In a hot seller's market, you may find yourself bidding with other buyers for the same property. In this case, you lose all your negotiating strength. You have to see the bid, raise it, or fold your cards gracefully and move to the next property.
• The negotiable offer: In most cases, the best offer is the one that leaves room for negotiating. You should plan what to offer first and what you can go up to.

When you are ready to make an offer on a property you want, we will fill out a Contract to Purchase Real Estate or an Offer Form. This is a standard form from the state Association of Realtors. On this form you will include/decide the:

• the names of all the buyers
• the address and legal description of the property (including the Registry of Deeds book number and page number)
• the names of the real estate agencies
• desired offer amount
• desired down payment
• duration of the offer
• desired Purchase and Sale date
• desired closing date
• escrow account holder
• mortgage contingency including commitment date and loan amount
• inspection contingency
• any additional terms or contingencies

Contingencies are conditions that must be met for the contract to continue. Remember market conditions will determine if the seller will accept or reject a contract with multiple contingencies. Here are the most common types of contingencies:

• Financing: You must obtain your proposed financing or your offer is null and void.
• Property Appraisal: Property must appraise for purchase price or more.
• General Inspection: If deficiencies are found, the seller usually has the right, but not the obligation, to fix the deficiency. The buyer has the right to walk away from the deal if the seller will not correct deficiencies.
• Pest inspection: Home is free of wood-destroying pests, and previous damage caused by pests will be fixed.
• Seller's disclosure form: You may want to review the form, if not previously presented. This will give you the right to back out of the contract if the seller discloses problems with the property.
• Flood plain: Home is to be certified as not to be in a flood plain.
• Lead paint disclosure: Seller must disclose the existence of lead paint (if known). Federal law allows you 10 days to conduct inspections for lead paint.
• Sale of another house: The contract is contingent upon the sale of another property, because proceeds from that sale will be needed for the new purchase.
• Insurance: Today home owner's insurance may no longer be guaranteed or the price may be steeper than expected. This especially near a flood plain or coastal area.
• Down payment money: You may be expecting a gift as part of the down payment. However, it may not be certain.
• Review of covenants, conditions, restrictions, and zoning regulations: When buying a condominium, a cooperative, or a home restricted by a home owners association, or planing any home business you should review all these documents before writing an offer, however, if this is not possible make the offer contingent upon these documents being presented for your review and acceptance.
• Review all future maintenance agreements and repair contracts: If the home you wish to purchase needs repairs requiring professional plans and specifications make the offer contingent upon your review and acceptance of such plans and specifications.
• Review of well water quality testing: If the property has a well for supplying drinking water, you can make the sale subject to testing the well water.
• Survey Verifies the location of the property boundary lines.
• Receiving clean Deed and Title: Your lender will require a title search that will turn up any problems (clouds on a title) like liens.

You may also specify/request some common terms:

• What else you want the seller to provide? Such as seller to cover the closing costs, or provide a home warranty.
• Request the sellers to include items like appliances, window treatments, pool, hot-tub etc.
• The required condition of the house at closing, for example: certain repairs be done, remove any clutter, diver the home 'broom clean' and so on.
• Request that taxes, club dues, homeowners association fees, and so on be prorated.

Remember: When you make an offer on a home, everything is negotiable. You can ask for what you want. You may not get it, but you can ask... The more terms and contingencies you include in the offer, the less attractive the offer will be to the seller. Especially in a seller's market.

Be reasonable. The best outcome is a win-win outcome for you and sellers.

Read your offer carefully. Does it include everything? If it is accepted, you can not go back and say you forgot something. So in an offer be specific and include everything in writing. For example: You may have a verbal agreement or made an assumption that the washer and dryer stay, but without it written in the offer , you will have no recourse if suddenly the washer and dryer aren't part of the deal. When in doubt, put it in writing.

Once the offer is completed and meets with your approval you will then sign it. Then we will attach a copy of your mortgage lender's pre-approval letter, a copy of the State Mandatory Licensee-Consumer Relationship Disclosure form and your deposit check. The package will then be presented to either the listing (seller) agent or may be directly presented by us to the sellers.

We want to make a strong point: You should never make an offer for more than one property. The reason being, if you present a written offer to a seller and the seller accepts your offer by affixing their signature to the contract; the two parties have now created a legal binding document. So should you happen to present two or more offers to two or more sellers and if by the off chance each seller accepts what is placed before them, you will find yourself in a situation that could turn out to be quite costly.

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The negotiating phase.

If possible we will research or obtain the following information to help you formulate a reasonable offer:

When your offer is presented to the sellers they have only three options:

• Accept the offer: Seller accepts the price, terms, and contingencies.
• Reject the offer: Seller can not accept the offer and does not see any hope that it can come together.
• Counter the offer: Seller has accept most of the offer however, either the price, terms or contingencies need to be modified to better suit him.

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Escrow Accounts and the Initial Deposit.

When you make an offer you may include with the offer an initial sum of money or a deposit as good faith to a seller. There is no rule as to the amount. Usually the amount is $1,000.00 however this figure can be negotiable. When the offer has met mutual agreement between you and the sellers and both you and sellers have signed the offer agreement, your deposit will be delivered and held by an escrow officer. Typically in Massachusetts and New Hampshire the escrow officer is the selling agent's broker who has a special escrow only account. This money will be held in this escrow account until either the deal goes to closing in which the money is released to the sellers at closing or the deal is withdrawn by mutual concent and the money is returned to the you.

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