Making Your Offer & The Contract Negotiation

When it's time for your offer and contract negotiation, there are two guidelines you need to understand:

  • An offer has to be "in writing" to be binding on both the Buyer and the Seller.  Unlike in New York, we do not make verbal offers.  Verbal offers do not have legal standing in New Jersey.
  • As your Exclusive Buyer Agent, we handle your offer and the negotiations with the Seller and their Real Estate Agent.  We represent your best interests throughout the process.  As the Buyer, you do not get involved in the "direct" negotiations.  The worst mistake you can make as a Home Buyer is to try to negotiate with the Seller for yourself.  If you do, you risk compromising your negotiating position.  Plus, since you are not a real estate professional, you risk making a mistake which we cannot fix later.

The following illustrates what happens in making your offer and the negotiation of your offer.

Preparation for Making An Offer on a Property
You tell us you want to offer on a particular property.
We discuss with you any defects or problems we observed regarding the property.
We obtain a current copy of:

  • the Multiple Listing System Property Listing,
  • the Current Property Tax Record,
  • and, information for comparable properties.
We check if there is a Seller's Disclosure, Lead Disclosure, Floor Plans, or any Survey available.

In New Jersey, the Seller has the option of completing what is called the "Seller's Disclosure".  This is a multi-page form the Seller completes and is basically a ''property condition disclosure'' statement intended to provide potential Buyers with information about the condition of the property. The Seller is supposed to answer the form to the "best of their ability" and inform a Buyer of anything they are aware of about their property. This disclosure may sometimes be useful; but, it does not take the place of having your own professional home inspection
We go over  a comparative market analysis of the property with you. This typically involves discussing information on similar properties (i.e., prior properties sold in the building or development, on the same street, and/or in the neighborhood).
We prepare a "Contract Key Dates and Amounts" worksheet to aid in discussing your offer with you.  This worksheet identifies the key amounts and dates which need to be decided to make your offer.
To offer, you need to provide us with:

  • Buyer personal information
    • Full Legal Name for the Contract and Deed
    • Current Legal Address
  • An updated mortgage pre-approval (if not already on file) with the amount for your offer
  • Optional: An "Initial Good Faith Deposit" check written to:
    •  “Buyer's Advisors – Escrow Account” - which we deposit and hold in our escrow account.  This can be a personal check.
We explain choices available to you in your "offer to purchase" including:

  • time requirements and deadlines,
  • deposits,
  • inspections,
  • contingencies under the contract, like the mortgage contingency or the home inspection contingency.
We discuss the importance of motivations in the negotiation:

  • how badly you want the property,
  • and, the Seller's motivation to sell.
We confirm the basic financial requirements related to your offer:

  • The "Offer Price" which equals your Mortgage Amount plus your Total Amount Down
  •  Your optional "Original Good Faith Deposit"
    • due with your offer,
    • approximately a $1,000 to $10,000 depending on the purchase price of the property (can be a personal check),
    •  held in our Broker Escrow account.
  • Your  "Additional deposit"
    • due within about 2 weeks of both parties agreeing on the offer and after "Attorney Review" of the offer contract is completed,
    • typically 50% of the total down payment less any "Initial Good Faith Deposit",
    • can be a wire transfer to your attorney's trust account or a personal check.
  • Your Home Inspection costs:
    • due at the time your home inspection is performed - typically within about 2 weeks of the end of "Attorney Review" of the offer contract.
    • approximately $500 to $1,500 depending on the square footage, age of property, condition of the property, and what additional tests may be necessary (like, termite inspection, radon test, oil tank sweep, mold, etc.).
  • Your Estimated Costs at Closing:
    • due at the Closing
    • includes approximately 50% of your total down payment (the remaining down payment which after your "Initial Good Faith Deposit" and your "Additional Deposit"
    • in addition there are Closing costs which vary depending on the transaction and your lender (typically 3 - 5% of the total purchase price). Your lender should provide you with their written "Good Faith Estimate of Closing Costs".
    • if your purchase price is over $1 million, New Jersey has a Realty Transfer Tax which is paid by the Buyer. This is the so-called "Mansion Tax". The rate is 1% of the sales price when the price is more than $1,000,000.
Develop negotiation strategies with you, including pre-set limits and/or key points (items included or to be fixed) for negotiation with the Seller.
Prepare your written "offer to purchase" (using the NJ Standard Contract Form) including the proper terms and disclosures:

  • Agency representation.
  • Any conditions and contingencies.
  • Items included and excluded (e.g., stove, refrigerator, air conditioners, window treatments, pool equipment, etc.).
  • Known Pre-closing repairs.
  • Tenants/leases/rentals/security deposits.
  • Financing alternatives.
  • Required inspections and timing (e.g., home inspection, radon, termite, etc.).
  • Key contract dates (additional deposit due, attorney review concluded, home inspection period concluded, mortgage commitment date, etc.).
  • Closing date and location (typically at the Buyer's Attorney's office).
  • Any State or Federal required disclosures.
  • Confirm with the Listing Agent:
    • The Lead Disclosure Paint Form
      (required for properties built prior to 1978).
    • The Seller Disclosure Form (if any).
  • If multiple bids are expected, we determine what is the time schedule for bids and the bidding procedure. The Seller's Agent may tell us "Give us your best offer, the owner will pick one".  Other times, the Seller's Agent may say "If there are multiple offers, there will be a second bidding round which is called 'highest & best'".  This means that all the Buyer’s will be contacted and asked to bid again with their best price and terms because this is their last chance to offer.  Then, the Seller will pick one offer and the next offer or two could be considered as “back up” offers.
We draft a "Letter of Introduction" to accompany your offer which describes your offer and other documentation we are sending to the Seller.
We ensure we have your updated mortgage pre-approval letter from your lender describing financing which agrees with the amount of your offer.
We arrange for you to sign (typically e-sign) your finalized offer including:

  • NJ Opinion 26
  • The Lead Disclosure (if required)
  • The Purchase Offer Contract
  • The Seller Disclosure (if required)
We give you, a copy of all the relevant offer contract paperwork.
We present and negotiate your offer with the Seller and/or Seller's Agent.  At this point, we, typically, email your offer packet (including your introduction letter, your mortgage pre-approval, and your signed offer and any related disclosures) to the Seller's Agent.
We assist you in evaluating and preparing any counter offer(s) received from the Seller.
We negotiate any counter offer(s) with the Seller and/or Seller's Agent.
Once both you and the Seller agree, we deliver the modified (if necessary) Buyer signed contract to the Seller for their final signature.

This final offer packet includes:

  • the original purchase contracts signed by our Buyer
  • a copy of the Buyer's "Original Good Faith Deposit" check (if necessary)
  • our Buyer's "Introductory Letter"
  • the Buyer's "Mortgage Pre-Approval" letter
  • the "Lead Paint Disclosure" (if required)
  • the "Seller Disclosure" ( if any)
We obtain the Seller signed and initialed Offer Contracts back from the Seller’s Agent.
After Notification of an Agreement and the Availability of
Signed Contracts from the Seller
We check the completeness of the final executed contract paperwork and all required signatures.
We advise you to seek legal counsel.  Typically, you need your attorney once the Seller and you agree on the terms of the offer and you both sign the offer contract.
We email a signed (by both parties) copy of your offer contract to your Attorney to start "Attorney Review".  It is best to start Attorney Review as soon as possible and have it finished as quickly as possible.

NOTE: During Attorney Review, the Seller is free to accept someone else's offer and cancel your contract, for no reason.
We provide your Attorney with information about all parties involved in the transaction - their names, addresses, telephone, fax numbers, and email addresses.
We follow-up with your attorney and lender to ensure they get the paperwork they need related to your purchase contract.
Attorney Review Begins (For more information about Attorney Review click HERE.)
We deposit your "Original Good Faith Deposit" to our "Buyer's Advisors - Escrow Account" (if used). This must be done within 5 business days of the contract being agreed/signed by both the Seller and the Buyer.

 

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