How to structure your offer Cash offer?

Question

I'm an newb that needs some advice.  I'm wanting to start submitting some cash offers on some properties that interest me.  What is the best way to structure these offers that would allow them to remain a strong offer, but give me protection in case there is a major expense that I didn't realize upon my first walk through?  For instance, there is a house I looked at yesterday that I want to put an offer on, but there is definite termite damage and I would like to get a more detailed inspection on it, but don't want to pay for it until I get it under contract.  I was thinking to just put a contingency on a termite inspection, but I was thinking there's a better way to do this.  Also, if they do accept and I find much more issues, can I negotiate the price again and if they declined do I lose my earnest money?

Account Closed · Answer

There's really no need to add any verbiage to a standard contract for an inspection contingency as long as you are using your option period (at least for Texas contracts).  You can use the option period to do all of your inspections (general, foundation, pool, HVAC, termite, etc) and still cancel the contract and receive the earnest money back.  The option period is designed for these types of contingencies.

There are other contingencies that wouldn't really play out during the option period (I.e.  Financing, credit approval, appraisal, surveys, title, etc).  As long as you are using an experienced agent and a standard contract even these can be covered without risk and extra verbiage added to the contract.

I would also agree that the inspection is the cost of doing business and should be paid for by the buyer.

And as a footnote, why show the seller your cards yet?  Just make your offer as simple as possible and leave the discussions about possible repairs (or price reductions for repairs) for after the seller has become emotionally invested in your contract.  Sellers will usually negotiate once they have had their home "off the market" during an option period because their only other option is to wait for the next buyer and possibly a lower price if the buyer terminates the contract.  Once you provide a seller with an inspection report showing items needing repair, they are obligated to disclose those items to all future potential buyers.  So most sellers will negotiate to repair at this point.

Trevor K. · Answer

You can put any kind of contingency in the contract you can think of.  I have done as long as a 21 day inspection contingency. The home had foundation issues and I wanted to make sure I had time to get an expert to see it.  In my opinion the termite inspection is just part of doing business, and you just need to pay for it.  However you could submit the offer with a contingency that they pay for a termite inspection, by a professional of your choosing.  I would also include a figure.  Something like "not to exceed $250."  Or whatever it costs in your location.

If they accept your offer you will have a limited time to have an inspection done.  As long as you find those issues in that time, you should get your earnest money back by any legitimate entity.

Sam B. · Answer

@Jerone Hammond - I've made quite a few cash offers and as mentioned above, the offer is always contingent on an inspection.  A couple of examples where the inspection came back with significant issues, I was able to opt out of the deal (or renego for a better price).

A good RE Agent will look out for you in this regard.

Kirsten Sitnick · Answer

Sounds to me like you need just what you mentioned...contingencies for home inspection and termite inspection. Usually you have a set amount of time, say 10 days, in which to get out of the contract (or try to renegotiate it with the seller).

---Kirsten

Account Closed · Answer

Hi @Jerone!

I am assuming you are talking about a SF home that you are wanting to put an offer on.  In Texas, when you make an offer using a standard residential real estate contract, you have an "option period" as part of the contract.  Generally, a small amount of money is paid to the seller (usually $100 on an average priced home) for the right to terminate the contract for ANY reason during the option period (usually 10 days, but negotiable).  This option fee is in addition to the earnest money that you deposit with the title company.  During the option period, you can have inspections done to check out the property.  Depending on what your inspector finds, you can ask the seller to make repairs, back out of the contract or ask for a reduction in the sales price.  As long as you terminate during the option period, you will get your earnest money back but the seller gets to keep the option fee as compensation for "taking the house off the market" long enough for you to do your research.  And remember, you can terminate for ANY reason, not just because you find something wrong with the house.

I hope this helps...