SUBMITTING AN OFFER TO PURCHASE
*The buyer should have contacted a lender and obtained and supplied to the buyer’s agent a pre-approval before viewing any properties. When submitting an offer, the buyer or buyer’s agent contacts the lender and asks for a NEW* pre-approval letter based on the offer amount (If the pre-approval shows a price that is less than the buyer is offering, the seller will ask “Is this buyer even qualified to spend the amount they are offering?” Likewise, if the pre-approval shows a price that is more than the buyer is offering, a seller might say “Great! They intend / can afford to come up higher in price!” For this reason, it is usually best for both numbers to be the same.)
In order to make a formal offer, the buyer needs to sign/submit the following documents to their agent:
-Consumer Information Statement (explains how agency works in NJ)
-Consent to dual agency form (explains that PPSIR is on both sides of the deal)
-PPSIR acknowledgment of receipt of disclosures
-PPSIR affiliated business arrangement disclosure statement
-Notice to buyer and seller aka opinion 26 (advises buyers and sellers to use an attorney)
-Purchase contract filled out completely and signed by buyer. (Buyers’ initials are required on each page)
-Addenda (If applicable)
-Wire fraud notice
-Lead paint form where applicable (found in the NJMLS listing)
-Proof of funds (for cash deals or large deposits)
-Preapproval letter from a lender (for deals where a mortgage loan is needed - again, the preapproval amount should match the purchase price)
The complete offer to purchase package is sent via email to the listing agent along with a summary in the body of the email.
The summary should include the following key points: Purchase price, % Down payment, Proposed closing date, Contingencies****, and any special requests.
For example: “They are offering $1.1m with 25% down, 60 day closing. Seller is to finish the basement.”
****Mortgage and Inspection contingencies are standard. If either of these is waived, it makes the offer much stronger. When purchasing land in cash, it is common to waive both if it is known that the property does not have any Underground Storage Tanks.
After sending the offer to the listing agent, the buyer’s agent should then text message the listing agent. “I just emailed you an offer on (property address). Please confirm receipt.”
We want them to confirm in writing that they have received our offer.
AT THIS POINT THE LISTING AGENT MUST PRESENT THE OFFER TO THE SELLER.
The seller can accept, make a counteroffer, or do nothing…
If the offer is not accepted and the listing goes ARIP (attorney review in progress) with another buyer
(An asterisk appears next to the active “A” on njmls) = A*
You can still increase your offer while they are in attorney review. The listing agent is required to present all offers received to the seller; and the seller can accept any new offer that comes in during attorney review. The seller can, without consequence, cancel a deal or switch deals at any point during attorney review.
Likewise a buyer who is in attorney review may cancel the deal at almost any time without consequence. (Even though we are required to know the law, we are not attorneys. When explaining the legal process to a buyer, say “I’m NOT an attorney so you should discuss with your attorney; but here is my understanding…)
IF THE OFFER IS ACCEPTED:
-The seller will sign all the documents and the listing agent will send out the signed agreement to both parties’ attorneys for their review.
ONCE BOTH ATTORNEYS HAVE RECEIVED THE SIGNED CONTRACT, THE ATTORNEY REVIEW PERIOD BEGINS.
-Typically, the buyers attorney will send out an immediate notice of “disapproval” which effectively extends the attorney review period until both sides come to an agreement.
-Then, it is usually the buyer’s attorney who sends out the first proposed “rider”.
-When the seller’s attorney receives the buyer’s proposed rider, they will present it to the seller and it will either be signed, or new proposed changes will be made. The rider can go back and forth countless times, but usually this process is over within a few days to a week…
ONCE THE RIDER IS AGREED TO AND SIGNED BY BOTH SIDES, THE ATTORNEY REVIEW PERIOD ENDS & THE DEAL IS “UNDER CONTRACT”
-As soon as the deal goes Under Contract, the buyer should schedule a home inspection with an inspector of their own choice. (The listing agent should also mark the deal “UC” in MLS and stop all showings to other potential buyers.)
-For buyers obtaining financing, now is the time to order an appraisal and supply the lender with any additional documents they require.