Chapter Eight

     When you become serious about making an offer on a property your broker should be able to put together some numbers which will indicate a reasonable offer price.   Contrary to popular belief, there is no one exact price that a property is worth until a buyer has actually offered to pay it.   

      No matter how many analyses, comparable marketing reports or appraisals are done on a subject, there are still the variables of seller motivation, buyer motivation and other factors that cannot be predicted for any particular piece of property.  Sometimes the analyses can be ongoing during the negotiations as parties reveal their necessities for buying or selling.

     One method for developing an offer price is to turn to Comparable Sales.   These are sales of properties in the same town, preferably close to the subject area that have closed within the last six months.  This method is only as effective as the available sales.  If you are able to find a recent sale of the same type of home as the subject, close to the subject, the same age and with a similar lot size, you have a perfect comparable sale.   Armed with this perfect sale you can conclude that the subject property should, more than likely, sell for close to the same price.

      A second way to develop an offer price is to perform a Comparable Market Analysis.  This is how a listing broker determines the selling price of a property to be put on the market.  It is done by finding three comparable sales as in the previous illustration.  The sales are then fed into a software CMA program and the result generated is a suggested sales price.  Once again, this method is only as good as the recent sales and software is not necessarily cognizant of the real world.  A good broker will know how to adjust the results accordingly. 

    A third method is called a Drive-By Appraisal or Broker Price Opinion.   This can only be done by someone who is trained in doing these analyses.    It is similar to the appraisals required by the bank, and some institutions actually use drive-by appraisals rather than full appraisals.  

    The Drive-By Appraisal is done using three recent sales that are as close as possible to the subject in every way.  Comparisons are then made by subtracting or adding value from the property dependent upon the features which may or may not be present.  For example, if the subject house has four bedrooms and the comparable sale has only three, an equivalent dollar value is added to the comparable sale for an additional room.    Adjustments are made for every feature and a new sales price is computed for each comparable sale.  From these adjusted sales, the broker arrives at a suggested sales and offer price for the subject property.

     After deciding on a price, the offer is written. Most realtors use the preprinted form provided by their board for the main section of the offer.   The contingency pages are another matter.  Obviously, a buyer broker will have contingencies that are geared toward the protection of the buyers' interests, especially, the deposit.

-- The Financing Contingency -- This states the amount of financing you will be applying for and accomplishes two things. One, it protects your deposit should your financing be turned down and states that if you are unable to obtain your loan by a certain date, you may withdrawn from the transaction and have your deposit money returned.  Two, it tells the seller how strong a buyer you are.   He can see from the mortgage amount whether you are a 5%, 10%, 20% down or more buyer and this could matter in a multiple offer situation. 

-- The Home Inspection Contingency -- Written into the offer is a time-frame, usually one week, to give you a chance to have the property inspected. A buyer broker contingency should state that "If the property is found to be unsatisfactory in any way to the buyer, the buyer may terminate the offer and have the deposit returned."

   The traditional, seller agent will have a contingency that states that a only certain amount of damage; $500 or sometimes, $1,000 will allow the buyers to get out of the transaction and have their deposit returned.

-- Additional Contingencies -- These will be tailored to meet the particular circumstances of the buyers' needs. For example, perhaps there is an unknown fact about the property that must be checked into, i.e., "Offer is contingent on information regarding the adjacent vacant lot" or "Offer is contingent on viewing a plot plan."

Exhibit D

OFFER TO PURCHASE REAL ESTATE

TO___________________________________________

     ___________________________________________

     ___________________________________________                                  DATE____________________________________________

The property herein referred to is identified as follows:__________________________________________________________________

_____________________________________________________________________________________________________________

Special provisions (if any) re fixtures, appliances, etc.____________________________________________________________________

______________________________________________________________________________________________________________

hereby offer to buy said property, which has been offered to me by ___________________________________________________________

_______________________________________________________as the Seller's Broker (s) under the following terms and conditions:

1.  I will pay therefore $______________________________, of which                                Check one:   __Check, subject collection

    (a) $______________________is paid herewith as a deposit to bind this Offer                                        __ Cash

    (b) $______________________is to be paid as an additional deposit upon the execution of the Purchase and Sale Agreement provided for below.

    (c) $______________________is to be paid at the time of delivery of the Deed in cash, or by certified, cashier's, treasurer's or bank check (s).

   (d)  $______________________

            ______________________

   (e)  $______________________  Total Purchase Price

2.  This Offer is good until ___________________A.M.  P.M. on ___________________________, 20____ at or before which time a copy hereof

     shall be signed by you, the Seller and your (husband) (wife), signifying acceptance of this Offer, and returned to me forthwith, otherwise this Offer

     shall be considered as rejected and the money deposited herewith shall be returned to me forthwith.

3.  The parties hereto shall, on or before ____________ A.M.  P.M. _________________________, 20____ execute the applicable Standard Form

     Purchase and Sale Agreement recommended by the Greater Boston Real Estate Board or any form substantially similar thereto, which, when

     executed, shall be the agreement between the parties hereto.

4.  A good and sufficient Deed, conveying a good and clear record and marketable title shall be delivered at 12:00 Noon on __________, 20_____

5.  If I do not fulfill my obligations under this Offer, the above mentioned deposit shall forthwith become your property without recourse to either 

     party.  Said deposit shall be held by ____________________________ as escrow agent subject to the terms hereof provided however that in

    the event of any disagreement between the parties, the escrow agent may retain said deposit pending instructions mutually given in writing by 

    parties,  A similar provision shall be included in the Purchase and Sale Agreement with respect to any deposit held under its terms.

6. Time is of the essence hereof.

7.  The initialed riders, if any, attached hereto are incorporated herein by reference.  Additional terms and conditions, if any:

NOTICE:  This is a legal document that creates binding obligations.  If not understood, consult an attorney.

WITNESS MY HAND SEAL                                         SIGNED __________________________________________________________________

                                                                                                            Buyer

                                                                                                            ___________________________________________________________________

                                                                                                            Buyer

__________________________________________________________________________________________________________________

This Offer is hereby accepted upon the foregoing terms and conditions at _______________ A.M./P.M. on _______________________, 20_____

      WITNESS my (our) hands) and seal (s)

_________________________________________________________    ________________________________________________________

    Seller (or spouse)                                                                                                                                       Seller

The body of the offer will contain the following:

 - address of the property;

 - the brokers involved in the transaction;

 -  the offer price;

 -  initial binder (usually $1,000);

 -  the additional deposit to be put down at Purchase and Sale (usually 5% of the purchase price minus the $1,000 initial deposit);

 -  the date of the Purchase and Sale Agreement (usually within two weeks);

  -  the closing date;

 -  who holds the deposit (usually the listing agency);

 -  what is included in the sale (i.e., refrigerator, washer, dryer);

 -  any additional terms of the offer.

    All offers are presented "as quickly as humanly possible".  This has been greatly helped with the advent of fax machines, and, at some point in the soon we will be seeing the e-mail offer.

   What is included with the property?