Why Offer On Contract
A lot of buyers ask me why I insist they offer on a contract rather than on a letter of offer. So I'd like to go over that with you.
When you're selling a house, the owners of the house take an offer on a contract far more seriously because all they have to do, if they want that offer, is sign on the dotted line and the house then belongs to the buyer. So if you're a buyer, and let's say you want to buy a house for $300,000, it's priced at $320,000, feel free to offer on a contract at $300,000. If the owners like your price they'll take it, if they don't you can continue to negotiate that price on the contract.
Now, why wouldn't you want to use a letter of offer? Because if there's another buyer that comes in and makes an offer on a well priced house on a contract, the owner might take that offer, sign it on the contract, and then you miss out on your chance because this isn't a legal, binding document.As a buyer, you have lots of ways to get out of a contract. There is a cooling off period of five days that if you change your mind about the house you can say, "Hey, it's just not for me," pull out of the contract for a small monetary penalty. On a $300,000 house about $750.
There is of course the building and pest clause. So if you do make an offer on a contract for the house, and you find that there's a major structural problem such as termites or rot in the roof, you say, "This house, the building and pest inspection was unacceptable to me." You pull out of the contract, you get your full deposit back.
And of course there's the finance clause. So, if you're not sure about your finance but you still want to buy the house, feel free to make an offer on a contract because if you then take that contract to your bank or to your broker and you find out that you weren't able to afford the payments on the house, or you just couldn't get enough credit, that's okay. Contract is done, you get your full deposit back.
So when you're making an offer on a contract, the owners take it very much more seriously because, as I said, all they have to do is read through the contract, sign on the doted line, and then the house is yours. So if you see value in a house anywhere and you want to make a serious offer, on a contract is the way to go. As a buyer you are protected in many, many ways and it gives you the best chance to buy the house.