An offer letter reads like a legal contract. In some states, once the offer is accepted, the document automatically becomes the purchase contract. Your real estate agent will be experienced with drawing up the offer letter, but make sure you understand the details of the offer agreement before you sign on the line. You may be asked to offer earnest money, also known as hand money, along with the offer. (It's just enough of your down payment to let the lender know you're serious.) This is normal. However, if the seller accepts your offer and you decide to back out of the deal, you will forfeit that hand money.
Since the offer letter often doubles as a contract, it will include a long list of clauses and contingencies required of both the buyer and seller. Here are some examples of items that will be included your offer:
- Your offered price and the amount of earnest money you are putting down
- Home inspection contingencies: Since the inspection may take place after the offer is accepted, you need to state that the entire deal is contingent upon an acceptable inspection report. If the house is on a well and septic system rather than city water and sewer, these should also be inspected
- Financing contingencies: You can also include a contingency for getting the mortgage you want (i.e., maximum interest rates, expected terms, etc.)
- Items included in the purchase: This list can include things like major appliances (often the refrigerator goes with the seller), lighting fixtures, shrubbery, basically anything that isn't nailed down and some things that are!
- Title contingencies: Your attorney will do a title search to make sure the property does not have any other legal claims against it (i.e. liens) and that the seller holds a clear title
- Timeline: A deadline for responding so you know when to consider the offer rejected
In most states, the seller is under no obligation to accept an offer, even if it matches the listing price. The seller doesn't even have to explain why an offer was rejected. In most cases, though, you should expect to receive an answer within a day or two. If the offer was too low, the seller will tell you. Then it's time for the age-old dance called negotiating.