As a new investor, the phrase “make an offer” seems to be slightly ambiguous. You have LOI’s, contracts, verbal offers, etc. I’m curious, especially when it comes to MHP’s, what are people referring to when they are “making offers”.
Thanks,
Will
Hi Will,
To me it means giving the owner/seller a written offer in the form of a contract to purchase (or purchase agreement, etc. - there seem to be several terms in use). You can have verbal discussions obviously leading up to that, and an LOI can be a lower pressure way to present initial options and gauge interest from the Seller while showing that you are serious. LOI’s can be problematic though if they aren’t drafted to correctly reflect your intention (ie binding vs non-binding). So in my experience, an actual Purchase Agreement that is legally binding once signed by both parties is really the primary vehicle for “making an offer”.
If others have a different take on this, please chime in. Thank you!
JayDub
I agree with @jaydub, for me a letter of intent is nice but not an offer. I can intend to do a lot of things I don’t actually follow through on. As a seller I would want a written offer on a sales agreement. Every state has different real estate laws so get to know enough to begin the process yourself or get a broker or lawyer to help you make the offer. A few hours of attorney time up front to prevent an issue has always been a good investment in my opinion.
I usually recommend a letter of intent as the best way to make an offer for these reasons: With a letter of intent you can work out the main aspects of the offer (Such as financing, length of the financing contingency, the price, the earnest deposit, due-diligence period, and any other contingencies which you may have in the offer). If you are to write a purchase contract from the beginning this often will require a lawyer which is expensive, especially if you haven’t agreed on the main terms of the deal yet. You will have to have lawyers red-line and change the contract every time there is a counter offer. With an LOI both parties can come to an agreement on the main terms without dealing with lawyers, expensive fees, or having to read through a large contract. Once the main terms of the deal are agreed in the LOI, then you can give the LOI to your attorneys and have them draft a purchase contract based on what has been agreed on. I have found this to be the smoothest way to sell a property. Also as a broker myself I have noticed the more you get lawyers involved, the more expensive & the less likely a transaction is to happen. Because of this when I use the term “make an offer” it is almost always a letter of intent. However there are always exceptions to the rule. For example, in our current market, or a very competitive market sometimes a purchase agreement will have more pull for a seller. Still you would at least want to hash out the contingencies over the phone first (at the very least to avoid the problems I listed above).
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I agree with @WarnerNAI on his points using an LOI. One point to add - an LOI is usually 1-2 pages and takes about 5 minutes to craft it. Whereas if you’re using the Frank & Dave or a state-specific contract then expect to spend 20-30 minutes or more.
F&D are great but I have stopped using their contract because it’s 20+ pages and scares off everyone except institutional investors. Using a state form I have some simple special provisions (e.g. POH titles, zoning type items) and give myself an unrestricted right to terminate up to the close date under the premise of caveat emptor.
@WillGraham , as per your post:
- “…what are people referring to when they are ‘making offers’?”
My Husband and I own 2 Mobile Home Parks.
I am also a Licensed South Carolina Real Estate Broker-In-Charge.
In South Carolina when my Husband and I ‘make offers’ we use:
- “Agreement/Contract: To Buy And Sell Real Estate” - State Specific = South Carolina
- With Multiple Addendums - Some Examples:
- Zoning = Mobile Home Park
- Zoning = Correct # Of Lots
- Park Owned Homes = Correct # With Titles
- Parcel Connected To = Correct Understanding Of Utilities (Electric, Gas, Water & Sewer)
- Acreage = Correct Acreage Amount
- Due Diligence Period = Specific Time Frame (ie…60 Business Days)
- Terminate Agreement = For Any Reason = Specific Time Frame = Get Entire Earnest Money Back
- Requests Of Documents From Seller
- Other Requests
The “Agreement/Contract: To Buy And Sell Real Estate” can go back in forth between the Buyer and Seller making multiple changes (such as Purchase Price or Closing Date or any other item that is changed) until BOTH Parties AGREE (Sign with Date & Time) to ALL the Newest Terms of the “Agreement/Contract”.
We wish you the very best!
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Thank you all, that is very helpful.
@jhutson I wondered that exact same thing about the long contract.
I’m curious. Are most people mailing offers, or sending them via email?
Email usually. Although I have dealt with owners who don’t use email, in which case it would be better to fax. If not fax, then in person. I’ve never sent offers by mail before it just seems too slow for me & time kills deals in my opinion.