Presenting an offer to purchase a home will vary from state to state. This article will go over the common practices for NYC and NJ. In all states it is recommended that you hire an attorney to advocate on your behalf with respect to the sales contract. There's a noticeable difference in the cost of hiring an attorney in NYC vs. NJ. Perhaps the biggest difference in the two areas is the offer and contract of sale. In both areas a real estate agent can prepare an offer on behalf of a buyer.
In NYC when an offer is presented it comes in a non binding format. It usually is submitted in a written format with some financial evidence to prove ability to purchase. If acceptable by the seller, the seller will prepare a contract of sale. Typically the seller will hire an attorney for this and it is highly recommended.
In NJ, the state has prepared a form contract that covers most of the possibilities involving a sale of real property. A real estate agent in NJ will fill out this form with all the specifics regarding the terms of the purchase. The buyer signs this contract and presents it to the seller along with financials. If acceptable the seller will countersign. This is now a binding contract. In most cases both the buyer and seller will have attorneys representing them. They will communicate in what's called the attorney review process to modify the original contract.
In both NYC and NJ, proof of the ability to purchase is required with submitting an offer. No seller in their right mind would enter into a contract not knowing that the buyer has the ability to purchase their property. If the buyer is seeking a mortgage to purchase the home they will need a preapproval letter from the lender.
Pre-approval vs. pre-qualification letters have a specific vital difference between them. In a pre-approval letter, the lender may not have reviewed the buyers financial documents i.e. tax returns. It's important to look for that language in either one of these letters. Most pre-qualification letters will state that the buyer's documents have been reviewed. Be cautious that neither letter states that the buyer's documents have not been reviewed.
Proof of funds, should be shown to the seller with any offer. If the buyer's offer is contingent on a mortgage, then proof of the down payment money should be shown. If the buyer's offer is not contingent on a mortgage, then proof of funds for the entire purchase should be shown. Some buyers don't want to show the seller that they have more money than needed to complete the purchase. In this instance, it is recommended that a separate bank account be opened with the amount needed for the proof of funds. All sellers want comfort that the offer they accept is backed by money. This is a great way to show a seller that the funds in this account have no other purpose as the only transaction will be funding the account.
Why Co-ops are different. There is a caveat when purchasing a Co-op. Sellers will have the additional concern that the buyer must be approved by the board of the Co-op. For this, sellers will request additional financial proof that the board will also require. When a buyer's agent is protecting their client from overpaying, it is fair practice to get an agreement on price first. This can come in the form of a purchase offer acceptance contingent on additional financial disclosure. Once the purchase price is agreed on, the buyer can show the rest of the financials to the seller. The seller will examine the buyers total finances and decide if they feel the Co-op board will approve. In NYC it is common for a financial statement to be presented to the seller. This document will show all of the buyer's financials. Download a copy here of the REBNY Financial Statement. In NJ Co-ops are far less common than NYC so there isn't a standard form that a buyer can use to disclose their finances. This becomes a case by case situation dictated by the seller and the Co-op board.
Laying out all your cards when making an offer is, eventually, necessary. Doing it in stages to secure the best price is part of how an agent will protect a buyer. Knowing what to ask for is how an agent will protect a seller.
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